Putnam
Global Natural
Resources
Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-03
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
We are pleased to report positive performance for Putnam Global Natural
Resources Fund for the 12 months ended August 31, 2003. Because of the
specialized nature of the fund's portfolio, however, its results lagged
both that of its benchmark index and its Lipper category average. You
will find the details on the facing page.
The results for the full fiscal year reflect a shift for the better in
the mood of global equity investors, in contrast to the prevailing mood
at the period's midpoint, when a cloud of political and economic
uncertainties hung persistently over the markets. Some of these
uncertainties are becoming clarified, if not resolved, and the economies
of many countries and regions are exhibiting signs of increasing vigor.
As health returns to the global economy, the need for natural resources
should increase, brightening the prospects for the companies in which
your fund invests.
As the fund begins a new fiscal year that we hope will bring renewed
strength to the global equity markets, what we told you at the midpoint
of the fiscal year bears repeating. We deeply appreciate your continued
confidence in Putnam and we firmly believe that over the long haul your
patience will be rewarded.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
October 15, 2003
Report from Fund Management
Fund highlights
* Putnam Global Natural Resources Fund recorded a gain for the year
ended August 31, 2003, with class A shares returning 11.12% at net asset
value and 4.73% at public offering price.
* The fund's emphasis on the energy sector caused it to underperform its
more broadly diversified benchmark, the S&P 500 Index, which returned
12.07% for the period.
* Differences in portfolio composition caused the fund's performance to
lag the 15.00% average return of the funds in the Lipper Natural
Resources Funds category over the period.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
Buoyed by a robust global equity market rally that began in March and
continued through period-end, Putnam Global Natural Resources Fund
turned in solid absolute performance for its fiscal year. The fund's
emphasis on energy-related companies caused it to modestly underperform
its more broadly diversified benchmark, the S&P 500 Index, as the market
rally that characterized the second half of the period favored other,
less defensive sectors.
FUND PROFILE
Putnam Global Natural Resources Fund seeks capital appreciation by
investing in stocks of companies in the energy and natural resources
industries. The fund targets companies in markets worldwide, in
industries such as oil and gas, chemicals, metals and mining, utilities,
and paper and forest products. The fund may be appropriate for investors
seeking long-term growth of capital.
The fund's portfolio composition often differs from its Lipper peer
group as we pursue a more diversified strategy in the global natural
resources sector. We work to balance fund holdings in the energy
industry with a significant exposure to basic materials industries such
as metals, chemicals, and paper. We believe these differences likely
account for the fund's underper formance versus its Lipper category for
the period.
Market overview
The fund's fiscal year results should be evaluated in the context of an
economic and market environment that was favorable for energy-related
holdings in the first half of the period but became less hospitable in
the latter half of the period.
The first half of the period was dominated by investor concerns about
the continued erosion of corporate earnings, geopolitical tension over
North Korea and Iraq, and the effectiveness of the U.S. Federal Reserve
Board's monetary policy. Stock prices exhibited unusual volatility
during this period, falling precipitously in the months leading up to
the conflict in Iraq. Energy-related holdings, which comprise about 80%
of the fund's portfolio, fared relatively well during this period as
risk-averse investors were drawn to the more defensive sectors of the
market. In addition, stock prices responded to rising energy prices, as
investors worried about the potential for war disrupting the flow of oil
and natural gas from the resource-rich Middle East.
Fueled by the end of major conflict in Iraq, continued favorable
monetary and fiscal policies, as well as signs of improving economic
growth and rising corporate earnings, stocks rallied robustly in the
second half of the period. However, the stock prices of companies in
energy-related industries didn't rise as much as those in the broader
market because investor focus shifted from defensive sectors to
higher-risk areas, such as technology. In addition, energy prices
dropped as geopolitical tensions eased.
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MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 8/31/03
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Equities
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S&P 500 Index (broad stock market) 12.07%
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Russell 1000 Growth Index (large-company growth stocks) 14.08%
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Russell 1000 Value Index (large-company value stocks) 11.63%
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MSCI World Index (global stocks) 10.92%
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Bonds
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Lehman Aggregate Bond Index (taxable bonds) 4.36%
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Lehman Municipal Bond Index (tax-exempt bonds) 3.14%
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Lehman Global Aggregate Bond Index (global bond market) 8.54%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 8/31/03.
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Strategy overview
The fund maintained its emphasis on energy-related holdings during the
period, particularly oil and natural gas exploration and production
companies. We believe this segment of the natural resources sector is
poised to benefit from the secular trend of a decreasing supply of
natural gas in North America amid continued growing demand for this
efficient, clean energy source. Consistent with this theme, the
portfolio also emphasized energy services companies, which provide
pumping, process, pipeline, chemical, and completion services to oil and
natural gas exploration and production companies. Investing in companies
that can offer power producers an alternative to increasingly expensive
natural gas, such as coal, was another aspect of this strategy. The fund
also increased its exposure to large, integrated oil companies,
believing that these high-quality companies were available at attractive
valuations and offered solid long-term growth potential. However, this
strategy did not contribute to performance during the period, as
investors favored higher-risk, lower-quality companies amid the
liquidity-driven rally.
Within basic materials stocks, which comprise about 20% of the fund's
portfolio, we favored diversified metals at the expense of chemical
companies. We believe that diversified metal companies offer more
reliable cash flows than specialty miners. Chemical companies, which are
dependent on oil and gas products as feedstock, are challenged by rising
prices on these commodities. We also established a small position in the
building materials industry during the period.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED
as of as of
2/28/03 8/31/03
Oil and gas 63.3% 63.9%
Energy services 17.5% 14.5%
Chemicals 5.4% 8.1%
Metals 6.0% 6.7%
Forest products and packaging 3.9% 2.6%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
Fund holdings Apache Corporation -- one of the top ten holdings -- and
XTO Energy remained standout per form ers among the fund's large
exposure to oil and natural gas exploration and pro duction companies.
We added the Apache position during the period, as this well-run company
has a history of creating value through acquisitions and effective
manage ment. Canadian natural gas producers -- such as Nexen Inc.,
EnCana, and Canadian Natural Resources Limited, another top-ten holding
- -- were added at what we believe were attractive valuations relative to
their U.S. counterparts. We believe that these producers, which appear
poised to benefit from growing demand in the United States and Canada,
are an overlooked segment of the market.
The fund also initiated a position in U.K.-based natural gas explorer
and producer BG Group during the period. We were attracted by BG Group's
leadership in harvesting and delivering liquefied natural gas (LNG) to
the world's leading markets. LNG is created by cooling natural gas to
the point at which it becomes liquid, which is easier to transport.
