Putnam
International
New Opportunities
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
This is the last letter to you and the other shareholders of Putnam
International New Opportunities 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.
In one final piece of news, I am pleased to announce the addition of
Carmel Peters to your fund's management team. Before joining Putnam in
1997, Carmel was with Wheelock NatWest Investment Management, Rothschild
Asset Management Asia Pacific. She has 24 years of investment
experience.
Respectfully yours,
/S/ GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 17, 2000
Report from the Fund Managers
Robert J. Swift
Carmel Peters
Stephen Dexter
During the past six months, we have witnessed the positive aspects of
globalization: A simultaneous global rally lifted several sectors during
the final quarter of 1999. Investors focused attention on the potential
for new technologies to transform business productivity. While the
technology sector led performance, companies in many industries are
taking advantage of technology in different ways to achieve excellent
results. Although many stocks peaked in January and have given back some
gains in the period since then, we are pleased to report a solid gain
for Putnam International New Opportunities Fund in the first six months
of its 2000 fiscal year.
Total return for 6 months ended 3/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
66.98% 57.33% 66.30% 61.30% 66.55% 65.55% 66.43% 60.65%
- ------------------------------------------------------------------------
Past performance is not indicative of future results. Returns were
achieved during favorable market conditions that may not be sustained.
Performance information for longer periods and explanation of
performance calculation methods begin on page 7.
* GLOBAL TRENDS ATTRACT INVESTOR ENTHUSIASM
As managers of your fund, it is difficult for us to imagine more
favorable market conditions than we saw in the final months of 1999. As
you know, our investment strategy is to scan international markets to
find companies that represent new global leaders. We strive to identify
companies that are capitalizing on a variety of trends to achieve
exceptionally high rates of earnings growth.
These trends may be technological, such as the introduction of new
products and services made possible by advances in computers,
telecommunications, and the like. Structural trends also create dramatic
opportunities. Examples would include the deepening integration of the
European Union or the introduction of free market reforms in China.
Finally social trends can create business opportunities by changing
consumer behavior, and we look for companies that capitalize on these
trends.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
Japan 36.3%
United Kingdom 19.6%
France 6.9%
Italy 6.7%
Germany 6.6%
Footnote reads:
*Based on net assets as of 3/31/00. Holdings will vary over time.
As calendar 1999 drew to a close, it seemed as if all global markets
were beginning to show the same optimism for expanding opportunities as
we have seen in the United States. The technology, media, and
telecommunications sectors, or TMT, as they are collectively known, led
more traditional sectors in nearly every market of the world. The
disparity in the sector returns was temporary because the rally subsided
during March of 2000. However, we believe that the example set in late
1999 and early 2000 heralds the rewards that companies can achieve by
leading change.
Of course, we do not merely invest in trends. We perform rigorous
analysis on companies to make sure that they are managed effectively and
in a way that produces strong profits for their shareholders. Our team
compares companies on a global basis because that is the only way to
properly assess their growth potential and possible risks. Your fund can
invest anywhere outside the United States where we believe the best
opportunities are occurring, both in developed and emerging markets.
During the period, our stock selections led us to emphasize relatively
large positions in developed markets. A limited exposure to emerging
markets included technology and telecom stocks as well as a number of
cyclical stocks more sensitive to the global economic upswing.
* COMPANIES HARVEST TECHNOLOGICAL OPPORTUNITIES
During the past six months, we have emphasized the stocks we believe are
benefiting the most from the trends we have mentioned above. Some of
them are technology and telecommunications companies that are directly
producing new goods and services. Although stocks in these sectors have
experienced a great deal of volatility in the closing weeks of the
semiannual period, we remain confident that our research process leads
us to the companies with the most competitive long-term prospects. We
also favor many companies in other sectors that are benefiting
indirectly from these trends.
Cellular telephones are becoming more widespread worldwide, and they are
really just the tip of the iceberg; a whole host of other wireless
devices are coming to market. Some of the newest items are connecting
the convenience of wireless capabilities to the enormous data capacity
of the Internet. Japan is home to many of the world's leading companies
in developing these electronic products and the protocols that operate
them, which is why it is the fund's largest country weighting.
Morningstar awarded Putnam International New Opportunities Fund's class
A shares 5 out of 5 stars for 5-year performance as of March 31, 2000.
This rating put the fund in the top 10% of the 672 international equity
funds rated.
Past performance is no guarantee of future results. Morningstar ratings
reflect risk-adjusted performance through 3/31/00 and are subject to
change every month. Morningstar ratings are calculated from a fund's 3-,
5-, and 10-year returns (with fee adjustments) in excess of 90-day
Treasury bill returns and a risk factor that reflects performance below
90-day Treasury bill returns. For the 3-year period, the fund received 5
stars and there were 1,124 international funds rated. Performance of
other share classes will vary.
