N-CSR 1 a_intlcapopps.htm PUTNAM INVESTMENT FUNDS a_intlcapopps.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811-07237)
Exact name of registrant as specified in charter: Putnam Investment Funds
Address of principal executive offices: 100 Federal Street, Boston, Massachusetts 02110
Name and address of agent for service: Stephen Tate, Vice President
100 Federal Street
Boston, Massachusetts 02110
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: August 31, 2021
Date of reporting period: September 1, 2020 – August 31, 2021



Item 1. Report to Stockholders:

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


 

 

Message from the Trustees

October 8, 2021

Dear Fellow Shareholder:

As the season changes to autumn, U.S. financial markets continue to generally perform well. Impressive corporate earnings have helped stock prices this year. Markets could face headwinds as the Federal Reserve weighs when to pare back its supportive policy measures. The Covid-19 pandemic also persists.

Putnam’s research teams, practicing their active discipline, continue to look for attractive new opportunities that the market may be mispricing. They carefully consider both potential return and risk as they select securities for portfolios to serve your financial objectives.

Thank you for investing with Putnam.


 


Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 8–10 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

Lipper peer group average provided by Lipper, a Refinitiv company.


This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 8/31/21. See above and pages 8–10 for additional fund performance information. Index descriptions can be found on pages 14–15.

All Bloomberg indices provided by Bloomberg Index Services Limited.

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Please describe the market environment during the 12-month reporting period.

The past 12 months have been characterized by a frenetic market. Equity markets across the globe saw a remarkable rebound, with markets climbing the proverbial “wall of worry.” While markets have steadily appreciated, there has been a lot of volatility in sector and style performance. This volatility has been driven by the push and pull of a recovering global economy under pressure from several risks including the spread of the Covid-19 Delta variant, concerns regarding the United States tapering its bond-buying program, and China’s regulatory crackdown on its internet behemoths.

A somewhat overlooked development in this environment has been a pickup in the performance of quality companies trading at discounted valuations. The latter half of fiscal year 2020 had experienced significant appreciation of highly speculative early-stage companies. In the beginning of fiscal year 2021, this outperformance began to wane, and we saw a shift in the market to favoring attractively valued quality businesses. This environment favors our quality biased, intrinsic value approach. In our opinion, there are

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Allocations are shown as a percentage of the fund’s net assets as of 8/31/21. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.


This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 8/31/21. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.

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clear signs of excesses in some segments of the equity markets. The very loose monetary conditions and excitement around innovation have created an environment reminiscent of the dot-com era, in our view. We believe the current relatively narrow market focus has created a variety of underappreciated investment opportunities.

How did the fund perform in this environment during the reporting period?

For the 12-month reporting period, Putnam International Capital Opportunities Fund posted a return of 38.96%, compared with 32.29% for its benchmark, the S&P Developed Ex-U.S. SmallCap Index.

What were some stocks that helped performance during the period?

Indian Energy Exchange (IEX), the dominant electricity trading exchange in India, was the top contributor to fund performance. Currently, only 12% of the power market in India is transacted via an exchange. Most power is provided by distribution companies under long-term power purchase agreements. IEX stock appreciated during the period in anticipation of several structural reforms being initiated by the Indian government. These reforms have the potential to significantly expand IEX’s market opportunity. The government issued a draft national electricity policy targeted to increase the share of the spot power market to 25% by 2023–2024. This could double IEX’s addressable market over the next three years. The government also proposed that electricity distribution companies be allowed to exit long-term power purchase agreements when their contracts expire. This would enable the contracted power to be procured via an exchange, which could benefit IEX. Despite meaningful appreciation of the stock, we continue to have a favorable view of the company’s prospects and believe it is undervalued.

Sino-American Silicon, a manufacturer of silicon wafers, was a solid contributor to fund performance. During the period, the company benefited from strong wafer demand driven by a booming semiconductor industry. Additionally, its subsidiary, GlobalWafers, announced the acquisition of Siltronic, making the combined entity the third-largest global silicon wafer producer. This action, subject to closure of the transaction, will consolidate the wafer industry. As a result, the top three players will control about 80% of the market. The potential for a more disciplined wafer market gave the stock an additional boost, in our view.

What were some stocks that detracted from fund performance?

PALTAC, Japan’s largest wholesaler of cosmetics, daily necessities, and over-the-counter pharmaceuticals, detracted from fund performance. The stock underperformed due to market perception that the company would be negatively affected by the pandemic. Approximately 60% of PALTAC’s sales are to drug stores that are dependent on inbound tourists. Despite this, PALTAC’s operations have proven resilient, with stable revenue and earnings. The company was able to substitute pandemic-induced revenue losses with sales of hygiene-related products. We continue to hold the stock because we believe the company has strong fundamentals and the temporary disruptions caused by the pandemic do not change its intrinsic value.

Melco, a casino owner and operator with key assets located in Macau, also detracted from performance. Covid 19-related travel restrictions reduced the flow of travelers to their casinos in Macau. Over the past year, Melco has operated at approximately 30% capacity compared with its pre-Covid levels. The market has extrapolated what we believe

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are short-term negative trends, resulting in a significant correction in the stock price. Travel restrictions are now starting to ease. We anticipate that the casinos will return to pre-Covid volume over the next year. In our opinion, the stock remains deeply undervalued.

