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:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
In the first months of 2004, we have continued to see the same positive
conditions in financial markets that arose during the recovery of 2003.
The U.S. economy and corporate profits have grown impressively based on
a solid foundation of rising productivity, low inflation, and low
interest rates. With both consumer spending and business capital
investment contributing to the expansion, the economy also shows greater
equilibrium than has been the case in recent years.
These favorable economic conditions contributed to strong returns in
both the stock and bond markets over the reporting period. Stocks of
natural resources companies participated in the rally, driving your fund
to post handsome gains for the period. The fund's performance at net
asset value surpassed that of its benchmark index but lagged its Lipper
category average, for reasons detailed in the following pages.
Experience teaches us that a run of good news like this does not give
reason to be complacent. Rather, in such an environment, active research
plays an even more important role in evaluating potential risks.
Uncertainties include the possibilities of a rise in interest rates and
the adverse effects of a weaker U.S. dollar. Putnam's investment
management teams are focused on analyzing these and similar issues. They
are also working to identify new opportunities, which may be less
abundant than they were in last year's broad rally.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
April 21, 2004
Report from Fund Management
Fund highlights
* Putnam Global Natural Resources Fund recorded a gain for the six
months ended February 29, 2004, with class A shares returning 19.76% at
net asset value (NAV) and 12.89% at public offering price (POP).
* A concentration in energy and building-materials stocks helped the
fund's results at NAV exceed those of its benchmark, the S&P 500 Index,
which returned 14.59% for the period.
* Differences in portfolio composition caused the fund's performance to
lag the 22.28% average return of the Lipper Natural Resources Funds
category, which encompasses a broad range of strategies.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
In a buoyant period for equity markets generally and natural-resources
stocks in particular, Putnam Global Natural Resources Fund recorded
robust absolute returns in the first half of its fiscal year. The fund's
holdings generally benefited from rising commodity prices amid a
steadily improving global economy. The industries emphasized in the
portfolio, energy and basic materials, fared particularly well, leading
to substantial outperformance versus the fund's benchmark, the S&P 500
Index.
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 Lipper peer group includes some mutual funds that employ
highly specialized strategies within the natural resources sector. Your
fund pursues a strategy that features exposure to a broad variety of
natural resources industries, including both energy-related and
basic-materials areas such as metals, chemicals, and paper. We believe
these differences in portfolio composition may account for the fund's
underperformance versus its Lipper category for the period.
Market overview
Stable geopolitical conditions, a $350 billion U.S. tax cut, and signs
of more vigorous global economic growth amid low inflation and interest
rates set the stage for a continuation of the worldwide equity market
rally that began in March 2003. Robust gross domestic product (GDP) and
productivity growth figures from a number of key economies, most notably
the United States, gave investors confidence that prospects for
corporate earnings growth were improving and helped to propel the market
upward through period-end.
Many of the stocks of companies that had been most severely punished by
the risk-averse environment that preceded this rally gained the most
during the period. Low interest rates boosted economic growth across the
globe; natural resources companies, which provide many of the raw
materials for increased levels of production, flourished in this
environment.
Oil and gas stocks registered especially strong gains on the back of
stronger oil prices. A number of forces acted to constrict oil supplies
even as demand continued to climb, including OPEC production cuts,
continued depressed production in Venezuela, reduced nuclear power
production in Japan in the wake of safety concerns, and delays in
post-war restoration of capacity in Iraq. The building- materials sector
also prospered on increasing demand in the United States and several
developing countries, notably China.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 2/29/04
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Equities
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S&P 500 Index (broad stock market) 14.59%
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Russell 1000 Growth Index (large-company growth stocks) 12.17%
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Russell 1000 Value Index (large-company value stocks) 17.53%
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MSCI World Index (global stocks) 18.75%
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Bonds
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Lehman Aggregate Bond Index (broad bond market) 4.92%
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Lehman Municipal Bond Index (tax-exempt bonds) 6.53%
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Lehman Global Aggregate Bond Index (international bonds) 10.00%
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These indexes provide an overview of performance in different market
sectors for the six months ended 2/29/04.
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Strategy overview
The most important factor in selecting stocks for your fund is our
analysis of each company's underlying business worth. While a company's
stock price may fluctuate, our view of its underlying worth is critical
in determining our opinion on its attractiveness and weighting in the
portfolio. We look for companies that we believe are worth more than
their current stock prices indicate.