NTT DoCoMo (NTT Mobile Communications Network), one of the fund's top
holdings, is a telecom service provider. It was spun off from its
parent, Japan's national telecommunications company, in 1999. It is the
leading provider of cellular phone service in its home country but has
other businesses with even greater future potential. It controls a
proprietary technology for wireless data transmission, including the
ability to send E-mail using a cellular telephone. This technology is
poised to become a global standard, allowing NTT DoCoMo to collect
licensing fees around the world. In its home market, its recently
introduced I-mode service, which utilizes this technology, is already a
hit with young consumers. The company anticipated 2 million subscribers
in the first year, but the actual number is likely to be 7 million.
Technology advances on many international fronts
Putnam's global research gives us special insights on new technologies
because people in different cultures adapt to technology in different ways.
Wireless technology is an example. NTT DoCoMo's I-mode service in Japan has
become popular because Japanese consumers have learned to use the
touch-tone numbers of their cell phones in special patterns to convert
the number symbols to kanji -- Japanese language characters. In Japan,
customers use this to send quick messages like voice mails. The
possibilities of this technology include M-commerce. The Financial Times
notes that the three cellular telephone giants, including Nokia of
Finland, a fund holding, are working on a world M-commerce standard to
enable people to make safe credit card purchases on their mobile phones.
In Finland, for example, people already use their mobile phones to buy
CDs or get drinks from vending machines.
In supplying the components for cellular phones, Murata Manufacturing,
another Japanese company, is a dominant player. It makes ceramic
capacitors and ceramic filters for phones and other computerized
devices. Orders have been accelerating strongly as these devices have
found an increasing variety of applications, such as in digital home
appliances.
Putnam International New Opportunities Fund's class A shares were ranked
in the top quartile by Lipper for the 5-year period ended March 31,
2000. The fund ranked in the top 4%, or 8 out of 254 international funds
that were ranked.
Past performance is no guarantee of future results. Lipper is an
industry research firm whose rankings are based on total return
performance, vary over time, and do not reflect the effects of sales
charges. Performance of other share classes will vary. The fund was
ranked 21 out of 423 (5%) for the 3-year period and 17 out of 643 (3%)
for the 1-year period.
While Murata is an established manufacturer seizing an opportunity to
make new products, ARM Holdings of the United Kingdom has a cutting-edge
business model. ARM performs no manufacturing itself but instead updates
the architecture of semiconductor chips. The company's goal is to
continually increase the speed with which these components transmit
data. 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.
* STRUCTURAL CHANGES IN EUROPE AND JAPAN
Vodafone Group, the fund's top holding, is taking advantage of both
structural and technological changes. After acquiring U.S. cell phone
service Airtouch in early 1999, Vodafone launched a hostile bid for
Germany's Mannesmann in late 1999 with the goal of establishing
Europe-wide wireless voice and data service. After much give-and-take,
Mannesmann has submitted. One of the motives for the ultimately friendly
merger was the volume of cross-border data transmission taking place in
Europe. Vodafone now dominates this activity from the Mediterranean to
the Hebrides.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Vodafone Group
United Kingdom
Telecommunications
NTT DoCoMo
Japan
Telecommunications
Nokia Oyj Class A
Finland
Communications equipment
Nortel Networks Corp.
Canada
Communications equipment
Softbank Corp.
Japan
Technology services
ARM Holdings
United Kingdom
Technology services
Oracle Corp.
Japan
Software
Marschollek, Lautenschlaeger und Partner Pfd.
Germany
Investment banking and brokerage
Bipop-Carire
Italy
Banking
Television Francaise 1 (TF1)
France
Broadcasting
Footnote:
These holdings represent 30.0% of the fund's net assets as of 3/31/00.
Portfolio holdings will vary over time.
In the financial sector, the prospects of Bipop-Carire are quite
attractive. This Italian bank has acquired competitors in its home
market and is a leading distributor of mutual funds, which are becoming
more popular in Italy. The company enjoyed 40% growth in this business
alone in 1999. Bipop-Carire also achieved the best investment
performance in the Italian market during 1999. It is also effectively
managing a transition to new technology by becoming the top Internet
brokerage service in Italy.
Advertising and media companies are also benefiting from technology. Not
only does the Web provide an entirely new communications channel and
service opportunity, but technology companies are also paying hefty sums
for advertising in order to establish global brands. Companies
benefiting from this trend include Television Francaise, or TF1, which
is being privatized from state control and reaping a windfall in new
advertising revenues. Also in France, Havas Advertising, the nation's
leading advertising agency, has become a leading designer of Web sites
for other French companies.