Other factors that influenced the purchase were the strong performance
of BG's Atlantic LNG export facilities in Trinidad and Tobago as well as
new U.S. import capacity created by a recently signed long-term lease on
its Louisiana regasification facility -- one of only four such
facilities in the United States. Regasification plants convert LNG back
into a gas form for piping to consumers.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
1 ConocoPhillips
United States
Oil and gas
2 Total SA ADR
France
Oil and gas
3 Exxon Mobil Corp.
United States
Oil and gas
4 Royal Dutch Petroleum Co. ADR
Netherlands
Oil and gas
5 ENI SpA
Italy
Oil and gas
6 Apache Corp.
United States
Oil and gas
7 Halliburton Co.
United States
Energy
8 GlobalSantaFe Corp.
Cayman Islands
Energy
9 Canadian Natural Resources, Ltd.
Canada
Oil and gas
10 BG Group PLC
United Kingdom
Oil and gas
Footnote reads:
These holdings represent 43.4% of the fund's net assets as of 8/31/03.
The fund's holdings will change over time.
We increased the fund's exposure to large, multinational, integrated oil
companies during the period -- such as France-based Total, SA and
Italy-based ENI SpA -- as many of these companies were available at what we
believed were attractive valuations. While the team believes these
high-quality companies offer solid long-term growth potential, two of the
fund's largest positions in this market segment, BP PLC and Royal Dutch
Petroleum Co., proved among the most significant detractors from relative
performance during the period. Two factors contributed to the relative
underperformance of integrated oil companies. First, in a global equity
market rally that was driven in large part by the liquidity provided by
historically low interest rates, investors favored higher-risk companies,
which benefit disproportionately under such conditions. Large integrated
oil companies, which are perceived as relatively stable, are viewed as
better defensive positions. In addition, as oil prices fell in the wake of
easing geopolitical tensions in Iraq, investors expected the profits of
these large oil companies to suffer the most.
In the energy services segment of the fund, we took advantage of strong
price appreciation to trim a large exposure to BJ Services Company, as
its stock's valuation level had risen above our fair value target price.
This holding was among the top contributors to relative results for the
period as were holdings of other service giants Halliburton Company and
Schlumberger Limited. Halliburton's stock price benefited from the
development of strategies expected to expedite the settlement of
asbestos and silica personal injury claims against two of the company's
subsidiaries.
Diversified metal companies remain our main emphasis in the basic
materials segment of the portfolio. Australian-based BHP Billiton, was a
strong contributor in this category. Gold miner, Newmont Mining
Corporation, and aluminum producer, Alcoa, were solid performers among
mining specialists. Elsewhere in basic materials, we added du Pont to
the fund's list of chemical companies, as its stockholders are expected
to benefit from a share repurchase program. We also initiated a position
in Ireland-based building materials giant CRH PLC, which we believe was
attractively valued and is poised to benefit from consolidation among
cement providers. Please note that all holdings discussed in this report
are subject to review in accordance with the fund's investment strategy
and may vary in the future.
OF SPECIAL INTEREST
In April 2003, Joshua Brooks became a member of the Putnam Global
Natural Resources Team. Mr. Brooks, who joined Putnam in 2003 as
Director, Global Equity Research, has more than 12 years of
investment experience. In September 2003, Mr. Brooks was named Portfolio
Leader, replacing Lisa Svensson. In addition, Maria Drew, Ellis Eckland,
Christopher O'Malley, and Konstantin Stoev were named members of the
Putnam Global Natural Resources Team. These new team members are all
experienced analysts on the Putnam Global Equity Research Team.
The fund's management team
The fund is managed by the Putnam Global Natural Resources Team. The
members of the team are Joshua Brooks (Portfolio Leader), Maria Drew,
Ellis Eckland, Christopher O'Malley, and Konstantin Stoev.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
The outlook for your fund is affected by factors specific to the natural
resources segment of the economy as well as by broader market factors.
As discussed, we expect scarcity and growing demand to lead to sustained
higher natural gas prices. We have positioned the fund to benefit from
this forecast. Likewise, the fund's exposure to integrated oil
companies should benefit from high oil prices.
We believe broader market sentiment is also likely to shape the fund's
performance in the coming months. The global stock-market rally has been
driven by accumulating signs of an acceleration in global economic
growth. Yet it is still unclear whether that growth will be sufficiently
robust and prolonged to drive a sustained recovery in capital spending
(a key ingredient for long-term expansion). In our view, major
structural constraints on equity markets remain in place -- notably,
overcapacity and weak pricing power across many industries. Furthermore,
investors today may be too complacent about geopolitical risks, just as
they were too fearful about such risks last winter. We expect market
leadership to shift from its current liquidity-driven focus on the
stocks of smaller-cap companies and those with lower-quality financials
to stocks of larger-cap companies with higher-quality financials. We
believe this shift should benefit the fund's holdings in larger-cap
companies with high-quality financials, such as integrated oil.
Management will continue to target companies in the global natural
resources area whose business worth is believed to be more than their
current stock prices indicate. The companies we seek should also have
strong management teams, solid fundamentals, a favorable operating
environment, and a competitive advantage.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. International
investing involves certain risks, such as currency fluctuations,
economic instability, and political developments. The fund concentrates
its investments in one sector and involves more risk than a fund that
invests more broadly.
Performance summary
This section provides information about your fund's performance during
its fiscal year, which ended August 31, 2003. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Past performance does not
indicate future results. More recent returns may be less or more than
those shown. Investment return and principal value will fluctuate and
you may have a gain or a loss when you sell your shares. A profile of
your fund's strategy appears on the first page of this report. See page
9 for definitions of some terms used in this section.
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TOTAL RETURN FOR PERIODS ENDED 8/31/03
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Class A Class B Class C Class M
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95)
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NAV POP NAV CDSC NAV CDSC NAV POP
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1 year 11.12% 4.73% 10.25% 5.25% 10.26% 9.26% 10.52% 6.68%
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5 years 59.23 50.09 53.22 51.22 53.38 53.38 55.10 49.67
Annual average 9.75 8.46 8.91 8.62 8.93 8.93 9.17 8.40
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10 years 80.19 69.84 67.04 67.04 67.10 67.10 71.13 65.17
Annual average 6.07 5.44 5.26 5.26 5.27 5.27 5.52 5.15
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Annual average
(life of fund) 6.47 6.19 5.58 5.58 5.60 5.60 5.84 5.68
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Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B
share returns reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declining to 1% in the sixth
year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the
first year that is eliminated thereafter. Performance for class B, C,
and M shares before their inception is derived from the historical
performance of class A shares, adjusted for the applicable sales charge
(or CDSC) and higher operating expenses for such shares. A 1% redemption
fee on total assets redeemed or exchanged within 90 days of purchase
will be imposed for all share classes of Putnam Global Natural Resources
Fund. See the prospectus for details.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/03
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Lipper Natural
Resources
S&P 500 Funds category
Index average*
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1 year 12.07% 15.00%
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5 years 13.01 90.84
Annual average 2.48 13.01
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10 years 161.30 118.39
Annual average 10.08 7.98
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Annual average
(life of fund) 12.97 8.31
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 1-, 5-, and 10-year periods ended 8/31/03, there were 80, 53,
and 19 funds, respectively, in this Lipper category.