Themes driving industries within the natural resources sector are also
important components of our strategy. During the period, the fund
increased its emphasis on stocks of energy and chemical companies, which
our analysis indicated were attractively valued. We especially favored
select oilfield-services companies and drillers with worldwide
operations that we believe are well positioned for an upswing in
exploration and development activity. Conversely, we lessened the fund's
exposure to basic materials and metals in the belief that valuations in
these industries fully reflected (and in some cases exceeded)
expectations of a global cyclical recovery.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED
as of 8/31/03 as of 2/29/04
Oil and gas 63.9% 64.2%
Energy/
energy services 14.5% 16.8%
Chemicals 8.1% 12.2%
Forest products
and packaging 2.6% 2.8%
Construction 0.9% 1.3%
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
The fund's position in oil exploration and production company Canadian
Natural Resources was the largest single positive contributor to
performance during the period. With its history of adept capital
investment and its fields in Alberta, the North Sea, and West Africa, we
believe that CNR is poised to substantially increase production output
over the next five to ten years. We expect operating profits to rise due
to higher revenues and lower production costs.
Halliburton, another major contributor to fund performance, has been
undervalued compared to its peers as investors have in our view
excessively discounted its asbestos-related liabilities. We believe that
Halliburton's worldwide presence, like that of Schlumberger, will
ultimately prove a long-term strength as successful players in the
oil-field services industry become more global. Our overweight in
Amerada Hess was also advantageous as this independent oil producer
began to recover from the aftermath of two unsuccessful acquisitions. We
believe this stock has the potential to outperform its peer group as its
current price does not appear to fully reflect our valuation of the
company's development pipeline, notably in Equatorial Guinea and the
Gulf of Mexico.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
1 ExxonMobil Corp.
Oil and gas
2 BP PLC ADR (United Kingdom)
Oil and gas
3 Halliburton Co.
Energy
4 ENI SpA (Italy)
Oil and gas
5 ConocoPhillips
Oil and gas
6 E.I. du Pont de Nemours & Co.
Chemicals
7 Chevron Texaco Corp.
Oil and gas
8 Total SA Class B ADR (France)
Oil and gas
9 Amerada Hess Corp.
Oil and gas
10 Imperial Oil, Ltd. (Canada)
Oil and gas
Footnote reads:
These holdings represent 50.3% of the fund's net assets as of 2/29/04.
The fund's holdings will change over time.
Our overweight in ExxonMobil was another plus. The company's stock price
advanced strongly during the period as investors responded to its
industry-leading returns on capital. We believe ExxonMobil is poised to
reap the benefits of wise capital investments and higher levels of
production. We initiated a position in Imperial Oil during the period.
This Canadian integrated oil company has a solid balance sheet, a
history of strong operating results, and a demonstrated willingness to
enhance shareholder returns through stock buybacks. An ample pipeline of
projects portends higher production volumes and falling costs as new
projects come on stream.
Trends in currency markets, notably the continued slide of the U.S.
dollar versus other major currencies, impaired the performance of some
of the fund's non-U.S. holdings. For example, the revenues of one of the
portfolio's largest overweights, French integrated oil company Total,
are mainly in dollars while the company's costs have euro exposure. We
have trimmed our position in Total but still like its favorable return
on capital, shareholder-friendly restructuring of its chemicals
operations, and promising fields in deepwater West Africa and the Middle
East.
Similarly, South African paper giant Sappi generates much of its sales
in dollars while its costs are primarily in rand, a currency which rose
significantly against the dollar during the period. We nevertheless
continue to favor Sappi, which carries the most attractive valuation of
any global paper company as measured by free cash flow; we think the
stock will benefit from growing demand for coated paper, one of Sappi's
main products, in print advertising.
A holding added to the fund in fiscal 2003, Ireland-based construction
company CRH, lagged the overall market during the period. Nevertheless,
recent revenue and cost numbers have exceeded investor expectations, and
we anticipate improving stock performance as the company digests
acquisitions and leverages its greater pricing power in a consolidating
industry.
The fund's position in YUKOS Oil, Russia's largest oil company, was
another detractor. The arrest of Yukos' chairman and largest shareholder
caused the stock to falter while spurring investor concerns about the
future political climate for capitalism in Russia. We eliminated the
holding from the portfolio as we believed its risk return profile was
not in keeping with our guidelines for this fund.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's strategy as well as market
conditions and may vary in the future.
The fund's management team
The fund is managed by the Putnam Global Equity Research Team, using an
analyst-driven interdisciplinary process in which all members take part
in management of the fund.
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.