* OUTLOOK REMAINS BRIGHT
Given the trends and the performance of many fund holdings, we can only
be optimistic about the coming months. Although many technology stocks
have retreated from their peak prices early in 2000, the long-term
trends remain in place. The cyclical recovery in the global economy also
contributes to the positive background for equity investors. In Japan
and Europe, consumer spending is gathering pace and should help
economies to accelerate during the next several quarters. Business
capital spending is already strong in these regions. Emerging markets
are also enjoying strong business conditions. International markets are
poised to outperform the United States, in part because of the efforts
of the Federal Reserve Board to restrain U.S. growth. International
markets are also benefiting from deregulation and a rising number of
stock offerings, which provide a fertile field for our stock selection
techniques.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 3/31/00, there is no guarantee the fund will
continue to hold these securities in the future. The fund invests all or
a portion of its assets in small to midsize companies. Such investments
increase the risk of greater price fluctuations. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
Performance Summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International New Opportunities Fund is designed to seek long-term
capital appreciation through investments in common stocks that are
principally traded outside the United States.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00
Class A Class B Class C Class M
(inception dates) (1/3/95) (7/21/95) (2/1/99) (7/21/95)
NAV POP NAV CDSC NAV CDSC NAV POP
<C> <S> <S> <S> <S> <S> <S> <S> <S>
- ----------------------------------------------------------------------------------------
6 months* 66.98% 57.33% 66.30% 61.30% 66.55% 65.55% 66.43% 60.65%
- ----------------------------------------------------------------------------------------
1 year* 100.61 89.14 99.12 94.12 99.52 98.52 99.57 92.53
- ----------------------------------------------------------------------------------------
5 years 243.91 224.00 231.61 229.61 232.14 232.14 235.91 224.33
Annual average 28.02 26.51 27.09 26.94 27.13 27.13 27.42 26.53
- ----------------------------------------------------------------------------------------
Life of fund 262.12 241.24 248.31 247.31 249.19 249.19 253.26 240.86
Annual average 27.84 26.39 26.89 26.82 26.95 26.95 27.23 26.37
- ----------------------------------------------------------------------------------------
* Returns were achieved during favorable market conditions that may not be sustained.
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/00
MSCI
Emerging
Markets MSCI Consumer
Index EAFE Index price index
- -------------------------------------------------------------------------
6 months 31.12% 16.86% 2.03%
- -------------------------------------------------------------------------
1 year 57.02 25.09 3.69
- -------------------------------------------------------------------------
5 years 27.77 79.34 13.15
Annual average 5.02 12.39 2.50
- -------------------------------------------------------------------------
Life of fund 13.31 82.68 13.98
Annual average 2.41 12.17 2.52
- -------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their
inception are derived from the historical performance of class A shares,
adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and in the case of class B and class
M shares the higher operating expenses applicable to such shares. For
class C shares, returns for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect
both the CDSC currently applicable to class C shares, which is 1% for
the first year and is eliminated thereafter, and the higher operating
expenses applicable to class C shares. All returns assume reinvestment
of distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. Performance data reflect an expense
limitation previously in effect. Without it, total returns would have
been lower. For a portion of this period, the fund was offered on a
limited basis and had limited assets.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/00
Class A Class B Class C Class M
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Distributions (number) 1 1 1 1
- -----------------------------------------------------------------------------------------------------
Capital gains
Long-term $1.406 $1.406 $1.406 $1.406
- -----------------------------------------------------------------------------------------------------
Short-term 0.062 0.062 0.062 0.062
- -----------------------------------------------------------------------------------------------------
Total $1.468 $1.468 $1.468 $1.468
- -----------------------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- -----------------------------------------------------------------------------------------------------
9/30/99 $16.64 $17.66 $16.20 $16.58 $16.38 $16.97
- -----------------------------------------------------------------------------------------------------
3/31/00 26.07 27.66 25.23 25.90 25.55 26.48
- -----------------------------------------------------------------------------------------------------
</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) EAFE Index* is an unmanaged
list of equity securities from Europe, Australasia and the Far East,
with all values expressed in U.S. dollars.
Morgan Stanley Capital International (MSCI) Emerging Markets Index* is
an unmanaged list of equity securities from emerging markets with all
values expressed in U.S. dollars.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
* Securities indexes assume reinvestment of all distributions and
interest payments and do not take in account brokerage fees or taxes.
Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest
directly in an index.
A guide to the financial statements
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, 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.