How did your sector allocations influence benchmark-relative fund performance during the period?

Our process focuses on bottom-up stock selection, with sector/country allocation being the outcome of bottom-up stock picking. Over the long term, we target alpha generation that is driven by stock selection, with the goal of sector/country allocation acting as a neutral contributor to performance. During the current reporting period, an underweight position in utilities and healthcare relative to the benchmark contributed positively to performance. Stretched valuations in those two sectors had led us to hold lower weightings.

An overweight position in the communication services sector was a modest drag on performance. We continue to like our holdings in this sector and believe they represent strong businesses with defensible moats, trading at significant discounts to their intrinsic worth.

During the period, we increased our overweight position in the consumer discretionary sector. We added new stocks that we believe may benefit from a return to a post-Covid “normal” environment. We also further decreased our holdings in real estate, resulting in a significant underweight in the sector relative to the benchmark. With interest rates at record lows and signs of rising inflation, we see a difficult environment for REITs, which account for the bulk of the real estate sector.

What is your outlook for the markets, and how is the fund positioned?

We believe the cliché of this being a stock picker’s market is more apt than ever. While global stock markets have had a strong run, the rally has come from an increasingly narrow group of stocks. At the same time, large segments of the market with what we believe to be strong fundamentals and reasonable valuations remain ignored. In our view, this has created an environment that is conducive for stock pickers to take advantage of this valuation arbitrage.

Similarly, there is a disconnect between the valuation of international and domestic


This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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indexes, with international indexes trading at meaningful discounts to their U.S. counterparts.

Covid-19 has led to what we believe are temporary disruptions in certain businesses that are being priced by the market as permanent impairments. An example of this within our holdings is Melco. The stock is trading at a deeply discounted valuation and close to half its pre-Covid level. Meanwhile, in our opinion, its long-term prospects are just as bright as before. Other areas of focus within the portfolio include homebuilders in the United Kingdom and France, including Berkeley, Bellway, Kaufman & Broad, and Nexity. These markets have a housing shortage, creating a favorable environment for homebuilders. Meanwhile these stocks are trading at low price-to-earnings [P/E] multiples and pay generous dividends.

We also continue to have a meaningful overweight exposure to the communication services sector. Our holdings include companies such as Cogeco, Liberty Global, and Megacable. We believe this is a largely underappreciated segment of the market.

Thank you, Karan, for this update on the fund.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended August 31, 2021, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. 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. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 8/31/21

  Annual               
  average    Annual    Annual    Annual   
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year 
Class A (12/28/95)                 
Before sales charge  9.60%  106.23%  7.51%  79.12%  12.36%  39.59%  11.76%  38.96% 
After sales charge  9.35  94.37  6.87  68.82  11.04  31.56  9.57  30.97 
Class B (10/30/96)                 
Before CDSC  9.34  94.18  6.86  72.57  11.53  36.50  10.93  37.95 
After CDSC  9.34  94.18  6.86  70.57  11.27  33.50  10.11  32.95 
Class C (7/26/99)                 
Before CDSC  9.35  94.15  6.86  72.60  11.53  36.51  10.93  37.93 
After CDSC  9.35  94.15  6.86  72.60  11.53  36.51  10.93  36.93 
Class R (1/21/03)                 
Net asset value  9.34  101.15  7.24  76.94  12.09  38.54  11.48  38.60 
Class R6 (5/22/18)                 
Net asset value  9.85  112.63  7.84  82.41  12.77  41.38  12.24  39.53 
Class Y (2/1/00)                 
Net asset value  9.83  111.42  7.77  81.38  12.65  40.65  12.04  39.32 

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

The fund has had performance fee adjustments that may have had a positive or negative impact on returns.

Class B and C share performance reflects conversion to class A shares after eight years.

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Comparative index returns For periods ended 8/31/21

  Annual               
  average    Annual    Annual    Annual   
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year 
S&P Developed Ex-U.S.                 
SmallCap Index  7.85%  146.67%  9.45%  74.24%  11.75%  34.30%  10.33%  32.29% 
Lipper International                 
Small/Mid-Cap Growth  10.31  157.32  9.73  84.71  12.87  41.42  12.08  33.42 
Funds category average*                 

 

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

Lipper peer group average provided by Lipper, a Refinitiv company.

* Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 8/31/21, there were 219, 201, 170, 107, and 5 funds, respectively, in this Lipper category.


Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $19,418 and $19,415, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $20,115, $21,263 and $21,142, respectively.