[GRAPHIC OMITTED: worm chart CHANGE IN THE VALUE OF A $10,000 INVESTMENT]
CHANGE IN THE VALUE OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment, 8/31/93 to 8/31/03
Fund's class A
Date shares at POP S&P 500 Index
08/31/93 9,425 10,000
08/31/94 8,514 10,547
08/31/95 9,459 12,809
08/31/96 10,873 15,208
08/31/97 14,287 21,390
08/31/98 10,667 23,121
08/31/99 15,200 32,329
08/31/00 17,034 37,605
08/31/01 16,480 28,433
08/31/02 15,284 23,317
08/31/03 $16,984 $26,130
Past performance does not indicate future results. At the end of the
same time period, a $10,000 investment in the fund's class B and class C
shares would have been valued at $16,704 and $16,710, respectively, and
no contingent deferred sales charges would apply. A $10,000 investment
in the fund's class M shares would have been valued at $17,113 ($16,517
at public offering price). See first page of performance section for
performance calculation method.
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PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 8/31/03
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Class A Class B Class C Class M
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Distributions (number) 1 -- -- 1
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Income $0.095 -- -- $0.004
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Total $0.095 -- -- $0.004
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Share value: NAV POP NAV NAV NAV POP
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8/31/02 $16.22 $17.21 $15.80 $15.98 $16.11 $16.69
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8/31/03 17.92 19.01 17.42 17.62 17.80 18.45
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TOTAL RETURN FOR PERIODS ENDED 9/30/03 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95)
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NAV POP NAV CDSC NAV CDSC NAV POP
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1 year 17.94% 11.15% 17.04% 12.03% 17.05% 16.05% 17.27% 13.14%
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5 years 33.70 26.03 28.67 26.72 28.78 28.78 30.28 25.70
Annual average 5.98 4.74 5.17 4.85 5.19 5.19 5.43 4.68
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10 years 78.53 68.27 65.54 65.54 65.53 65.53 69.64 63.71
Annual average 5.97 5.34 5.17 5.17 5.17 5.17 5.43 5.05
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Annual average
(life of fund) 6.32 6.05 5.44 5.44 5.46 5.46 5.70 5.54
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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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
Comparative indexes
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Global Aggregate Bond Index is an unmanaged index used as a broad
measure of international investment-grade bonds.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Morgan Stanley Capital International (MSCI) World Index is an unmanaged
index of developed and emerging markets.
Russell 1000 Growth Index is an unmanaged index of those companies in
the Russell 1000 Index chosen for their growth orientation.
Russell 1000 Value Index is an unmanaged index of those companies in the
Russell 1000 Index chosen for their value orientation.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Putnam's policy on confidentiality
In order to conduct business with our shareholders, we must obtain
certain personal information such as account holders' addresses,
telephone numbers, Social Security numbers, and the names of their
financial advisors. We use this information to assign an account number
and to help us maintain accurate records of transactions and account
balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
preceded by the Independent Auditors' 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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
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.
Independent auditors' report
The Board of Trustees and Shareholders Putnam Global Natural Resources
Fund:
We have audited the accompanying statement of assets and liabilities of
Putnam Global Natural Resources Fund, including the fund's portfolio, as
of August 31, 2003, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of
the four years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year or period ended August 31, 1999 were audited by
other auditors whose report dated October 12, 1999 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of August 31, 2003 by correspondence with the custodian and brokers or
by other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Global Natural Resources Fund as of August
31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the
period then ended in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Boston, Massachusetts
October 7, 2003
The fund's portfolio
August 31, 2003
Common stocks (98.7%) (a)
Number of shares Value
Chemicals (8.1%)
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14,970 Air Liquide (France) $2,149,576
43,700 Avery Dennison Corp. 2,392,575
102,671 BASF AG (Germany) 4,767,727
32,401 Ciba Specialty Chemicals AG
(Switzerland) (NON) 2,229,565
81,139 Dow Chemical Co. (The) 2,801,730
149,700 E.I. du Pont de Nemours & Co. 6,697,578
38,069 PPG Industries, Inc. 2,090,369
--------------
23,129,120
Coal (1.1%)
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119,000 Arch Coal, Inc. 2,731,050
19,300 CONSOL Energy, Inc. 389,860
--------------
3,120,910
Construction (0.9%)
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142,927 CRH PLC (Ireland) 2,722,306
Energy Services (14.5%)
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63,800 Baker Hughes, Inc. 2,134,748
37,637 BJ Services Co. (NON) 1,406,495
22,856 Compania Espanola de Petroleos, S.A.
(CEPSA) (Spain) 595,919
197,428 ENSCO International, Inc. 5,518,113
320,088 GlobalSantaFe Corp. (Cayman Islands) 7,938,182
420,500 Halliburton Co. 10,167,690
37,000 Nabors Industries, Ltd. (NON) 1,485,550
91,669 Precision Drilling Corp. (Canada)
(NON) 3,661,209
63,300 Pride International, Inc. (NON) 1,081,797
102,139 Schlumberger, Ltd. 5,056,902
69,314 Weatherford International, Ltd.
(Bermuda) (NON) 2,604,820
--------------
41,651,425
Engineering & Construction (0.9%)
- -------------------------------------------------------------------------------
332,800 Saipem SpA (Italy) 2,495,326
Forest Products and Packaging (2.6%)
- -------------------------------------------------------------------------------
273,500 Sappi, Ltd. ADR (South Africa) 3,522,680
243,506 Smurfit-Stone Container Corp. (NON) 3,842,525
--------------
7,365,205
Metals (6.7%)
- -------------------------------------------------------------------------------
190,300 Alcoa, Inc. 5,434,968
284,851 BHP Billiton, Ltd. ADR (Australia) 4,064,824
60,600 Newmont Mining Corp. 2,379,156
24,941 Phelps Dodge Corp. (NON) 1,196,919
107,338 Placer Dome, Inc. (Canada) 1,464,090
56,500 POSCO ADR (South Korea) 1,695,000
132,910 Rio Tinto PLC (United Kingdom) 2,924,027
--------------
19,158,984
Oil & Gas (63.9%)
- -------------------------------------------------------------------------------
151,257 Apache Corp. 10,433,708
1,732,092 BG Group PLC (United Kingdom) 7,471,923
76,000 Tom Brown, Inc. (NON) 2,089,240
85,006 Burlington Resources, Inc. 4,115,991
202,458 Canadian Natural Resources, Ltd.