The fund's portfolio
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (97.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Banking (3.0%)
- ----------------------------------------------------------------------------------------------------------------------------
943,263 BiPop-Carire SpA (Italy) (REL) $ 98,997,897
3,559,700 Grupo Financiero Bancomer, S.A. de C.V. (Mexico) (NON) 16,353,610
142,197 Yapi ve Kredi Bankasi A.S. GDR (Turkey) (NON) 3,626,024
----------------
118,977,531
Beverage (0.4%)
- ----------------------------------------------------------------------------------------------------------------------------
750,260 Coca-Cola Femsa S.A. ADR (Mexico) 13,926,701
100,800 South African Breweries, Ltd. (South Africa) 772,651
----------------
14,699,352
Broadcasting (3.8%)
- ----------------------------------------------------------------------------------------------------------------------------
1,796,205 Capital Radio PLC (United Kingdom) 48,484,737
297,474 EM TV & Merchandising AG (Germany) 24,374,722
1,221 Fuji Television Network, Inc. (Japan) 21,230,634
1,941,986 Mediaset SPA (Italy) 38,501,426
189,383 ProSieben Media AG (Germany) 21,612,861
----------------
154,204,380
Capital Goods (1.2%)
- ----------------------------------------------------------------------------------------------------------------------------
198,830 Altran Technologies SA (France) 48,420,076
Commercial and Consumer Services (2.7%)
- ----------------------------------------------------------------------------------------------------------------------------
160,984 GfK AG (Germany) (NON) 8,916,904
95,593 Havas Advertising SA (France) 51,579,593
167,100 TPI Paginas Amarillas (Spain) 7,259,317
331,562 TPI Paginas Amarillas 144A (Spain) 14,404,031
1,457,109 WPP Group PLC (United Kingdom) 25,571,316
----------------
107,731,161
Communications Equipment (8.8%)
- ----------------------------------------------------------------------------------------------------------------------------
25,120 Gilat Satellite Networks Ltd. (Israel) (NON) 2,945,320
465,000 Matsushita Communication Industrial Co., Ltd. (Japan) 85,850,347
895,202 Nortel Networks Corp. (Canada) 112,487,085
717,057 Nokia Oyj AB Class A (Finland) 151,338,465
----------------
352,621,217
Computers (--%)
- ----------------------------------------------------------------------------------------------------------------------------
400 Sharp Corp. (Japan) 8,577
200 Trend Micro Inc. (Japan) (NON) 35,167
----------------
43,744
Conglomerates (0.9%)
- ----------------------------------------------------------------------------------------------------------------------------
9,306,293 Aegis Group PLC (United Kingdom) 28,751,327
2,749,527 Aegis Group PLC 144A (United Kingdom) 8,494,526
----------------
37,245,853
Consumer (4.6%)
- ----------------------------------------------------------------------------------------------------------------------------
657,700 Sony Corp. (Japan) 93,158,640
128,122 Television Francaise I (TF1) (France) 94,214,513
----------------
187,373,153
Consumer Goods (0.2%)
- ----------------------------------------------------------------------------------------------------------------------------
473 Hindustan Lever Ltd. (India) (NON) 26,501
37,547 Fancl Corp. (Japan) 6,154,524
----------------
6,181,025
Electrical Equipment (1.5%)
- ----------------------------------------------------------------------------------------------------------------------------
152,160 Keyence Corp (Japan) 60,941,291
Electronics (12.4%)
- ----------------------------------------------------------------------------------------------------------------------------
1,915,800 Chartered Semiconductor Manufacturing (Singapore) (NON) 18,139,077
411,908 Epcos AG (Germany) (NON) 54,285,355
10 Fuji Soft AB, Inc. (Japan) 684
111,800 Fujitsu Support and Services Inc. 144A (Japan) 18,904,542
246,700 Konami Co., Ltd. (Japan) 16,869,200
340,000 Murata Manufacturing Co. Ltd. (Japan) 82,866,074
126,900 Rohm Co. Ltd. (Japan) 44,254,469
166,259 Samsung Electronics Co. (South Korea) 50,404,312
400,039 STMicroelectronics N.V. ADR (France) 74,882,300
4,587,000 Taiwan Semiconductor Manufacturing Co. (Taiwan) 30,952,436
414,000 Tokyo Electron Ltd. (Japan) (NON) 62,684,380
1,403,000 Venture Manufacturing Ltd. (Singapore) 19,269,725
7,654,000 Winbond Electronics Corp. (Taiwan) (NON) 22,800,757
89,200 Winbond Electronics Corp. 144A GDR (Taiwan) (NON) 2,620,250
----------------
498,933,561
Entertainment (0.2%)
- ----------------------------------------------------------------------------------------------------------------------------
1,795,000 Corporacion Interamericana de Entretenimiento
S.A. (Mexico) (NON) 9,041,941
Food (0.9%)
- ----------------------------------------------------------------------------------------------------------------------------
198,800 C TWO-NETWORK Co., Ltd. (Japan) 34,955,553
Insurance (1.2%)
- ----------------------------------------------------------------------------------------------------------------------------
2,410,854 Mediolanum SPA (Italy) 42,524,692
1,571,244 Old Mutual PLC 144A (United Kingdom) 3,753,309
----------------
46,278,001
Investment Banking/brokerage (5.7%)
- ----------------------------------------------------------------------------------------------------------------------------