We believe the outlook for the natural-resources sector, and
particularly energy-related industries, is positive. Oil and gas prices
should remain above mid-cycle levels as the global economic recovery
continues to progress amid tight inventories. Although Iraqi and
Venezuelan capacity is in the process of being restored after last
year's disruptions, it is unlikely that production from these countries
will return quickly to normal levels. Accordingly, we are slightly
overweighting energy-related companies, particularly those in the
oilfield services and drilling industries. Within energy, we are
targeting companies whose stock prices are attractively valued by our
measures, as we find that valuation levels of energy issues overall are
not cheap.
In our view, current valuations in basic materials industries are
generally high; investors have aggressively priced in the effects of a
global cyclical recovery. In many of the category's sub-industries
(cement, construction, building materials), we favor stocks of non-U.S.
companies because, according to our analysis, their valuations are, in
many cases, more appealing than those of their U.S. counterparts. Also
on valuation grounds, we are currently trimming the fund's overall
exposure to the paper and chemicals industries, while retaining holdings
in select names.
We believe the fund's strategy of targeting stocks of competitively
positioned companies selling below our view of their long-term business
worth will continue to serve the fund well, whatever direction the
markets take.
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 shows your fund's performance during the first half of its
fiscal year, which ended February 29, 2004. 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. Data represent past performance.
Past performance does not guarantee 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. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 2/29/04
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Class A Class B Class C Class M Class R
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 19.76% 12.89% 19.35% 14.35% 19.35% 18.35% 19.50% 15.29% 19.69%
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1 year 35.39 27.59 34.39 29.39 34.46 33.46 34.79 30.09 35.14
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5 years 76.48 66.37 69.84 67.84 69.98 69.98 71.99 65.93 74.40
Annual average 12.03 10.72 11.17 10.91 11.19 11.19 11.46 10.66 11.77
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10 years 145.20 131.04 127.38 127.38 127.51 127.51 133.04 124.81 139.36
Annual average 9.38 8.73 8.56 8.56 8.57 8.57 8.83 8.44 9.12
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Annual average
(life of fund) 7.14 6.87 6.25 6.25 6.28 6.28 6.52 6.36 6.88
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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 (which
for class A shares does not reflect a reduction in sales charges that
went into effect on January 28, 2004; if this reduction had been in
place for all periods indicated, returns would have been higher). 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. Class R share returns have no
initial sales charge or CDSC. Performance for class B, C, M, and R
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 2% short-term trading fee will be imposed on shares exchanged or sold
within 5 days of purchase. In addition, there is a 1% short-term trading
fee for this fund on shares sold or exchanged between 6 and 90 days.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/04
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Lipper Natural
Resources Funds
category
S&P 500 Index average*
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6 months 14.59% 22.28%
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1 year 38.52 40.40
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5 years -0.60 132.93
Annual average -0.12 17.11
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10 years 193.17 189.29
Annual average 11.36 10.92
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Annual average
(life of fund) 13.33 9.01
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 2/29/04, there
were 77, 75, 54, and 20 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION* INFORMATION 6 MONTHS ENDED 2/29/04
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Class A Class B Class C Class M Class R
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Share value: NAV POP NAV NAV NAV POP NAV
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8/31/03 $17.92 $19.01 $17.42 $17.62 $17.80 $18.45 --
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12/1/03+ -- -- -- -- -- -- $18.32
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2/29/04 21.46 22.65 20.79 21.03 21.27 22.04 21.46
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* The fund made no distributions during the period.
+ Inception for class R shares.
++ Reflects a reduction in sales charges that took effect on
January 28, 2004.
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TOTAL RETURN FOR PERIODS ENDED 3/31/04 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 21.94% 14.90% 21.45% 16.45% 21.45% 20.45% 21.63% 17.36% 21.81%
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1 year 36.65 28.80 35.59 30.59 35.59 34.59 35.98 31.24 36.32
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5 years 56.58 47.60 50.79 48.79 50.78 50.78 52.61 47.28 54.68
Annual average 9.38 8.10 8.56 8.27 8.56 8.56 8.82 8.05 9.12
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10 years 161.69 146.70 142.68 142.68 142.64 142.64 148.58 139.85 155.24
Annual average 10.10 9.45 9.27 9.27 9.27 9.27 9.53 9.14 9.82
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Annual average
(life of fund) 7.08 6.81 6.19 6.19 6.21 6.21 6.45 6.29 6.81
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Risk comparison
As part of new initiatives to enhance disclosure, we are including a
risk comparison to help you understand how your fund compares with other
funds. The comparison utilizes a risk measure developed by Morningstar,
an independent fund-rating agency. This risk measure is referred to as
the fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 3.48
U.S. stock
fund average 3.97
Percentile rank [plot as risk bar]: 72%
0% INCREASING RISK > 100%
Your fund's Overall Morningstar Risk is shown alongside that of the
average fund in its broad asset class, as determined by Morningstar. The
risk bar broadens the comparison by translating the fund's Overall
Morningstar Risk into a percentile, which is based on the fund's ranking
among all funds rated by Morningstar as of 3/31/04. A higher Overall
Morningstar Risk generally indicates that a fund's monthly returns have
varied more widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class
A shares only; information for other classes may vary. Overall
Morningstar Risk is based on historical data and does not indicate
future results. Morningstar does not purport to measure the risk
associated with a current investment in a fund, either on an absolute
basis or on a relative basis. Low Overall Morningstar Risk does not mean
that you cannot lose money on an investment in a fund. Copyright 2004
Morningstar, Inc. All Rights Reserved. The information contained herein
(1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate,
complete, or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information.