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Fund price and distribution information For the 12-month period ended 8/31/21

Distributions  Class A Class B  Class C  Class R  Class R6  Class Y 
Number  1  1  1  1  1  1 
Income  $0.349  —  $0.018  $0.236  $0.513  $0.436 
Capital gains               
Long-term gains  0.873  $0.873  0.873  0.873  0.873  0.873 
Short-term gains  0.634  0.634  0.634  0.634  0.634  0.634 
Total  $1.856  $1.507  $1.525  $1.743  $2.020  $1.943 
  Before  After  Net  Net  Net  Net  Net 
  sales  sales  asset  asset  asset  asset  asset 
Share value  charge  charge  value  value  value  value  value 
8/31/20  $37.10  $39.36  $36.52  $36.28  $36.36  $37.45  $37.29 
8/31/21  49.35  52.36  48.60  48.24  48.33  49.85  49.64 

 

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

Fund performance as of most recent calendar quarter Total return for periods ended 9/30/21

  Annual               
  average    Annual    Annual    Annual   
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year 
Class A (12/28/95)                 
Before sales charge  9.43%  132.55%  8.81%  69.10%  11.08%  35.27%  10.59%  36.12% 
After sales charge  9.18  119.18  8.16  59.38  9.77  27.49  8.43  28.29 
Class B (10/30/96)                 
Before CDSC  9.17  118.96  8.15  62.91  10.25  32.30  9.78  35.13 
After CDSC  9.17  118.96  8.15  60.91  9.98  29.30  8.94  30.13 
Class C (7/26/99)                 
Before CDSC  9.17  119.02  8.16  62.88  10.25  32.25  9.76  35.09 
After CDSC  9.17  119.02  8.16  62.88  10.25  32.25  9.76  34.09 
Class R (1/21/03)                 
Net asset value  9.17  126.84  8.54  67.02  10.80  34.28  10.32  35.80 
Class R6 (5/22/18)                 
Net asset value  9.68  139.85  9.14  72.22  11.49  37.02  11.07  36.68 
Class Y (2/1/00)                 
Net asset value  9.66  138.45  9.08  71.22  11.36  36.29  10.87  36.45 

 

See the discussion following the fund performance table on page 8 for information about the calculation of fund performance.

 

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Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios

  Class A  Class B  Class C  Class R  Class R6  Class Y 
Total annual operating expenses for the             
fiscal year ended 8/31/20  1.54%  2.29%  2.29%  1.79%  1.11%  1.29% 
Annualized expense ratio for the             
six-month period ended 8/31/21*†  1.49%  2.24%  2.24%  1.74%  1.10%  1.24% 

 

Fiscal year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

* Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

† Includes an increase of 0.02% from annualizing the performance fee adjustment for the six months ended 8/31/21.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 3/1/21 to 8/31/21. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class R  Class R6  Class Y 
Expenses paid per $1,000*†  $8.16  $12.24  $12.24  $9.52  $6.03  $6.79 
Ending value (after expenses)  $1,171.70  $1,167.40  $1,167.50  $1,170.20  $1,174.30  $1,173.20 

 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 8/31/21. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period (184); and then dividing that result by the number of days in the year (365).

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Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 8/31/21, use the following calculation method. To find the value of your investment on 3/1/21, call Putnam at 1-800-225-1581.


Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

  Class A  Class B  Class C  Class R  Class R6  Class Y 
Expenses paid per $1,000*†  $7.58  $11.37  $11.37  $8.84  $5.60  $6.31 
Ending value (after expenses)  $1,017.69  $1,013.91  $1,013.91  $1,016.43  $1,019.66  $1,018.95 

 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 8/31/21. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period (184); and then dividing that result by the number of days in the year (365).

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Consider these risks before investing

The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings.

International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.

Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.

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Terms and definitions

Important terms

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.

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares.

Contingent deferred sales charge (CDSC) is generally 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 over time 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.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.

Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

Class Y shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

Bloomberg U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

S&P 500 Index is an unmanaged index of common stock performance.

S&P Developed Ex-U.S. SmallCap Index is an unmanaged index of small-cap stocks from developed countries, excluding the United States.

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.

BLOOMBERG®  is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approve or endorse this material, or guarantee the accuracy or completeness of any information herein, or make any warranty, express or implied, as to the results to be obtained therefrom, and to the maximum extent allowed

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by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

Lipper, a Refinitiv company, is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

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Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2021, are available in the Individual Investors section of putnam.com and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.

Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of August 31, 2021, Putnam employees had approximately $583,000,000 and the Trustees had approximately $82,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the most recent annual report on the program to the Trustees in April 2021. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from January 2020 through December 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2020. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the Covid-19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.

16 International Capital Opportunities Fund 

 

 

Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

International Capital Opportunities Fund 17 

 

 

Trustee approval of management contract

General conclusions

The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”), the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, The Putnam Advisory Company (“PAC”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel considered any possible changes to the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and, as applicable, identified those changes to Putnam Management. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2021, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2021, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2021 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2021. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not attempted to evaluate PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)

The Independent Trustees’ approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund and the application of certain reductions and waivers noted below; and

• That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of any economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater

18 International Capital Opportunities Fund 

 

 

scrutiny in some years than others and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with certain exceptions primarily involving newly launched or repositioned funds, the current fee arrangements under the vast majority of the funds’ management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with reduced fee levels as assets under management in the Putnam family of funds increase. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to fund shareholders. (Two funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment strategy, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee schedule for your fund would be appropriate at this time.