201,643 Consors Discount Broker AG (Germany) (NON) 28,211,368
5,350,000 Nikko Securities Co. Ltd. (Japan) (NON) 81,214,223
2,092,000 Nomura Securities Co. Ltd. (Japan) (NON) 68,459,510
2,047,100 TD Waterhouse Group, Inc. (NON) 51,177,500
----------------
229,062,601
Health Care Services (0.5%)
- ----------------------------------------------------------------------------------------------------------------------------
1,465,498 Misys PLC (United Kingdom) 20,444,137
Machinery (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
275,500 SMC Corp. 57,861,190
219,000 THK Co., Ltd. (Japan) 10,097,490
----------------
67,958,680
Manufacturing (1.2%)
- ----------------------------------------------------------------------------------------------------------------------------
1,950,118 Bombardier, Inc. (Canada) 49,048,993
Pharmaceuticals (1.8%)
- ----------------------------------------------------------------------------------------------------------------------------
223,036 Sanofi-Synthelabo SA (France) (NON) 8,488,025
917,000 Takeda Chemical Industries (Japan) 65,391,228
----------------
73,879,253
Publishing (2.8%)
- ----------------------------------------------------------------------------------------------------------------------------
4,467,326 Gruppo Editoriale L'Espresso (Italy) 90,274,830
2,434,768 Trinity PLC (United Kingdom) 23,404,957
----------------
113,679,787
Retail (3.4%)
- ----------------------------------------------------------------------------------------------------------------------------
12,891,635 Esprit Holdings Ltd. 12,582,858
240,183 Medion AG (Germany) 24,084,350
5,363,800 Migros Turk T.A.S. (Turkey) 2,960,606
561,000 Seven-Eleven Japan Co., Ltd. (Japan) (NON) 64,665,429
9,600 Shimamura Co., Ltd. (Japan) 1,050,308
393,600 Tsuruha Co., Ltd. (Japan) 29,605,549
----------------
134,949,100
Semiconductor Production Equipment (1.3%)
- ----------------------------------------------------------------------------------------------------------------------------
453,248 ASM Lithography Holding N.V. (Netherlands) (NON) 50,513,810
Software (5.3%)
- ----------------------------------------------------------------------------------------------------------------------------
585,090 Fantastic Corp. (Switzerland) (NON) 17,304,827
1,400,663 Logica PLC (United Kingdom) 46,863,978
123,600 Oracle Corp. (Japan) 103,835,108
3,916,650 Sage Group (The) PLC (United Kingdom) 43,879,160
----------------
211,883,073
Technology Services (14.3%)
- ----------------------------------------------------------------------------------------------------------------------------
1,741,410 ARM Holdings PLC (United Kingdom) (NON) 105,104,107
2,627,687 Capita Group PLC (United Kingdom) 67,079,003
447,248 CMG PLC (United Kingdom) 38,290,154
2,541,000 Hon Hai Precision Industry (Taiwan) 29,525,115
1,719,089 KPNQwest N.V. (Netherlands) (NON) 91,280,188
79,160 Obic Co., Ltd. (Japan) 55,675,686
1,074,515 SEMA Group PLC (United Kingdom) 21,423,788
119,800 Softbank Corp. (Japan) 107,079,222
98 Yahoo Japan Corp. (Japan) (NON) 59,640,520
----------------
575,097,783
Telecommunications (18.0%)
- ----------------------------------------------------------------------------------------------------------------------------
3,013,900 Carso Global Telecom (Mexico) (NON) 9,301,356
8,335,000 China Telecom Ltd. (Hong Kong) (NON) 73,057,696
1,879,119 Colt Telecom Group PLC (United Kingdom) (NON) 89,326,036
60,500 Hellenic Telecommunication Organization SA GDR (Greece) 877,250
426,700 Kyocera Corp. (Japan) (NON) 71,526,541
3,761 NTT DoCoMo (Japan) 154,672,365
617,400 SK Telecom Co., Ltd. ADR (South Korea) 24,078,600
916,384 Sonera Group OYJ (Finland) 62,397,961
404,200 Telefonos de Mexico S.A. ADR Class L, (Mexico) 27,081,400
4,540,927 Telewest Communications PLC (United Kingdom) (NON) 34,819,317
31,664,346 Vodafone Group PLC (United Kingdom) 175,732,766
----------------
722,871,288
----------------
Total Common Stocks (cost $2,460,338,743) $ 3,927,036,344
PREFERRED STOCKS (2.5%) (a) (cost $62,732,211)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------
171,629 Marschollek, Lautenschlaeger und Partner AG DEM
$3.05 pfd. (Germany) $ 101,785,437
UNITS (0.5%) (a)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------
29,505 Infosys Technologies Ltd. equity participation note
(issued by Goldman Sachs & Co.) (India) $ 12,471,764
12,300 Infosys Technologies Ltd. II equity participation note
(issued by Goldman Sachs & Co.) (India) 5,334,387
75,500 HCL Technologies Ltd. II equity participation note
(issued by Goldman Sachs & Co.) (India) 3,193,650
----------------
Total Units (cost $15,376,257) $ 20,999,801
CONVERTIBLE PREFERRED STOCKS (--%) (a) (cost $883,238)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------
22,600 Pentamedia Graphics 6.6732% cv. pfd. (India) $ 653,592
SHORT-TERM INVESTMENTS (2.4%) (a)(cost $96,755,000)
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
$96,755,000 Interest in $779,235,000 joint repurchase agreement
dated March 31, 2000 with S.B.C. Warburg Inc.due
April 3, 2000 with respect to various U.S. Treasury
obligations -- maturity value of$ 96,804,184 for
an effective yield of 6.10% $ 96,755,000
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,636,085,449) (b) $ 4,147,230,174
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Percentages indicated are based on net assets of $4,016,904,546.