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 (since reduced to 5.25%) 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).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
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.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. Our proxy voting guidelines and policies are
available on the Putnam Individual Investor Web site,
www.putnaminvestments.com, by calling Putnam's Shareholder Services at
1-800-225-1581, or on the SEC's Web site, www.sec.gov.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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 period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
The fund's portfolio
February 29, 2004 (Unaudited)
Common stocks (99.6%) (a)
Number of shares Value
Building Materials (1.3%)
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1,301,145 Aggregate Industries PLC (United
Kingdom) $2,082,536
29,100 Vulcan Materials Co. 1,376,430
--------------
3,458,966
Chemicals (12.2%)
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9,460 Air Liquide (France) 1,675,858
24,600 Avery Dennison Corp. 1,558,902
67,571 BASF AG (Germany) 3,592,780
22,636 Ciba Specialty Chemicals AG
(Switzerland) (NON) 1,626,026
208,439 Dow Chemical Co. (The) 9,060,843
258,400 E.I. du Pont de Nemours & Co. 11,651,256
41,569 PPG Industries, Inc. 2,439,685
--------------
31,605,350
Construction (1.3%)
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166,960 CRH PLC (Ireland) 3,484,562
Energy (16.8%)
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50,900 Baker Hughes, Inc. 1,914,858
93,004 BJ Services Co. (NON) 4,026,143
18,417 Compania Espanola de Petroleos, S.A.
(CEPSA) (Spain) 628,956
53,828 ENSCO International, Inc. 1,580,928
302,588 GlobalSantaFe Corp. (Cayman Islands) 8,926,346
402,689 Halliburton Co. 12,869,940
29,500 Nabors Industries, Ltd. (Bermuda)
(NON) 1,396,825
72,569 Precision Drilling Corp. (Canada)
(NON) 3,466,999
50,900 Pride International, Inc. (NON) 872,426
80,939 Schlumberger, Ltd. 5,219,756
55,114 Weatherford International, Ltd.
(Bermuda) (NON) 2,469,107
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43,372,284
Forest Products and Packaging (2.8%)
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291,700 Abitibi-Consolidated, Inc. (Canada) 2,304,554
49,750 Hankuk Paper Manufacturing Co., Ltd.
(South Korea) 1,119,904
159,600 Sappi, Ltd. ADR (South Africa) 2,186,520
85,206 Smurfit-Stone Container Corp. 1,581,423
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7,192,401
Metals (1.0%)
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99,851 BHP, Ltd. ADR (Australia) 1,908,153
27,704 Rio Tinto PLC (United Kingdom) 740,823
--------------
2,648,976
Oil & Gas (64.2%)
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159,707 Amerada Hess Corp. 10,277,145
1,371,531 BG Group PLC (United Kingdom) 8,068,126
960,186 BP PLC (United Kingdom) 7,710,814
326,800 BP PLC ADR (United Kingdom) 16,078,560
67,306 Burlington Resources, Inc. 3,940,093
121,058 Canadian Natural Resources, Ltd.