(Canada) 7,842,310
957,500 CNOOC, Ltd. (Hong Kong) 1,792,450
362,200 ConocoPhillips 20,225,248
95,500 Devon Energy Corp. 4,942,125
125,562 EnCana Corp. (Canada) 4,701,673
106,884 Energy Partners, Ltd. (NON) 1,202,445
763,325 ENI SpA (Italy) 11,572,479
422,727 Exxon Mobil Corp. 15,936,808
29,800 Forest Oil Corp. (NON) 692,850
52,395 Murphy Oil Corp. 3,024,763
194,000 Nexen, Inc. (Canada) 5,109,091
438,000 Nippon Oil Corp. (Japan) 1,730,825
125,200 Noble Corp. (Cayman Islands) (NON) 4,529,736
41,900 Occidental Petroleum Corp. 1,438,427
151,533 Petro-Canada (Canada) 5,966,933
43,800 Pogo Producing Co. 2,013,048
304,200 Royal Dutch Petroleum Co. ADR
(Netherlands) 13,649,454
928,500 Shell Transport & Trading Co. PLC
(United Kingdom) 5,822,664
537,700 Statoil ASA (Norway) 4,842,528
225,100 Suncor Energy, Inc. (Canada) 4,219,306
30,500 Sunoco, Inc. 1,239,215
109,300 Talisman Energy, Inc. (Canada) 5,186,285
248,561 Total SA ADR (France) 19,141,683
63,700 Valero Energy Corp. 2,509,780
213,500 XTO Energy, Inc. 4,481,365
369,689 YUKOS (Russia) 5,323,522
--------------
183,247,875
Real Estate (--%)
- -------------------------------------------------------------------------------
1,579 Cross Timbers Royalty Trust 35,272
--------------
Total Common stocks
(cost $244,671,175) $282,926,423
Short-term investments (3.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$7,435,014 Short-term investments held as
collateral for loaned securities
with yields ranging from 1.00% to
1.08% and due dates ranging from
September 2, 2003 to October 24,
2003 (d) $7,430,328
2,261,470 Short-term investments held in
Putnam commingled cash account with
yields ranging from 0.94% to 1.22%
and due dates ranging from September
2, 2003 to October 22, 2003 (d) 2,261,470
--------------
Total Short-term investments
(cost $9,691,798) $9,691,798
- -------------------------------------------------------------------------------
Total Investments
(cost $254,362,973) $292,618,221
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $286,708,903.
(NON) Non-income-producing security.
(d) See Note 1 to the financial statements.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with a
custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at August 31, 2003: (as
a percentage of Market Value)
Australia 1.4%
Canada 13.0
Cayman Islands 4.3
France 7.3
Germany 1.6
Italy 4.8
Netherlands 4.7
Norway 1.7
Russia 1.8
South Africa 1.2
United Kingdom 5.5
United States 48.1
Other 4.6
------
Total 100.0%
Forward currency contracts to buy at August 31, 2003
(aggregate face value $16,323,816)
Market Aggregate Delivery Unrealized
value face value date depreciation
- --------------------------------------------------------------------------
Australian Dollar $188,875 $188,358 12/17/03 $517
British Pounds 13,637,317 13,561,975 12/17/03 75,342
Japanese Yen 2,590,396 2,573,483 12/17/03 16,913
- --------------------------------------------------------------------------
$92,772
- --------------------------------------------------------------------------
Forward currency contracts to sell at August 31, 2003
(aggregate face value $57,107,398)
Unrealized
Market Aggregate Delivery appreciation/
value face value date (depreciation)
- ---------------------------------------------------------------------------
Australian Dollar $710,683 $716,061 12/17/03 $5,378
Canadian Dollar 29,255,163 29,006,021 12/17/03 (249,142)
Euro 21,797,107 21,509,196 12/17/03 (287,911)
Hong Kong Dollar 1,151,422 1,151,157 12/17/03 (265)
Norwegian Krone 3,549,671 3,552,791 9/17/03 3,120
Swiss Franc 1,182,936 1,172,172 12/17/03 (10,764)
- ---------------------------------------------------------------------------
$(539,584)
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
August 31, 2003
Assets
- ------------------------------------------------------------------------------
Investments in securities, at value, including $7,224,362 of
securities on loan (identified cost $254,362,973) (Note 1) $292,618,221
- ------------------------------------------------------------------------------
Dividends, interest and other receivables 969,474
- ------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,157,045
- ------------------------------------------------------------------------------
Receivable for securities sold 2,447,959
- ------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 101,270
- ------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 2,248,744
- ------------------------------------------------------------------------------
Total assets 299,542,713
Liabilities
- ------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 1,162,162
- ------------------------------------------------------------------------------
Payable for securities purchased 2,078,445
- ------------------------------------------------------------------------------
Payable for shares of the fund repurchased 446,070
- ------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 487,569
- ------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 84,571
- ------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 34,135
- ------------------------------------------------------------------------------
Payable for administrative services (Note 2) 577
- ------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 158,413
- ------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 548,082
- ------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 365,605
- ------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 7,430,328
- ------------------------------------------------------------------------------
Other accrued expenses 37,853
- ------------------------------------------------------------------------------
Total liabilities 12,833,810
- ------------------------------------------------------------------------------
Net assets $286,708,903
Represented by
- ------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $267,277,212
- ------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,933,741)
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (16,443,959)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investments 37,809,391
- ------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $286,708,903
- ------------------------------------------------------------------------------
Computation of net asset value and offering price
- ------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($186,504,127 divided by 10,406,940 shares) $17.92
- ------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $17.92)* $19.01
- ------------------------------------------------------------------------------
Net asset value and offering price per class B share
($82,108,722 divided by 4,712,671 shares)** $17.42
- ------------------------------------------------------------------------------
Net asset value and offering price per class C share
($14,546,450 divided by 825,493 shares)** $17.62
- ------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($3,549,604 divided by 199,382 shares) $17.80
- ------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.80)* $18.45
- ------------------------------------------------------------------------------
* 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.