(b) The aggregate identified cost on a tax basis is $2,642,455,686,
resulting in gross unrealized appreciation and depreciation of
$1,575,160,658 and $70,386,170, respectively, or net unrealized
appreciation of $1,504,774,488.
(NON) Non-income-producing security.
(REL) BiPop-Carire SpA is involved in a joint venture
with Putnam Investments.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR or GDR after the name of a foreign holding stands for American
Depositary Receipts or Global Depositary Receipts, respectively,
representing ownership of foreign securities on deposit with a
domestic custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at March 31, 2000:
(as percentage of Market Value)
Canada 3.9%
Finland 5.2
France 6.7
Germany 6.4
Hong Kong 2.1
India 1.0
Italy 6.5
Japan 35.1
Mexico 1.8
Netherlands 3.4
Singapore 1.0
South Korea 1.8
Spain 1.0
Taiwan 2.1
United Kingdom 18.4
Other 3.6
-------
Total 100.0%
- -----------------------------------------------------------------------
Forward Currency Contracts to Sell at March 31, 2000 (Unaudited)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- -----------------------------------------------------------------------
Japanese Yen $250,188,752 $242,478,017 7/07/00 $ (7,710,735)
Japanese Yen 220,798,386 205,007,350 5/25/00 (15,791,036)
- -----------------------------------------------------------------------
$(23,501,771)
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 2000 (Unaudited)
Assets
- ----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $2,636,085,449) (Note 1) $ 4,147,230,174
- ----------------------------------------------------------------------------------------------
Foreign currency (cost $10,070,440) 10,332,013
- ----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 3,752,319
- ----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 40,310,301
- ----------------------------------------------------------------------------------------------
Receivable for securities sold 369,244,966
- ----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 6,513,382
- ----------------------------------------------------------------------------------------------
Total assets 4,577,383,155
Liabilities
- ----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 6,334,313
- ----------------------------------------------------------------------------------------------
Payable for securities purchased 518,691,220
- ----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 7,931,371
- ----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 566,930
- ----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 47,263
- ----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,575
- ----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,073,228
- ----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 23,501,771
- ----------------------------------------------------------------------------------------------
Other accrued expenses 324,938
- ----------------------------------------------------------------------------------------------
Total liabilities 560,478,609
- ----------------------------------------------------------------------------------------------
Net assets $4,016,904,546
Represented by
- ----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 2,131,950,437
- ----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (14,576,009)
- ----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
and foreign currency transactions (Note 1) 411,608,730
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 1,487,921,388
- ----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $4,016,904,546
Computation of net asset value and offering price
- ----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,894,633,205 divided by 72,672,471 shares) $26.07
- ----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $26.07)* $27.66
- ----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,903,810,559 divided by 75,463,880 shares)** $25.23
- ----------------------------------------------------------------------------------------------
Net asset value and redemption price per class C share
($70,854,100 divided by 2,735,598, shares)** $25.90
- ----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($147,606,682 divided by 5,776,902 shares) $25.55
- ----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $25.55)* $26.48
- ----------------------------------------------------------------------------------------------
* 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.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 2000 (Unaudited)
Investment income:
- ----------------------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign tax of $1,015,283) $ 5,975,214
- ----------------------------------------------------------------------------------------------
Interest 1,132,698
- ----------------------------------------------------------------------------------------------
Total investment income 7,107,912
Expenses:
- ----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 13,535,072
- ----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,237,221
- ----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 15,232
- ----------------------------------------------------------------------------------------------
Administrative services (Note 2) 15,326
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,812,331
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 7,801,736
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 141,112
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 465,267
- ----------------------------------------------------------------------------------------------
Amortization of organization expense (Note 1) 809
- ----------------------------------------------------------------------------------------------
Reports to shareholders 55,672
- ----------------------------------------------------------------------------------------------
Registration fees 196,891
- ----------------------------------------------------------------------------------------------
Auditing 36,087
- ----------------------------------------------------------------------------------------------
Legal 8,732
- ----------------------------------------------------------------------------------------------
Postage 191,740
- ----------------------------------------------------------------------------------------------
Other 521,078
- ----------------------------------------------------------------------------------------------
Total expenses 28,034,306
- ----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,047,475)
- ----------------------------------------------------------------------------------------------
Net expenses 26,986,831
- ----------------------------------------------------------------------------------------------
Net investment loss (19,878,919)
- ----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 434,314,998
- ----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 8,263,114
- ----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (15,461,381)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 1,002,782,403
- ----------------------------------------------------------------------------------------------