(Canada) 6,609,151
118,500 Chevron Texaco Corp. 10,469,475
763,500 CNOOC, Ltd. (Hong Kong) 1,544,931
173,100 ConocoPhillips 11,921,397
85,184 Energy Partners, Ltd. (NON) 1,170,428
620,675 ENI SpA (Italy) 12,159,688
579,696 ExxonMobil Corp. 24,445,780
220,300 Imperial Oil, Ltd. (Canada) 10,100,755
19,995 Murphy Oil Corp. 1,254,286
115,900 Nexen, Inc. (Canada) 4,314,828
348,000 Nippon Oil Corp. (Japan) 1,818,838
175,100 Noble Corp. (Cayman Islands) (NON) 7,109,060
76,079 Occidental Petroleum Corp. 3,377,908
425,900 Statoil ASA (Norway) 5,053,595
112,567 Total SA Class B ADR (France) 10,355,038
50,500 Valero Energy Corp. 3,030,000
213,200 Western Oil Sands, Inc. (Canada)
(NON) 5,307,358
--------------
166,117,254
--------------
Total Common stocks (cost $198,169,923) $257,879,793
Short-term investments (1.0%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$558,016 Short-term investments held as
collateral for loaned
securities with yields ranging from
1.03% to 1.08% due March 1, 2003 (d) $558,000
2,089,151 Short-term investments held in
Putnam commingled cash account with
yields ranging from 1.01% to 1.07%
and due dates ranging from March 1,
2004 to April 23, 2004 (d) 2,089,151
--------------
Total Short-term investments (cost $2,647,151) $2,647,151
- -------------------------------------------------------------------------------
Total Investments (cost $200,817,074) $260,526,944
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $259,003,785.
(NON) Non-income-producing security.
(d) See Note 1 to the financial statements.
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 February 29, 2004:
(as a percentage of Market Value)
Bermuda 1.5% Italy 4.7%
Canada 12.3 Norway 1.9
Cayman Islands 6.2 United Kingdom 13.3
France 4.6 United States 48.6
Germany 1.4 Other 4.2
Ireland 1.3 -----
Total 100.0%
Forward currency contracts to buy at February 29, 2004 (Unaudited)
(aggregate face value $3,652,140)
Aggregate Delivery Unrealized
Value face value date depreciation
- ------------------------------------------------------------------------------------------------------
Australian Dollar $873,077 $881,146 6/16/04 $(8,069)
Japanese Yen 2,757,832 2,770,994 3/17/04 (13,162)
- ------------------------------------------------------------------------------------------------------
$(21,231)
- ------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at February 29, 2004 (Unaudited)
(aggregate face value $47,578,258)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
British Pound $12,127,440 $12,132,284 6/16/04 $4,844
Canadian Dollar 21,998,056 22,136,647 6/16/04 138,591
Euro 6,386,090 6,405,201 6/16/04 19,111
Hong Kong Dollar 1,154,189 1,159,158 3/17/04 4,969
Japanese Yen 634,442 653,612 3/17/04 19,170
Norwegian Krone 3,782,168 3,940,502 3/17/04 158,334
Swiss Franc 1,167,970 1,150,854 3/17/04 (17,116)
- ------------------------------------------------------------------------------------------------------
$327,903
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
February 29, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value, including $546,282 of
securities on loan (identified cost $200,817,074) (Note 1) $260,526,944
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 948,435
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 358,518
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 345,019
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 864,542
- -------------------------------------------------------------------------------
Total assets 263,043,458
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 385,035
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 811,674
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 442,371
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 74,138
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 36,521
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,156
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 138,014
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 38,347
- -------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 1,490,183
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 558,000
- -------------------------------------------------------------------------------
Other accrued expenses 64,234
- -------------------------------------------------------------------------------
Total liabilities 4,039,673
- -------------------------------------------------------------------------------
Net assets $259,003,785
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $194,202,596
- -------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (1,675,293)
- -------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 6,445,069
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and asset and
liabilities in foreign currencies 60,031,413
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $259,003,785
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($166,232,926 divided by 7,745,138 shares) $21.46
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.75 of $21.46)* $22.65
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($76,516,018 divided by 3,680,711 shares)** $20.79
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($13,067,668 divided by 621,523 shares)** $21.03
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($3,139,193 divided by 147,602 shares) $21.27
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $21.27)* $22.04
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($47,980 divided by 2,236 shares) $21.46
- -------------------------------------------------------------------------------
* 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
Six months ended February 29, 2004 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $107,340) $2,125,389
- -------------------------------------------------------------------------------
Interest 13,448
- -------------------------------------------------------------------------------
Securities lending 3,267
- -------------------------------------------------------------------------------
Total investment income 2,142,104
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 923,696
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 409,247
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 8,451
- -------------------------------------------------------------------------------
Administrative services (Note 2) 3,572
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 211,718
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 388,108
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 70,257
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 11,982
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 21
- -------------------------------------------------------------------------------
Other 88,894
- -------------------------------------------------------------------------------
Non-recurring costs (Note 5) 6,562
- -------------------------------------------------------------------------------
Costs assumed by Manager (Note 5) (6,562)
- -------------------------------------------------------------------------------
Total expenses 2,115,946
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (232,290)
- -------------------------------------------------------------------------------
Net expenses 1,883,656
- -------------------------------------------------------------------------------
Net investment income 258,448
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 27,164,490