In addition, your fund’s management contract provides that its management fees will be adjusted up or down depending upon whether your fund’s performance is better or worse than the performance of an appropriate index of securities prices specified in the management contract. In the course of reviewing investment performance, the Trustees examined the operation of your fund’s performance fees and concluded that these fees were operating effectively to align further Putnam Management’s economic interests with those of the fund’s shareholders.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. The Trustees and Putnam Management and the funds’ investor servicing agent, Putnam Investor Services, Inc. (“PSERV”), have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2020. These expense limitations were: (i) a contractual expense limitation applicable to specified open-end funds, including your fund, of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2020. However, in the case of your fund, the first expense limitation applied during its fiscal year ending in 2020. Putnam Management and PSERV have agreed to maintain these expense limitations until at least December 30, 2022. Putnam Management and PSERV’s commitment to these expense limitation arrangements, which were intended to support an effort to have fund expenses meet competitive standards, was an important factor in the Trustees’ decision to approve the continuance of your fund’s management, sub-management and sub-advisory contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Broadridge Financial Solutions, Inc. (“Broadridge”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fees), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the second quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2020. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by

International Capital Opportunities Fund 19 

 

 

Broadridge as of December 31, 2020 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of the revenues, expenses and profitability of Putnam Management and its affiliates, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place for the Putnam funds, including the fee schedule for your fund, represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of any economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding services provided and fees charged by Putnam Management and its affiliates to other clients, including defined benefit pension and profit-sharing plans, sub-advised mutual funds, private funds sponsored by affiliates of Putnam Management, model-only separately managed accounts and Putnam Management’s newly launched exchange-traded funds. This information included, in cases where a product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these clients as compared to the services provided to the Putnam funds. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate marketplaces. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for other clients, and the Trustees also considered the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of Putnam Management’s investment process and performance by the work of the investment oversight committees of the Trustees and the full Board of Trustees, which meet on a regular basis with individual portfolio managers and with senior management of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that, in the aggregate, The Putnam Funds generally performed well in 2020, which Putnam Management characterized as a challenging year with significant volatility and varied market dynamics. On an asset-weighted basis, the Putnam funds ranked in the second quartile of their peers as determined by Lipper Inc. (“Lipper”) for the year ended December 31, 2020 and, on an asset-weighted-basis, delivered a gross return that was 2.3% ahead of their benchmarks in 2020. In addition to the performance of the individual Putnam funds, the Trustees considered, as they had in prior years, the performance of The Putnam Fund complex versus competitor fund complexes. In this regard, the Trustees observed that The Putnam Funds’ relative performance, as reported in the Barron’s/Lipper Fund Families survey, continued to be exceptionally strong over

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the long term, with The Putnam Funds ranking as the 3rd best performing mutual fund complex out of 44 complexes for the ten-year period, with 2020 marking the fourth consecutive year that The Putnam Funds have ranked in the top ten fund complexes for the ten-year period. The Trustees noted that The Putnam Funds’ performance was solid over the one- and five-year periods, with The Putnam Funds ranking 22nd out of 53 complexes and 14th out of 50 complexes, respectively. In addition to the Barron’s/Lipper Fund Families Survey, the Trustees also considered the funds’ ratings assigned by Morningstar Inc., noting that 26 of the funds were four- or five-star rated at the end of 2020 (representing an increase of four funds year-over-year) and that this included seven funds that had achieved a five-star rating (representing an increase of two funds year-over-year). They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2020 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor closely the performance of those funds and evaluate whether additional actions to address areas of underperformance may be warranted.

For purposes of the Trustees’ evaluation of the Putnam funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and comparisons of those returns to the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper peer group (Lipper International Small/Mid-Cap Growth Funds) for the one-year, three-year and five-year periods ended December 31, 2020 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):

One-year period  3rd 
Three-year period  3rd 
Five-year period  3rd 

 

Over the one-year, three-year and five-year periods ended December 31, 2020, there were 216, 196 and 159 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees considered Putnam Management’s continued efforts to support fund performance through certain initiatives, including structuring compensation for portfolio managers to enhance accountability for fund performance, emphasizing accountability in the portfolio management process and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management had made selective hires and internal promotions in 2020 to strengthen its investment team.

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee. In addition, with the assistance of their Brokerage Committee, the Trustees indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management, sub-management and sub-advisory contracts, the Trustees reviewed

International Capital Opportunities Fund 21 

 

 

your fund’s investor servicing agreement with PSERV and its distributor’s contract and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are fair and reasonable in relation to the nature and quality of such services, the fees paid by competitive funds and the costs incurred by PSERV and PRM, as applicable, in providing such services. Furthermore, the Trustees were of the view that the investor services provided by PSERV were required for the operation of the funds, and that they were of a quality at least equal to those provided by other providers.

22 International Capital Opportunities Fund 

 

 

Audited financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s audited 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 non-investment 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 liquidation preference of 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 the fund’s net investment gain or loss, 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 highlights table also includes the current reporting period.

International Capital Opportunities Fund 23 

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Putnam Investment Funds and Shareholders of
Putnam International Capital Opportunities Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam International Capital Opportunities Fund (one of the funds constituting Putnam Investment Funds, referred to hereafter as the “Fund”) as of August 31, 2021, the related statement of operations for the year ended August 31, 2021, the statement of changes in net assets for each of the two years in the period ended August 31, 2021, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended August 31, 2021 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 2021

We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.