Net gain on investments 1,429,899,134
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,410,020,215
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
2000* 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment loss $(19,878,919) $(15,335,477)
- -------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 442,578,112 286,475,647
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 987,321,022 487,599,465
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,410,020,215 758,739,635
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (83,760,025) --
- -------------------------------------------------------------------------------------------------------
Class B (96,628,101) --
- -------------------------------------------------------------------------------------------------------
Class C (1,069,334) --
- -------------------------------------------------------------------------------------------------------
Class M (7,574,068) --
- -------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 746,266,011 (207,264,183)
- -------------------------------------------------------------------------------------------------------
Total increase in net assets 1,967,254,698 551,475,452
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 2,049,649,848 1,498,174,396
- -------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss
and undistributed net investment income of $14,576,009
and $5,302,910, respectively) $4,016,904,546 $2,049,649,848
- -------------------------------------------------------------------------------------------------------
* Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- --------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Jan. 3, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.64 $10.81 $13.60 $11.69 $10.29 $8.50
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.10) (.06) (.04) (.03) .04(e) .02(e)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 11.00 5.89 (1.63) 1.98 1.37 1.77
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 10.90 5.83 (1.67) 1.95 1.41 1.79
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01) (.04) (.01) --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d) --
- --------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.12) (.04) (.01) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $26.07 $16.64 $10.81 $13.60 $11.69 $10.29
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 66.98* 53.93 (12.37) 16.74 13.76 21.06*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,894,633 $905,842 $630,422 $859,999 $499,396 $15,137
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .69* 1.54 1.75 1.75 1.95(e) 1.23*(e)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.43)* (.45) (.30) (.24) .34 .86*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.35* 204.39 170.28 141.29 24.69 9.24*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses for the fund reflect a
reduction of less than $0.01 and $0.02 per share for each share class
for periods ended September 30, 1996 and 1995, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- --------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 July 21, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.20 $10.61 $13.45 $11.61 $10.28 $10.25
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.18) (.16) (.13) (.13) (.05)(e) (.01)(e)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 10.68 5.75 (1.60) 1.97 1.39 .04
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 10.50 5.59 (1.73) 1.84 1.34 .03
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.01) --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d) --
- --------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.11) -- (.01) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $25.23 $16.20 $10.61 $13.45 $11.61 $10.28
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 66.30* 52.69 (12.98) 15.87 13.02 .29*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,903,811 $1,053,443 $803,785 $1,079,912 $573,129 $7,053
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.06* 2.29 2.50 2.50 2.72(e) .83*(e)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.80)* (1.20) (1.05) (.99) (.43) (.20)*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.35* 204.39 170.28 141.29 24.69 9.24*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses for the fund reflect a
reduction of less than $0.01 and $0.02 per share for each share class
for periods ended September 30, 1996 and 1995, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- --------------------------------------------------------------------------------------------------------------------------
Six months
Ended For the period
Per-share March 31 Feb. 1, 1999+
operating performance (Unaudited) to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $16.58 $13.82
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.20) (.12)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 10.99 2.88
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 10.79 2.76
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) --
- --------------------------------------------------------------------------------------------------------------------------
Return of capital -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.47) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $25.90 $16.58
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 66.55* 19.97*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $70,854 $6,780
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.06* 1.52*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.84)* (.78)*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.35* 204.39
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses for the fund reflect a
reduction of less than $0.01 and $0.02 per share for each share class
for periods ended September 30, 1996 and 1995, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 July 21, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.38 $10.69 $13.51 $11.64 $10.29 $10.25
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.15) (.13) (.10) (.10) (.02)(e) --(e)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 10.79 5.82 (1.61) 1.98 1.38 .04
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 10.64 5.69 (1.71) 1.88 1.36 .04
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- (.01) (.01) --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d) --
- --------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.11) (.01) (.01) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $25.55 $16.38 $10.69 $13.51 $11.64 $10.29
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 66.43* 53.23 (12.76) 16.12 13.22 .39*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $147,607 $83,585 $63,967 $91,390 $52,182 $1,259
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .94* 2.04 2.25 2.25 2.46(e) .79*(e)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.68)* (.95) (.80) (.74) (.17) (.15)*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.35* 204.39 170.28 141.29 24.69 9.24*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses for the fund reflect a
reduction of less than $0.01 and $0.02 per share for each share class
for periods ended September 30, 1996 and 1995, respectively.