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 256,478
- -------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (4,531,940)
- -------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 767,400
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 21,454,622
- -------------------------------------------------------------------------------
Net gain on investments 45,111,050
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $45,369,498
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
February 29 August 31
Increase (decrease) in net assets 2004* 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $258,448 $2,244,497
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 22,889,028 (14,247,049)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 22,222,022 38,477,061
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 45,369,498 26,474,509
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A -- (990,062)
- -------------------------------------------------------------------------------
Class M -- (950)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (73,074,616) (13,029,771)
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets (27,705,118) 12,453,726
Net assets
- -------------------------------------------------------------------------------
Beginning of period 286,708,903 274,255,177
- -------------------------------------------------------------------------------
End of period (including accumulated net
investment loss and distributions in excess
of net investment income of $1,675,293 and
$1,933,741, respectively) $259,003,785 $286,708,903
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- -------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $17.92 $16.22 $19.58 $21.79 $19.98 $15.28
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .04 .18 .14 .14 .14 .20
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.50 1.62 (1.50) (.79) 2.17 5.91
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.54 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 $21.46 $17.92 $16.22 $19.58 $21.79 $19.98
- -------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.76* 11.12 (7.26) (3.25) 12.07 42.50
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $166,233 $186,504 $173,632 $192,785 $206,190 $200,824
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .66* 1.26 1.18 1.14 1.15 1.16
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment inco
to average net assets (%) .23* 1.12 .81 .69 .74 1.09
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.59* 131.17 137.57 102.45 199.50 118.37
- -------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(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
- -------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $17.42 $15.80 $19.14 $21.37 $19.61 $15.00
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (a) (.03) .05 .01 (.01) (.01) .06
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.40 1.57 (1.47) (.78) 2.13 5.81
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.37 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 $20.79 $17.42 $15.80 $19.14 $21.37 $19.61
- -------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.35* 10.25 (7.96) (3.98) 11.19 41.42
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $76,516 $82,109 $87,085 $113,258 $126,004 $146,228
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.04* 2.01 1.93 1.89 1.90 1.91
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) (.14)* .35 .05 (.07) (.04) .35
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.59* 131.17 137.57 102.45 199.50 118.37
- -------------------------------------------------------------------------------------------------------------------------
* 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).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- -------------------------------------------------------------------------------------------------------------------------
Six months For the
ended period
February 29 July 26, 1999+
Per-share (Unaudited) Year ended August 31 to August 31
operating performance 2004 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $17.62 $15.98 $19.34 $21.64 $19.98 $19.78
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (a) (.03) .06 .02 -- (d) .03 .02
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.44 1.58 (1.49) (.81) 2.12 .18
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.41 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 $21.03 $17.62 $15.98 $19.34 $21.64 $19.98
- -------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.35* 10.26 (7.94) (4.03) 11.22 1.01*
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $13,068 $14,546 $9,657 $7,878 $4,040 $209
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.04* 2.01 1.93 1.89 1.90 .19*
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) (.14)* .40 .09 (.02) .14 .13*
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.59* 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
- -------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $17.80 $16.11 $19.43 $21.62 $19.82 $15.15
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (a) -- (d) .10 .05 .03 .05 .11
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.47 1.59 (1.49) (.78) 2.14 5.86
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.47 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 $21.27 $17.80 $16.11 $19.43 $21.62 $19.82
- -------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.50* 10.52 (7.72) (3.73) 11.47 41.72
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,139 $3,550 $3,881 $5,448 $8,254 $10,537
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .91* 1.76 1.68 1.64 1.65 1.66
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) (.02)* .60 .30 .16 .26 .62
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.59* 131.17 137.57 102.45 199.50 118.37
- -------------------------------------------------------------------------------------------------------------------------
* 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 R
- ---------------------------------------------------------------------------------------------------
For the
period
December 1, 2003+
Per-share to February 29
operating performance 2004
- ---------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $18.32
- ---------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------
Net investment income (a) .02
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.12
- ---------------------------------------------------------------------------------------------------
Total from
investment operations 3.14
- ---------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.46
- ---------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 17.14*
- ---------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $48
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .52*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .05*
- ---------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.59*
- ---------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 broker service arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
February 29, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam Global Natural Resources Fund ("the fund") is registered under
the Investment Company 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
concentrates its investments in one sector which involves more risk than
a fund that invests more broadly.
The fund offers class A, class B, class C, class M and class R shares.