Statement of operations
Year ended August 31, 2003
Investment income:
- ------------------------------------------------------------------------------
Dividends (net of foreign tax of $472,767) $5,840,616
- ------------------------------------------------------------------------------
Interest 136,919
- ------------------------------------------------------------------------------
Securities lending 113,707
- ------------------------------------------------------------------------------
Total investment income 6,091,242
Expenses:
- ------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,846,675
- ------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 532,451
- ------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 17,289
- ------------------------------------------------------------------------------
Administrative services (Note 2) 8,357
- ------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 423,598
- ------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 791,925
- ------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 116,207
- ------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 27,081
- ------------------------------------------------------------------------------
Other 255,923
- ------------------------------------------------------------------------------
Total expenses 4,019,506
- ------------------------------------------------------------------------------
Expense reduction (Note 2) (172,761)
- ------------------------------------------------------------------------------
Net expenses 3,846,745
- ------------------------------------------------------------------------------
Net investment income 2,244,497
- ------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (9,658,169)
- ------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (654,677)
- ------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (3,934,203)
- ------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (665,824)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures
contracts during the year 39,142,885
- ------------------------------------------------------------------------------
Net gain on investments 24,230,012
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $26,474,509
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Year ended August 31
Increase (decrease) in net assets 2003 2002
- ------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------
Net investment income $2,244,497 $1,584,485
- ------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions (14,247,049) (2,157,982)
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currencies 38,477,061 (23,746,554)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 26,474,509 (24,320,051)
- ------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- ------------------------------------------------------------------------------
From net investment income
Class A (990,062) (1,188,254)
- ------------------------------------------------------------------------------
Class C -- (3,600)
- ------------------------------------------------------------------------------
Class M (950) --
- ------------------------------------------------------------------------------
From net realized short-term gain on investments
Class A -- (6,412,474)
- ------------------------------------------------------------------------------
Class B -- (3,453,122)
- ------------------------------------------------------------------------------
Class C -- (281,734)
- ------------------------------------------------------------------------------
Class M -- (153,066)
- ------------------------------------------------------------------------------
From net realized long-term gain on investments
Class A -- (12,835,191)
- ------------------------------------------------------------------------------
Class B -- (6,911,761)
- ------------------------------------------------------------------------------
Class C -- (563,918)
- ------------------------------------------------------------------------------
Class M -- (306,377)
- ------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (13,029,771) 11,315,345
- ------------------------------------------------------------------------------
Total increase (decrease) in net assets 12,453,726 (45,114,203)
Net assets
- ------------------------------------------------------------------------------
Beginning of year 274,255,177 319,369,380
- ------------------------------------------------------------------------------
End of year (including distributions in
excess of net investment income and
undistributed net investment income of
$1,933,741 and $1,416,014, respectively) $286,708,903 $274,255,177
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended August 31
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.22 $19.58 $21.79 $19.98 $15.28
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .18 .14 .14 .14 .20
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.62 (1.50) (.79) 2.17 5.91
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.80 (1.36) (.65) 2.31 6.11
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.12) (.12) (.19) (.23)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.88) (1.44) (.31) (1.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (2.00) (1.56) (.50) (1.41)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.92 $16.22 $19.58 $21.79 $19.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 11.12 (7.26) (3.25) 12.07 42.50
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $186,504 $173,632 $192,785 $206,190 $200,824
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.26 1.18 1.14 1.15 1.16
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.12 .81 .69 .74 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 131.17 137.57 102.45 199.50 118.37
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Per share net investment income 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) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended August 31
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $15.80 $19.14 $21.37 $19.61 $15.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .05 .01 (.01) (.01) .06
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.57 (1.47) (.78) 2.13 5.81
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.62 (1.46) (.79) 2.12 5.87
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- (.05) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.88) (1.44) (.31) (1.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.88) (1.44) (.36) (1.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.42 $15.80 $19.14 $21.37 $19.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.25 (7.96) (3.98) 11.19 41.42
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $82,109 $87,085 $113,258 $126,004 $146,228
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.01 1.93 1.89 1.90 1.91
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .35 .05 (.07) (.04) .35
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 131.17 137.57 102.45 199.50 118.37
- ---------------------------------------------------------------------------------------------------------------------------------
(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) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
For the
period
July 26,
1999+ to
Per-share Year ended August 31 August 31
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $15.98 $19.34 $21.64 $19.98 $19.78
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .06 .02 -- (d) .03 .02
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.58 (1.49) (.81) 2.12 .18
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.64 (1.47) (.81) 2.15 .20
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.01) (.05) (.18) --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.88) (1.44) (.31) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.89) (1.49) (.49) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.62 $15.98 $19.34 $21.64 $19.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.26 (7.94) (4.03) 11.22 1.01*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $14,546 $9,657 $7,878 $4,040 $209
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.01 1.93 1.89 1.90 .19*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .40 .09 (.02) .14 .13*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 131.17 137.57 102.45 199.50 118.37
- ---------------------------------------------------------------------------------------------------------------------------------
+ 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) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended August 31
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.11 $19.43 $21.62 $19.82 $15.15
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .10 .05 .03 .05 .11
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.59 (1.49) (.78) 2.14 5.86
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.69 (1.44) (.75) 2.19 5.97
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (d) -- -- (d) (.08) (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.88) (1.44) (.31) (1.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.88) (1.44) (.39) (1.30)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.80 $16.11 $19.43 $21.62 $19.82
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.52 (7.72) (3.73) 11.47 41.72
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,550 $3,881 $5,448 $8,254 $10,537
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.76 1.68 1.64 1.65 1.66
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .60 .30 .16 .26 .62
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 131.17 137.57 102.45 199.50 118.37
- ---------------------------------------------------------------------------------------------------------------------------------
(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) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
August 31, 2003
Note 1
Significant accounting policies
Putnam Global Natural Resources Fund (the "fund") is registered under
the Investment Com pany Act of 1940, as amended, as a diversified,
open-ended management investment company. The fund continues to seek
capital appreciation by investing primarily in the common stocks of
companies in the energy and natural resource industries.
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 and class M 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.
A redemption fee of 1.00% may apply to any shares held less than 90
days.
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 the 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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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 valued at the last reported sales price on their
principal exchange, or official closing price for certain markets. If no
sales are reported -- as in the case of some securities traded
over-the-counter -- a security is valued at its last reported bid price.
For foreign investments, if trading or events occurring in other markets
after the close of the principal exchange in which the foreign
investments are traded are expected to materially affect the value of
the investments, then those investments are valued, taking into
consideration these events, at their fair value following procedures
approved by the Trustees. Securities quoted in foreign cur rencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are valued at
amortized cost, which approximates fair value. Other investments,
including restricted securities, are valued at fair value following pro
cedures approved by the Trustees. Such valuations and procedures are
reviewed periodically by the Trustees.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a join trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having maturities
of up to 397 days for collateral received under security lending
arrangements and up to 90 days for other cash investments.