</TABLE>
Notes to financial statements
March 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam International New Opportunities Fund (the "fund") is a series of
Putnam Investment Funds (the "Trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The objective of the fund is to seek
long-term capital appreciation by investing primarily in common stocks
that offer potential for capital appreciation and are primarily traded
in security markets outside the United States.
The fund offers class A, class B, class C and class M shares. 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 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) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using current forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate with
changes in currency exchange rates. The contract is "marked to market"
daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain
or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The fund
could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter into a
closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended March 31, 2000, the fund had no borrowings against the line of
credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
J) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
K) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $6,425. The expenses have been fully
amortized on a projected net asset basis over a five year period as of
March 31, 2000.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500
million, 0.85% of the next $500 million, 0.80% of the next $5 billion,
0.775% of the next $5 billion, 0.755% of the next $5 billion, 0.74% of
the next $5 billion, and 0.73% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended March 31, 2000, fund expenses were reduced by
$1,047,475 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $3,018
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam 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. Effective May 1, 2000 the
fund's class B shares annual rate will be 0.90%.
For the six months ended March 31, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $689,824 and $33,920
from the sale of class A and class M shares, respectively and received
$573,938 and $4,280 in contingent deferred sales charges from
redemptions of class B and 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 March 31, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received $50,789 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $2,766,462,697 and $2,172,181,327, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At March 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended March 31, 2000
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 48,802,314 $1,144,891,932
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,512,974 78,409,583
- ---------------------------------------------------------------------------
52,315,288 1,223,301,515
Shares
repurchased (34,069,459) (792,578,192)
- ---------------------------------------------------------------------------
Net decrease 18,245,829 $430,723,323
- ---------------------------------------------------------------------------
Year ended September 30, 1999
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 97,757,355 $1,353,981,693
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ---------------------------------------------------------------------------
97,757,355 1,353,981,693
Shares
repurchased (101,658,562) (1,416,390,912)
- ---------------------------------------------------------------------------
Net decrease (3,901,207) $(62,409,219)
- ---------------------------------------------------------------------------
Six months ended March 31, 2000
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 15,148,249 $352,546,977
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 3,742,444 81,023,906
- ---------------------------------------------------------------------------
18,890,693 433,570,883
Shares
repurchased (8,449,927) (191,049,809)
- ---------------------------------------------------------------------------
Net increase 10,440,766 $242,521,074
- ---------------------------------------------------------------------------
Year ended September 30, 1999
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 11,537,016 $157,850,106
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- ---------------------------------------------------------------------------
11,537,016 157,850,106
Shares
repurchased (22,303,116) (297,113,522)
- ---------------------------------------------------------------------------
Net decrease (10,766,100) $(139,263,416)
- ---------------------------------------------------------------------------
Six months ended March 31, 2000
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,741,010 $68,340,941
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 37,361 829,036
- ---------------------------------------------------------------------------
2,778,371 69,169,977
Shares
repurchased (451,743) (11,363,587)
- ---------------------------------------------------------------------------
Net increase 2,326,628 $57,806,390
- ---------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations) to
September 30, 1999
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 525,383 $7,702,343
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- ---------------------------------------------------------------------------
525,383 7,702,343
Shares
repurchased (116,413) (1,625,823)
- ---------------------------------------------------------------------------
Net increase 408,970 $6,076,520
- ---------------------------------------------------------------------------
Six months ended March 31, 2000
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 1,843,687 $42,831,432
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 307,454 6,736,315
- ---------------------------------------------------------------------------
2,151,141 49,567,747
Shares
repurchased (1,477,971) (34,352,523)
- ---------------------------------------------------------------------------
Net increase 673,170 $15,215,224
- ---------------------------------------------------------------------------
Year ended September 30, 1999
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,876,518 $39,720,844
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ---------------------------------------------------------------------------
2,876,518 39,720,844
Shares
repurchased (3,757,198) (51,388,912)
- ---------------------------------------------------------------------------
Net decrease (880,680) $(11,668,068)
- ---------------------------------------------------------------------------
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
Robert J. Swift
Vice President and Fund Manager
Carmel Peters
Vice President and Fund Manager
Stephen Dexter
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam
International New Opportunities Fund. It may also be used as sales
literature when preceded or accompanied by the current prospectus, which
gives details of sales charges, investment objectives, and operating
policies of the fund, and the most recent copy of Putnam's Quarterly
Performance Summary. 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
SA010-60355 539/2AH/2AI 5/00