The fund began offering class R shares on December 1, 2003. Class A
shares are sold with a maximum front-end sales charge of 5.25%. Prior to
January 28, 2004, the maximum front-end sales charge for class A shares
was 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, class M and class R
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 and class R shares but lower than class
B and class C shares. Class R shares are sold without a front-end sales
charge and pay an ongoing distribution fee that is higher than class A
shares, but lower than class B, class C and class M shares. Class R
shares are offered to qualified employee-benefit plans.
A redemption fee of 1.00%, which is retained by the fund, may apply to
shares of any class redeemed (either by selling or by exchanging to
another fund) within 90 days of purchase. Effective April 19, 2004 a
2.00% redemption fee may apply to any shares that are redeemed (either
by selling or exchanging into another fund) within 5 days of purchase. A
1.00% redemption fee would apply to any shares that are redeemed (either
by selling or exchanging into another fund) within 6-90 days of
purchase.
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.
Many securities markets and exchanges outside the U.S. close prior to
the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect events that occur after such close but before the close of the
New York Stock Exchange. Accordingly, on certain days, the fund will fair
value foreign securities taking into account multiple factors, including
movements in the U.S. securities markets. The number of days on which
fair value prices will be used will depend on market activity and it is
possible that fair value prices will be used by the fund to a
significant extent. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are valued at
amortized cost, which approximates fair value. Other investments,
including restricted securities, are valued at fair value following
procedures 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 arrange ments,
into a joint 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, net of applicable withholding taxes, 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, if any, 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. Risks may exceed amounts recognized on the statement
of assets and liabilities. 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, if any,
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 February 29, 2004, the value
of securities loaned amounted to $546,282. The fund received cash
collateral of $558,000 which is pooled with collateral of other Putnam
funds into 10 issuers of high grade short-term investments.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986 (the "Code"), 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 the Code 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 applicable 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.
The aggregate identified cost on a tax basis is $202,984,502, resulting
in gross unrealized appreciation and depreciation of $57,820,920 and
$278,478, respectively, or net unrealized appreciation of $57,542,442.
I) 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. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations.
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.
Effective January 28, 2004, Putnam Management has agreed to limit its
compensation (and, to the extent necessary, bear other expenses) through
December 31, 2004, to the extent that the fund's net expenses as a
percentage of average net assets exceed the average expense ratio for
the fund's Lipper peer group of front-end load funds.
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. Putnam
Investor Services, a division of PFTC, provides investor serving agent
functions to the fund. During the six months ended February 29, 2004,
the fund paid PFTC $348,855 for these services.
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 six months ended February 29,
2004, the fund's expenses were reduced by $232,290 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $810, as a quarterly retainer, 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 Trustee compensation and expenses in the
Statement of operations. Accrued pension liability is included in
Payable for Trustee 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, class M and class R 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 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%, 1.00% and
1.00% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and
0.50% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively.
For the six months ended February 29, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $12,466 and $196 from
the sale of class A and class M shares, respectively, and received
$232,248 and $9,325 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 six
months ended February 29, 2004, Putnam Retail Management, acting as
underwriter, received $74,611 and no monies on class A and class M
redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended February 29, 2004, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $109,965,798 and $183,631,540, respectively.
There were no purchases or sales of U.S. government securities.
Note 4
Capital shares
At February 29, 2004, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 636,877 $12,472,083
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
636,877 12,472,083
Shares repurchased (3,298,679) (61,724,249)
- ----------------------------------------------------------------
Net decrease (2,661,802) $(49,252,166)
- ----------------------------------------------------------------
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)
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 354,775 $6,659,207
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
354,775 6,659,207
Shares repurchased (1,386,735) (25,653,467)
- ----------------------------------------------------------------
Net decrease (1,031,960) $(18,994,260)
- ----------------------------------------------------------------
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)
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 135,758 $2,498,801
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------------------
135,758 2,498,801
Shares repurchased (339,728) (6,423,104)
- ----------------------------------------------------------------
Net decrease (203,970) $(3,924,303)
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 9,358 $179,201
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
9,358 179,201
Shares repurchased (61,138) (1,128,837)
- ----------------------------------------------------------------
Net decrease (51,780) $(949,636)
- ----------------------------------------------------------------
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)
- ----------------------------------------------------------------
For the period December 1, 2003
(commencement of operations)
to February 29, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 2,265 $46,357
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
2,265 46,357
- ----------------------------------------------------------------
Shares repurchased (29) (608)
- ----------------------------------------------------------------
Net increase 2,236 $45,749
- ----------------------------------------------------------------
At February 29, 2004, Putnam, LLC owned 55 class R shares of the fund
(2.45% of class R shares outstanding), valued at $1,180.