C) Security transactions and related investment income Security
transactions are recorded 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 recognized on the ex-dividend date except that
certain dividends from foreign securities are recognized as soon as the
fund is informed of the ex-dividend date. Non-cash dividends, if any,
are recorded at the fair market value of the securities received.
D) 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 earned 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, currency gains and losses realized
between the trade and settlement dates on securities transactions 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.
E) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used 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. Forward currency contracts outstanding at
period end are listed after The fund's portfolio.
F) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform.
When the contract is closed, the fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Realized gains and losses
on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." Exchange traded options are valued at the last
sale price, or if no sales are reported, the last bid price for
purchased options and the last ask price for written options. Options
traded over-the-counter are valued using prices supplied by dealers.
Futures and written option contracts outstanding at period end are
listed after The fund's portfolio.
G) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the Statement of operations. At August 31, 2003, the value of
securities loaned amounted to $7,224,362. The fund received cash
collateral of $7,430,328 which is pooled with collateral of other Putnam
funds into 32 issuers of high grade short-term investments.
H) Line of credit During the period, the fund was entered into a
committed line of credit with certain banks. The line of credit
agreement included restrictions that the fund maintain an asset coverage
ratio of at least 300% and borrowings must not exceed prospectus
limitations. For the period ended August 6, 2003, the fund had no
borrowings against the line of credit. Effective August 6, 2003, the
fund no longer participated in a committed line of credit.
I) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At August 31, 2003, the fund had a capital loss carryover of $12,099,349
available to the extent allowed by tax law to offset future capital
gains, if any. The amount of the carryover and the expiration dates
are:
Loss Carryover Expiration
- ---------------------------------------
$3,190,780 Aug. 31, 2010
8,908,569 Aug. 31, 2011
Pursuant to federal income tax regulations appli cable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending August 31, 2004, $4,557,476 of losses recognized during the
period November 1, 2002 to August 31, 2003.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, if any, are recorded on the ex-dividend
date and paid at least annually. The amount and character of income and
gains to be distributed are determined in accordance with income tax
regulations, which may differ from generally accepted accounting
principles. These differences include temporary and permanent differences
of losses on wash sale transactions, foreign currency gains and losses,
post-October loss deferrals and realized gains and losses on certain
futures contracts. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under in come tax regulations. For the
year ended August 31, 2003, the fund reclassified $4,603,240 to increase
distributions in excess of net investment income and $669,036 to increase
paid-in-capital, with an de crease to accumulated net realized losses of
$3,934,204.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Unrealized appreciation $37,888,579
Unrealized depreciation (1,800,759)
------------
Net unrealized appreciation 36,087,820
Capital loss carryforward (12,099,349)
Post October loss (4,557,476)
Cost for federal income
tax purposes $256,530,401
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.70% of the first $500 million
of average net assets, 0.60% of the next $500 million, 0.55% of the next
$500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion,
and 0.43% 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, LLC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the sub custodian bank for the settlement of securities
purchased by the fund. At August 31, 2003, the payable to the
subcustodian bank represents the amount due for cash advanced for the
settlement of a security purchased.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the year ended August 31, 2003, the
fund's expenses were reduced by $172,761 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $806 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 Trustees compensation and expenses in the
Statement of operations. Accrued pension liability is included in
Payable for Trustees compensation and expenses in the Statement of
assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C and class M shares pursuant to rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam,
LLC and Putnam Retail Management GP, Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The Plans
provide for payments by the fund to Putnam Retail Management at an annual
rate of 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 the annual rates of
0.25%, 1.00%, 1.00% and 0.75% of the average net assets attributable to
class A, class B, class C and class M shares, respectively.
For the year ended August 31, 2003, Putnam Retail Management, acting as
underwriter, received net commissions of $33,840 and $316 from the sale
of class A and class M shares, respectively, and received $105,114 and
$24,699 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain
redemptions of class A and class M shares, respectively. For the year
ended August 31, 2003, Putnam Retail Management, acting as underwriter,
received $2,131 and no monies on class A and class M redemptions,
respectively.
Note 3
Purchases and sales of securities
During the year ended August 31, 2003, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $342,169,640 and $356,984,168, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At August 31, 2003, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended August 31, 2003
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 3,286,778 $53,126,656
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 54,525 892,886
- ----------------------------------------------------------------
3,341,303 54,019,542
Shares repurchased (3,639,739) (57,934,078)
- ----------------------------------------------------------------
Net decrease (298,436) $(3,914,536)
- ----------------------------------------------------------------
Year ended August 31, 2002
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 4,082,590 $73,503,794
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,105,361 18,448,474
- ----------------------------------------------------------------
5,187,951 91,952,268
Shares repurchased (4,329,670) (76,419,581)
- ----------------------------------------------------------------
Net increase 858,281 $15,532,687
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 750,649 $11,813,010
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
750,649 11,813,010
Shares repurchased (1,549,262) (23,986,799)
- ----------------------------------------------------------------
Net decrease (798,613) $(12,173,789)
- ----------------------------------------------------------------
Year ended August 31, 2002
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 1,976,277 $35,084,317
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 553,701 9,047,471
- ----------------------------------------------------------------
2,529,978 44,131,788
Shares repurchased (2,935,878) (51,140,832)
- ----------------------------------------------------------------
Net decrease (405,900) $(7,009,044)
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 496,392 $8,035,879
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------------------
496,392 8,035,879
Shares repurchased (275,234) (4,314,273)
- ----------------------------------------------------------------
Net increase 221,158 $3,721,606
- ----------------------------------------------------------------
Year ended August 31, 2002
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 403,502 $7,182,049
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 44,546 736,348
- ----------------------------------------------------------------
448,048 7,918,397
Shares repurchased (250,959) (4,440,092)
- ----------------------------------------------------------------
Net increase 197,089 $3,478,305
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 45,281 $733,397
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
45,281 733,397
Shares repurchased (86,845) (1,396,449)
- ----------------------------------------------------------------
Net decrease (41,564) $(663,052)
- ----------------------------------------------------------------
Year ended August 31, 2002
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 54,797 $991,438
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 24,974 415,323
- ----------------------------------------------------------------
79,771 1,406,761
Shares repurchased (119,208) (2,093,364)
- ----------------------------------------------------------------
Net decrease (39,437) $(686,603)
- ----------------------------------------------------------------
Federal tax information
(Unaudited)
For the period, interest and dividends from foreign countries were
$3,993,696, or $0.25 per share (for all classes of shares). Taxes paid
to foreign countries were $472,767 or $0.029 per share (for all classes
of shares).