24 International Capital Opportunities Fund 

 

 

The fund’s portfolio 8/31/21
COMMON STOCKS (99.0%)* Shares Value
Australia (2.4%)
Brickworks, Ltd. 346,916 $6,113,498
Mineral Resources, Ltd. 100,636 4,013,899
10,127,397
Canada (7.9%)
CI Financial Corp. 460,300 8,934,924
Cogeco Communications, Inc. 109,500 10,068,636
Constellation Software, Inc. 3,315 5,618,119
Home Capital Group, Inc. † 265,100 8,310,312
32,931,991
Chile (1.0%)
Liberty Latin America, Ltd. Class C † 297,686 4,283,702
4,283,702
Denmark (1.6%)
Royal Unibrew A/S 51,175 6,609,149
6,609,149
France (11.0%)
Dassault Aviation SA 9,255 10,436,095
Eurazeo SA 99,986 10,282,897
Euronext NV 67,689 7,852,515
Kaufman & Broad SA 188,719 8,768,362
Nexity SA 80,809 4,165,830
Thermador Groupe 39,005 4,333,792
45,839,491
Germany (2.2%)
CompuGroup Medical SE & Co. KgaA 32,731 3,053,124
CTS Eventim AG & Co. KGaA † 91,792 5,919,904
8,973,028
Greece (4.3%)
Motor Oil (Hellas) Corinth Refineries SA † 448,088 7,407,122
OPAP SA 671,056 10,522,404
17,929,526
Hong Kong (1.3%)
Melco International Development, Ltd. † 3,685,000 5,349,833
5,349,833
India (2.2%)
Indian Energy Exchange, Ltd. 1,314,555 9,076,369
9,076,369
Ireland (2.1%)
Dalata Hotel Group PLC † 939,426 4,192,881
Hibernia REIT PLC R 2,940,168 4,401,995
8,594,876
Italy (0.7%)
DiaSorin SpA 13,159 3,002,621
3,002,621
Japan (23.4%)
Amano Corp. 258,200 6,551,419
Avant Corp. 162,900 2,253,166
Daiho Corp. 59,200 2,145,985


International Capital Opportunities Fund 25


COMMON STOCKS (99.0%)* cont. Shares Value
Japan cont.
Daiseki Co., Ltd. 190,920 $7,725,778
Fukui Computer Holdings, Inc. 276,600 10,942,235
JINS Holdings, Inc. 58,300 3,802,267
Kobe Bussan Co., Ltd. 130,100 5,060,730
Kyowa Exeo Corp. 197,100 4,944,576
Kyudenko Corp. 312,400 11,220,089
Nabtesco Corp. 152,200 6,006,468
Nakanishi, Inc. 309,800 7,003,383
NSD Co., Ltd. 307,600 5,725,748
PALTAC Corp. 134,000 5,830,462
Solasto Corp. 303,600 4,163,602
Takeuchi Manufacturing Co., Ltd. 270,500 6,489,901
TechnoPro Holdings, Inc. 280,200 7,478,607
97,344,416
Jersey (1.6%)
Breedon Group PLC † 4,526,347 6,459,525
6,459,525
Mexico (1.8%)
Megacable Holdings SAB de CV (Units) 2,153,334 7,507,292
7,507,292
Netherlands (1.7%)
QIAGEN NV † 126,099 6,978,542
6,978,542
Russia (0.7%)
Globaltrans Investment PLC 375,591 3,079,846
3,079,846
South Korea (3.1%)
Hana Financial Group, Inc. 155,438 6,018,203
i-SENS, Inc. 68,315 1,904,487
Vieworks Co., Ltd. 129,411 4,919,936
12,842,626
Spain (3.1%)
Cia de Distribucion Integral Logista Holdings SA 413,304 8,974,483
Fomento de Construcciones y Contratas SA 309,761 3,957,420
12,931,903
Sweden (1.5%)
BHG Group AB † 369,923 6,254,369
6,254,369
Switzerland (1.9%)
Swissquote Group Holding SA 42,579 8,034,563
8,034,563
Taiwan (6.7%)
Elite Material Co., Ltd. 1,162,000 9,778,376
Lite-On Technology Corp. 3,853,000 8,494,009
momo.com, Inc. 48,900 3,025,087
Sino-American Silicon Products, Inc. 935,000 6,481,951
27,779,423
United Kingdom (16.8%)
Admiral Group PLC 79,928 3,968,093
Afren PLC † F 4,060,504 6


26 International Capital Opportunities Fund



COMMON STOCKS (99.0%)* cont. Shares Value
United Kingdom cont.
Bellway PLC 143,947 $6,964,296
Berkeley Group Holdings PLC (The) 163,530 10,852,508
Cairn Energy PLC 1,920,009 5,076,191
Domino’s Pizza Group PLC 1,098,411 6,212,759
Dr. Martens PLC † 595,476 3,459,785
Jet2 PLC † 151,872 2,409,566
Liberty Global PLC Class C † 275,900 7,995,582
Nomad Foods, Ltd. † 264,300 6,974,877
PageGroup PLC † 777,832 6,737,235
Vivo Energy PLC 6,319,854 9,436,093
70,086,991
Total common stocks (cost $323,207,354) $412,017,479