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought
against Putnam Management by those agencies on October 28, 2003 in
connection with excessive short-term trading by Putnam employees
and, in the case of the charges brought by the Massachusetts
Securities Division, by participants in some Putnam-administered
401(k) plans. The settlement with the SEC requires Putnam Management
to pay $5 million in disgorgement plus a civil monetary penalty of
$50 million, and the settlement with the Massachusetts Securities
Division requires Putnam Management to pay $5 million in restitution
and an administrative fine of $50 million. The settlements also
leave intact the process established under an earlier partial
settlement with the SEC under which Putnam Management agreed to pay
the amount of restitution determined by an independent consultant,
which may exceed the disgorgement and restitution amounts specified
above, pursuant to a plan to be developed by the independent
consultant.
Putnam Management, and not the investors in any Putnam fund, will
bear all costs, including restitution, civil penalties and
associated legal fees stemming from both of these proceedings. The
SEC's and Massachusetts Securities Division's allegations and
related matters also serve as the general basis for numerous
lawsuits, including purported class action lawsuits filed against
Putnam Management and certain related parties, including certain
Putnam funds. Putnam Management has agreed to bear any costs
incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, Putnam Management believes that the
likelihood that the pending private lawsuits and purported class
action lawsuits will have a material adverse financial impact on the
fund is remote, and the pending actions are not likely to materially
affect its ability to provide investment management services to its
clients, including the Putnam funds.
For the period ended February 29, 2004, Putnam Management has assumed
$6,562 of legal, shareholder servicing and communication, audit, and
Trustee fees incurred by the Fund in connection with these matters.
Review of these matters by counsel for Putnam Management and by
separate independent counsel for the Putnam funds and their
independent Trustees is continuing. The fund may experience increased
redemptions as a result of these matters, which could result in
increased transaction costs and operating expenses.
Putnam puts your interests first
In January, Putnam announced a number of voluntary initiatives designed
to reduce fund expenses, provide investors with more useful information,
and help safeguard the interests of all Putnam investors. For details,
visit www.putnaminvestments.com.
Cost-cutting initiatives
Reduced sales charges
Effective immediately, the maximum sales charge for class A shares has
been reduced to 5.25% for equity funds (formerly 5.75%) and 4.50% for
most income funds* (formerly 4.75%).
Lower class B purchase limit
To help ensure that investors are in the most cost-effective share
class, the maximum amount that can be invested in class B shares has
been reduced to $100,000. (Larger trades or accumulated amounts will be
directed to class A shares.)
Ongoing expenses will be limited
During calendar 2004, total ongoing expenses, including management fees
for all funds, will be maintained at or below the average of each fund's
industry peers in its Lipper load-fund universe. For more information,
please see the Statement of Additional information.
Additional measures are being taken to reduce expenses for shareholders
in the six global and international funds that had short-term trading
issues.
Improved disclosure
Putnam fund prospectuses and shareholder reports are being revised to
disclose additional information that will help shareholders compare
funds and weigh their costs and risks along with their potential
benefits. Shareholders will find easy-to-understand information about
fund expense ratios, portfolio manager compensation, risk comparisons,
brokerage commissions, and employee and trustee ownership of Putnam
funds. Disclosure of breakpoint discounts is also being enhanced to
alert investors to potential cost savings.
Protecting investors' interests
New short-term trading fee introduced
To discourage short-term trading, which can interfere with a fund's
long-term strategy, a 2% short-term trading fee will be imposed on any
Putnam fund shares redeemed or exchanged within five calendar days of
purchase.
* The maximum sales charge for class A shares of Putnam U.S.
Intermediate Government Income Fund remains 3.25%.
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
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
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 Executive Officer
Patricia C. Flaherty
Senior Vice President
Steven D. Krichmar
Vice President and Principal Financial Officer
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Beth S. Mazor
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, the most recent copy
of Putnam's Quarterly Performance Summary, and Putnam's Quarterly
Ranking Summary. For more recent performance, please visit
www.putnaminvestments.com. Investors should carefully consider the
investment objective, risks, charges, and expenses of a fund, which are
described in its prospectus. For this and other information or to
request a prospectus, call 1-800-225-1581 toll free. Please read the
prospectus carefully before investing. 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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
SA007-212131 018/501/2AD 4/04
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal financial
officer 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 generally 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.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(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
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: May 4, 2004
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/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: May 4, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: May 4, 2004