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
For its tax year ended August 31, 2003, the fund hereby designates 100%,
or the maximum amount allowable, of its net taxable income as qualified
dividends taxed at individual net capital gain rates.
The Form 1099 you receive in January 2004 will show the tax status of
all distributions paid to your account in calendar 2003.
About the Trustees
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), Advocate Health Care, and BoardSource,
formerly the National Center for Nonprofit Boards. She is Chairman
Emeritus of the Board of Trustees, Mount Holyoke College, having served
as Chairman for five years and as a board member for thirteen years.
Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a
manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and
corporate finance, including Vice President and Principal of the Regency
Group, and Vice President of and Consultant to First Boston Corporation.
She is a graduate of Mount Holyoke College.
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear
Threat Initiative (a private foundation dealing with national security
issues) and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the
Trustee Advisory Council of the Applied Physics Laboratory, Johns
Hopkins University. Until 2003, Mr. Curtis was a member of the Electric
Power Research Institute Advisory Council and the University of Chicago
Board of Governors for Argonne National Laboratory. Prior to 2002, Mr.
Curtis was a Member of the Board of Directors of the Gas Technology
Institute and the Board of Directors of the Environment and Natural
Resources Program Steering Committee, John F. Kennedy School of
Government, Harvard University. Until 2001, Mr. Curtis was a member of
the Department of Defense Policy Board and Director of EG&G Technical
Services, Inc. (a fossil energy research and development support
company).
Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy. He served
as Chairman of the Federal Energy Regulatory Commission from 1977 to
1981 and has held positions on the staff of the U.S. House of
Representatives, the U.S. Treasury Department, and the Securities and
Exchange Commission.
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice President and Managing Director of First Reserve
Corporation, a private equity buyout firm that specializes in energy
investments in the diversified worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company, Continuum Health Partners of New York, and various private
companies controlled by First Reserve Corporation, as well as a Trustee
of TH Lee Putnam Investment Trust (a closed-end investment company). He
is also a Trustee of Sarah Lawrence College.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy
Associate Director of the Office of Management and Budget, and Deputy
Director of the Federal Energy Administration. He is active in various
business associations, including the Economic Club of New York, and
lectures on energy issues in the United States and Europe. Mr. Hill
holds a B.A. degree in Economics from Southern Methodist University and
pursued graduate studies there as a Woodrow Wilson Fellow.
Ronald J. Jackson (12/17/43), Trustee since 1996
Mr. Jackson is a private investor.
Mr. Jackson is President of the Kathleen and Ronald J. Jackson
Foundation (a charitable trust). He is also a member of the Board of
Overseers of WGBH (a public television and radio station) as well as a
member of the Board of Overseers of the Peabody Essex Museum.
Mr. Jackson is the former Chairman, President, and Chief Executive
Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he
retired in 1993. He previously served as President and Chief Executive
Officer of Stride-Rite, Inc. (a manufacturer and distributor of
footwear) and of Kenner Parker Toys, Inc. (a major toy and game
manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor
of women's apparel) and has held financial and marketing positions with
General Mills, Inc. and Parker Brothers (a toy and game company). Mr.
Jackson is a graduate of the University of Michigan Business School.
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental
Policy Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid Transco (a UK-based
holding company with interests in electric and gas transmission and
distribution, and telecommunications infrastructure). He also serves on
the board of the Whitehead Institute for Biomedical Research (a
non-profit research institution) and has been President of the Yale
University Council since 1993. Prior to February 2002, he was a Director
of State Farm Indemnity Company (an automobile insurance company) and
prior to March 2000 he was a Director of New England Electric System (a
public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring,
environmental, energy, competition, and privatization policies --
serving as an advisor to governments and corporations worldwide. Dr.
Joskow holds a Ph.D. and M. Phil from Yale University and B.A. from
Cornell University.
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a partner in and Chairman of Cambus-Kenneth Bloodstock,
LLC (cattle and thoroughbred horses). She is President Emeritus of Mount
Holyoke College.
Dr. Kennan serves as a Trustee of Northeast Utilities and is a Director
of Talbots, Inc. She has served as Director on a number of other boards,
including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire
Life Insurance, and Kentucky Home Life Insurance. She is a Trustee of
Centre College and of Midway College in Midway, Kentucky. She is also a
member of The Trustees of Reservations. Dr. Kennan has served on the
oversight committee of the Folger Shakespeare Library, as President of
Five Colleges Incorporated, as a Trustee of Notre Dame University, and
is active in various educational and civic associations.
As a member of the faculty of Catholic University for twelve years,
until 1978, Dr. Kennan directed the post-doctoral program in Patristic
and Medieval Studies, taught history, and published numerous articles.
Dr. Kennan holds a Ph.D. from the University of Washington in Seattle,
an M.S. from St. Hilda's College at Oxford University, and an A.B. from
Mount Holyoke College. She holds several honorary doctorates.
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of Alex. Brown Realty, Inc., The Liberty
Corporation (a broadcasting company), Progress Energy, Inc. (a utility
company, formerly known as Carolina Power & Light), and Sonoco Products,
Inc. (a packaging company). Mr. Mullin is Trustee Emeritus of Washington
& Lee University, where he served as Chairman of the Investment
Committee. Prior to May 2001, he was a Director of Graphic Packaging
International Corp.
Mr. Mullin also served as a Director of Dillon, Read & Co., Inc. until
October 1997 and The Ryland Group, Inc. until January 1998. Mr. Mullin
is a graduate of Washington & Lee University and The Wharton Graduate
School, University of Pennsylvania.
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman
of Cabot Properties, Inc.
Mr. Patterson serves as Chairman of the Joslin Diabetes Center, as a
Trustee of Sea Education Association, and as a Director of Brandywine
Trust Company. Prior to December 2001, he was President and Trustee of
Cabot Industrial Trust (a publicly traded real estate investment trust).
Prior to February 1998, Mr. Patterson was Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership (a
registered investment advisor involved in institutional real estate
investments). Prior to 1990, he served as Executive Vice President of
Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of
Cabot Partners) and as a Senior Vice President of the Beal Companies (a
real estate management, investment, and development firm).
Mr. Patterson practiced law and held various positions in state
government, and was the founding Executive Director of the Massachusetts
Industrial Finance Agency. Mr. Patterson is a graduate of Harvard
College and Harvard Law School.
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens serves on a number of corporate boards.