U.S. TREASURY OBLIGATIONS (0.1%)* Principal
amount		 Value
U.S. Treasury Bonds 3.375%, 11/15/48 i $315,000 $417,473
Total U.S. treasury obligations (cost $417,473) $417,473

SHORT-TERM INVESTMENTS (1.5%)* Principal amount/
shares		 Value
Putnam Short Term Investment Fund Class P 0.08% L Shares 3,650,503 $3,650,503
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.03% P Shares 440,000 440,000
U.S. Treasury Bills 0.046%, 10/14/21 ∆ $1,800,000 1,799,914
U.S. Treasury Cash Management Bills 0.050%, 11/16/21 ∆ 434,000 433,956
U.S. Treasury Cash Management Bills 0.046%, 11/9/21 ∆ 100,000 99,988
Total short-term investments (cost $6,424,351) $6,424,361

TOTAL INVESTMENTS
Total investments (cost $330,049,178) $418,859,313
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2020 through August 31, 2021 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, references to “the SEC” represent the Securities and Exchange Commission and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $415,980,940.
† This security is non-income-producing.
∆ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $1,364,952 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).
F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities are classified as Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).
i This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1).
L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.


International Capital Opportunities Fund 27



P This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
R Real Estate Investment Trust.
At the close of the reporting period, the fund maintained liquid assets totaling $1,606,637 to cover certain derivative contracts.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
Industrials 20.7%
Consumer discretionary 20.4
Financials 15.0
Information technology 13.4


FORWARD CURRENCY CONTRACTS at 8/31/21 (aggregate face value $274,585,369)
Counterparty Currency Contract
type*		 Delivery
date		 Value Aggregate
face value		 Unrealized
appreciation/
(depreciation)
Bank of America N.A.
Australian Dollar Buy 10/20/21 $410,654 $419,507 $(8,853)
British Pound Buy 9/15/21 5,687,525 5,862,909 (175,384)
Canadian Dollar Sell 10/20/21 803,331 793,743 (9,588)
Euro Sell 9/15/21 2,877,615 2,975,030 97,415
Japanese Yen Sell 11/17/21 2,455,959 2,446,827 (9,132)
Norwegian Krone Buy 9/15/21 494,238 494,117 121
Swedish Krona Buy 9/15/21 1,701,070 1,710,344 (9,274)
Barclays Bank PLC
British Pound Sell 9/15/21 11,364,184 11,694,060 329,876
Euro Sell 9/15/21 1,979,076 2,046,147 67,071
Hong Kong Dollar Buy 11/17/21 693,010 692,600 410
Japanese Yen Sell 11/17/21 7,665,998 7,636,999 (28,999)
Swedish Krona Buy 9/15/21 1,061,826 1,109,481 (47,655)
Citibank, N.A.
Australian Dollar Buy 10/20/21 595,346 599,365 (4,019)
British Pound Buy 9/15/21 5,477,441 5,635,383 (157,942)
Canadian Dollar Sell 10/20/21 4,372,985 4,405,386 32,401
Chilean Peso Sell 10/20/21 4,045,040 4,284,520 239,480
Chinese Yuan (Offshore) Buy 11/17/21 2,978,878 2,960,961 17,917
Danish Krone Buy 9/15/21 1,599,642 1,650,864 (51,222)
Euro Buy 9/15/21 5,919,158 6,120,744 (201,586)
Goldman Sachs International
British Pound Sell 9/15/21 1,585,940 1,631,925 45,985
Canadian Dollar Buy 10/20/21 1,492,375 1,489,463 2,912
Chinese Yuan (Offshore) Sell 11/17/21 1,427,883 1,407,303 (20,580)
Euro Sell 9/15/21 4,179,126 4,321,252 142,126
Japanese Yen Buy 11/17/21 3,193,559 3,181,410 12,149
HSBC Bank USA, National Association
British Pound Sell 9/15/21 2,017,245 2,075,589 58,344
Canadian Dollar Buy 10/20/21 1,507,989 1,518,878 (10,889)
Chinese Yuan (Offshore) Sell 11/17/21 677,673 673,668 (4,005)


28 International Capital Opportunities Fund


FORWARD CURRENCY CONTRACTS at 8/31/21 (aggregate face value $274,585,369) cont.
Counterparty Currency Contract
type*		 Delivery
date		 Value Aggregate
face value		 Unrealized
appreciation/
(depreciation)
HSBC Bank USA, National Association cont.
Euro Buy 9/15/21 $2,297,722 $2,350,728 $(53,006)
Hong Kong Dollar Buy 11/17/21 5,232,817 5,229,562 3,255
Japanese Yen Sell 11/17/21 1,781,876 1,775,453 (6,423)
Norwegian Krone Buy 9/15/21 1,862,136 1,956,600 (94,464)
JPMorgan Chase Bank N.A.
Australian Dollar Buy 10/20/21 6,254,942 6,360,923 (105,981)
British Pound Sell 9/15/21 10,154,968 10,449,203 294,235
Japanese Yen Buy 11/17/21 1,736,771 1,730,407 6,364
New Zealand Dollar Buy 10/20/21 1,143,795 1,128,190 15,605
Norwegian Krone Buy 9/15/21 875,570 920,139 (44,569)
Singapore Dollar Buy 11/17/21 4,305,969 4,283,882 22,087
South Korean Won Buy 11/17/21 8,517,583 8,641,423 (123,840)
Swedish Krona Buy 9/15/21 7,964,467 8,322,277 (357,810)
Swiss Franc Buy 9/15/21 28,058,744 28,673,449 (614,705)
Morgan Stanley & Co. International PLC
Australian Dollar Buy 10/20/21 1,734,378 1,771,760 (37,382)
British Pound Sell 9/15/21 6,149,627 6,294,453 144,826
Canadian Dollar Sell 10/20/21 3,356,379 3,380,713 24,334
Euro Buy 9/15/21 4,919,759 5,086,864 (167,105)
Japanese Yen Sell 11/17/21 6,031,480 6,016,141 (15,339)
Swiss Franc Sell 9/15/21 837,074 870,259 33,185
NatWest Markets PLC
Chinese Yuan (Offshore) Buy 11/17/21 2,032,233 2,022,608 9,625
State Street Bank and Trust Co.
Australian Dollar Buy 10/20/21 4,463,415 4,558,562 (95,147)
British Pound Sell 9/15/21 5,849,625 6,072,684 223,059
Canadian Dollar Buy 10/20/21 2,999,889 3,021,566 (21,677)
Chinese Yuan (Offshore) Sell 11/17/21 1,377,092 1,368,836 (8,256)
Euro Buy 9/15/21 7,512,033 7,766,749 (254,716)
Hong Kong Dollar Sell 11/17/21 3,318,459 3,314,873 (3,586)
Israeli Shekel Buy 10/20/21 3,761,175 3,692,554 68,621
Japanese Yen Buy 11/17/21 4,592,726 4,576,328 16,398
Toronto-Dominion Bank
Canadian Dollar Sell 10/20/21 1,520,511 1,531,597 11,086
Chinese Yuan (Offshore) Buy 11/17/21 380,087 377,780 2,307
Euro Buy 9/15/21 718,311 742,711 (24,400)
UBS AG
Australian Dollar Buy 10/20/21 3,228,525 3,264,915 (36,390)
British Pound Buy 9/15/21 936,028 963,150 (27,122)
Canadian Dollar Buy 10/20/21 10,101,155 10,169,349 (68,194)
Chinese Yuan (Offshore) Sell 11/17/21 965,433 959,769 (5,664)
Euro Sell 9/15/21 11,248,976 11,548,120 299,144
Hong Kong Dollar Buy 11/17/21 453,750 453,471 279


International Capital Opportunities Fund 29



FORWARD CURRENCY CONTRACTS at 8/31/21 (aggregate face value $274,585,369) cont.
Counterparty Currency Contract
type*		 Delivery
date		 Value Aggregate
face value		 Unrealized
appreciation/
(depreciation)
UBS AG cont.
Japanese Yen Sell 11/17/21 $10,226,346 $10,215,982 $(10,364)
Swedish Krona Sell 9/15/21 609,912 637,510 27,598
WestPac Banking Corp.
Australian Dollar Buy 10/20/21 1,508,123 1,540,424 (32,301)
British Pound Buy 9/15/21 291,478 299,922 (8,444)
Canadian Dollar Sell 10/20/21 2,344,686 2,361,819 17,133
Euro Buy 9/15/21 5,225,295 5,402,973 (177,678)
Japanese Yen Buy 11/17/21 2,649,990 2,640,216 9,774
Unrealized appreciation 2,275,122
Unrealized (depreciation) (3,133,691)
Total $(858,569)
* The exchange currency for all contracts listed is the United States Dollar.


30 International Capital Opportunities Fund


ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1: Valuations based on quoted prices for identical securities in active markets.

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:

Valuation inputs
Investments in securities: Level 1 Level 2 Level 3
Common stocks*:
Australia $— $10,127,397 $—
Canada 32,931,991 — —
Chile 4,283,702 — —
Denmark 6,609,149 — —
France 45,839,491 — —
Germany 8,973,028 — —
Greece 17,929,526 — —
Hong Kong — 5,349,833 —
India — 9,076,369 —
Ireland 8,594,876 — —
Italy 3,002,621 — —
Japan — 97,344,416 —
Jersey 6,459,525 — —
Mexico 7,507,292 — —
Netherlands 6,978,542 — —
Russia 3,079,846 — —
South Korea — 12,842,626 —
Spain 12,931,903 — —
Sweden 6,254,369 — —
Switzerland 8,034,563 — —
Taiwan — 27,779,423 —
United Kingdom 70,086,985 — 6
Total common stocks 249,497,409 162,520,064 6
U.S. treasury obligations — 417,473 —
Short-term investments 440,000 5,984,361 —
Totals by level $249,937,409 $168,921,898 $6
Valuation inputs
Other financial instruments: Level 1 Level 2 Level 3
Forward currency contracts $— $(858,569) $—
Totals by level $— $(858,569) $—
* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.
At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.