Mr. Stephens serves as a Director of Xcel Energy Incorporated (a public
utility company), TransCanada Pipelines Limited, Norske Canada, Inc. (a
paper manufacturer), and Qwest Communications. Until 2003, Mr. Stephens
was a Director of Mail-Well, Inc. (a diversified printing company). He
served as Chairman of Mail-Well until 2001 and as CEO of
MacMillan-Bloedel, Ltd. (a forest products company) until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
W. Nicholas Thorndike (3/28/33), Trustee since 1992
Mr. Thorndike serves on the boards of various corporations and
charitable organizations.
Mr. Thorndike is a Director of Courier Corporation (a book publisher and
manufacturer) and The Providence Journal Co. (a newspaper publisher). He
is also a Trustee of Northeastern University and an honorary Trustee of
Massachusetts General Hospital, where he previously served as Chairman
and President. Prior to September 2000, he was a Director of Bradley
Real Estate, Inc.; prior to April 2000, he was a Trustee of Eastern
Utilities Associates; and prior to December 2001, he was a Trustee of
Cabot Industrial Trust.
Mr. Thorndike has also served as Chairman of the Board and Managing
Partner of Wellington Management Company/Thorndike, Doran, Paine & Lewis
(a registered investment advisor that manages mutual funds and
institutional assets), as a Trustee of the Wellington Group of Funds
(currently The Vanguard Group), and as Chairman and a Director of Ivest
Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
Lawrence J. Lasser* (11/1/42), Trustee since 1992
Mr. Lasser is the President and Chief Executive Officer of Putnam
Investments, LLC since 1985. He started his career at Putnam in 1969.
Mr. Lasser is a Director of Marsh & McLennan Companies, Inc. (the parent
company of Putnam Investments). He is also a member of the Board of
Governors of the Investment Company Institute (the national association
for the U.S. investment company industry). Mr. Lasser is a Director of
the United Way of Massachusetts Bay, a Trustee of the Museum of Fine
Arts, Boston, and a Trustee and Member of the Finance and Executive
Committees of Beth Israel Deaconess Medical Center, Boston. He is also a
member of the CareGroup Board of Managers Investment Committee, the
Council on Foreign Relations, and the Commercial Club of Boston.
Mr. Lasser is a graduate of Antioch College and Harvard Business School.
George Putnam, III* (8/10/51), Trustee since 1984 and President since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment advisor). He is a Trustee of St. Mark's School, Shore Country
Day School, and until 2002 was a Trustee of the Sea Education
Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
Price & Rhoads in Philadelphia. He is a graduate of Harvard College,
Harvard Business School, and Harvard Law School.
A.J.C. Smith* (4/13/34), Trustee since 1986
Mr. Smith is a Director of Marsh & McLennan Companies, Inc.
Mr. Smith is also a Director of Trident Corp. (a limited partnership
with over thirty institutional investors). He is also a Trustee of the
Carnegie Hall Society, the Educational Broadcasting Corporation, and the
National Museums of Scotland. He is Chairman of the Central Park
Conservancy and a Member of the Board of Overseers of the Joan and
Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Prior to May 2000 and November 1999, Mr. Smith was Chairman
and CEO, respectively, of Marsh & McLennan Companies, Inc.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of August 31, 2003, there were 102 Putnam Funds.
Each Trustee serves for an indefinite term, until his or her
resignation, retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Putnam, III, Lasser, and Smith are deemed "interested persons"
by virtue of their positions as officers or shareholders of the fund or
Putnam Management, Putnam Retail Management, or Marsh & McLennan
Companies, Inc. George Putnam, III is the President of your fund and
each of the other Putnam funds. Lawrence J. Lasser is the President and
Chief Executive Officer of Putnam Investments and Putnam Management. Mr.
Lasser and Mr. Smith serve as Directors of Marsh & McLennan Companies,
Inc.
Officers
In addition to George Putnam, III, the other officers of the
fund are shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Treasurer and
Principal Financial Officer
Since 1989
Managing Director, Putnam Investments
and Putnam Management
Patricia C. Flaherty (12/1/46)
Senior Vice President
Since 1993
Senior Vice President, Putnam Investments and
Putnam Management
Karnig H. Durgarian (1/13/56)
Vice President and Principal Executive Officer
Since 2002
Senior Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Managing Director, Putnam Investments. Prior to
July 2001, Partner, PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal
Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Gordon H. Silver (7/3/47)
Vice President
Since 1990
Senior Managing Director, Putnam Investments,
Putnam Management and Putnam Retail Management
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
William H. Woolverton (1/17/51)
Vice President and Chief Legal Officer
Since 2003
Managing Director, Putnam Investments,
Putnam Management and Putnam Retail
Management
Judith Cohen (6/7/45)
Clerk and Assistant Treasurer
Since 1993
Clerk and Assistant Treasurer, The Putnam Funds
The address of each Officer is One Post Office Square,
Boston, MA 02109.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Independent Auditors
KPMG LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Treasurer and Principal
Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and
Principal Executive Officer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President and BSA
Compliance Officer
William H. Woolverton
Vice President and
Chief Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Global
Natural Resources Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance Summary
and Putnam's Quarterly Ranking Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581. The fund's
Statement of Additional Information contains additional information
about the fund's Trustees and is available without charge upon request
by calling 1-800-225-1581.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
AN007-203385 018/501/2AD 10/03
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
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All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
Item 3. Audit Committee Financial Expert:
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The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson and Mr. Stephens qualify as "audit committee
financial experts" (as such term has been defined by the Regulations)
based on their review of their pertinent experience and education.
Certain other Trustees, although not on the Audit and Pricing Committee,
would also qualify as "audit committee financial experts." The SEC has
stated that the designation or identification of a person as an audit
committee financial expert pursuant to this Item 3 of Form N-CSR does
not impose on such person any duties, obligations or liability that are
greater than the duties, obligations and liability imposed on such
person as a member of the Audit and Pricing Committee and the Board of
Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
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Not applicable
Items 5-6. [Reserved]
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Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
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Management Investment Companies: Not applicable
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Item 8. [Reserved]
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Item 9. Controls and Procedures:
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(a) The registrant's principal executive officer and principal financial
officers have concluded, based on their evaluation of the effectiveness
of the design and operation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report
on Form N-CSR, that the design and operation of such procedures are
effective to provide reasonable assurance that information required to
be disclosed by the investment company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in
the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 10. Exhibits:
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(a) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
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Michael T. Healy
Principal Accounting Officer
Date: October 29, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Karnig H. Durgarian
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Karnig H. Durgarian
Principal Executive Officer
Date: October 29, 2003
By (Signature and Title): /s/Charles E. Porter
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Charles E. Porter
Principal Financial Officer
Date: October 29, 2003
By (Signature and Title): /s/Steven D. Krichmar
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Steven D. Krichmar
Principal Financial Officer
Date: October 29, 2003