The accompanying notes are an integral part of these financial statements.


International Capital Opportunities Fund 31


Statement of assets and liabilities 8/31/21

ASSETS   
Investment in securities, at value, including (Notes 1 and 8):   
Unaffiliated issuers (identified cost $326,398,675)  $415,208,810 
Affiliated issuers (identified cost $3,650,503) (Note 5)  3,650,503 
Foreign currency (cost $183,498) (Note 1)  183,908 
Dividends, interest and other receivables  1,062,646 
Foreign tax reclaim  297,362 
Receivable for shares of the fund sold  271,735 
Unrealized appreciation on forward currency contracts (Note 1)  2,275,122 
Prepaid assets  42,697 
Total assets  422,992,783 
 
LIABILITIES   
Payable for investments purchased  1,904,058 
Payable for shares of the fund repurchased  109,080 
Payable for compensation of Manager (Note 2)  327,470 
Payable for custodian fees (Note 2)  38,201 
Payable for investor servicing fees (Note 2)  125,224 
Payable for Trustee compensation and expenses (Note 2)  220,001 
Payable for administrative services (Note 2)  1,169 
Payable for distribution fees (Note 2)  157,711 
Unrealized depreciation on forward currency contracts (Note 1)  3,133,691 
Collateral on certain derivative contracts, at value (Notes 1 and 8)  857,473 
Other accrued expenses  137,765 
Total liabilities  7,011,843 
 
Net assets  $415,980,940 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $302,383,308 
Total distributable earnings (Note 1)  113,597,632 
Total — Representing net assets applicable to capital shares outstanding  $415,980,940 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share   
($347,964,061 divided by 7,050,453 shares)  $49.35 
Offering price per class A share (100/94.25 of $49.35)*  $52.36 
Net asset value and offering price per class B share ($1,600,251 divided by 32,925 shares)**  $48.60 
Net asset value and offering price per class C share ($3,626,227 divided by 75,176 shares)**  $48.24 
Net asset value, offering price and redemption price per class R share   
($11,426,091 divided by 236,403 shares)  $48.33 
Net asset value, offering price and redemption price per class R6 share   
($16,395,583 divided by 328,909 shares)  $49.85 
Net asset value, offering price and redemption price per class Y share   
($34,968,727 divided by 704,419 shares)  $49.64 

 

* On single retail sales of less than $50,000. On sales of $50,000 or more 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.

32 International Capital Opportunities Fund 

 

 

Statement of operations Year ended 8/31/21

INVESTMENT INCOME   
Dividends (net of foreign tax of $1,022,622)  $8,696,953 
Interest (including interest income of $5,110 from investments in affiliated issuers) (Note 5)  5,576 
Securities lending (net of expenses) (Notes 1 and 5)  11,132 
Total investment income  8,713,661 
 
EXPENSES   
Compensation of Manager (Note 2)  3,420,170 
Investor servicing fees (Note 2)  732,709 
Custodian fees (Note 2)  102,615 
Trustee compensation and expenses (Note 2)  15,622 
Distribution fees (Note 2)  883,569 
Administrative services (Note 2)  9,541 
Other  271,908 
Total expenses  5,436,134 
Expense reduction (Note 2)  (472) 
Net expenses  5,435,662 
 
Net investment income  3,277,999 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (net of foreign tax of $30,301) (Notes 1 and 3)  40,313,553 
Foreign currency transactions (Note 1)  (74,579) 
Forward currency contracts (Note 1)  563,455 
Total net realized gain  40,802,429 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers  78,426,364 
Assets and liabilities in foreign currencies  (17,195) 
Forward currency contracts  (2,252,637) 
Total change in net unrealized appreciation  76,156,532 
 
Net gain on investments  116,958,961 
 
Net increase in net assets resulting from operations  $120,236,960 

 

The accompanying notes are an integral part of these financial statements.

International Capital Opportunities Fund 33 

 

 

Statement of changes in net assets

INCREASE (DECREASE) IN NET ASSETS  Year ended 8/31/21  Year ended 8/31/20 
Operations     
Net investment income  $3,277,999  $1,418,608 
Net realized gain on investments     
and foreign currency transactions  40,802,429  344,114 
Change in net unrealized appreciation of investments     
and assets and liabilities in foreign currencies  76,156,532  25,886,542 
Net increase in net assets resulting from operations  120,236,960  27,649,264 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (2,469,868)  (2,710,201) 
Class B  —  (21,779) 
Class C  (1,784)  (48,792) 
Class R  (52,441)  (94,410) 
Class R6  (151,981)  (110,483) 
Class Y  (292,222)  (299,893) 
Net realized short-term gain on investments     
Class A  (4,487,104)  — 
Class B  (27,185)  — 
Class C  (62,844)  — 
Class R  (140,879)  — 
Class R6  (187,829)  — 
Class Y  (424,928)  — 
From net realized long-term gain on investments     
Class A  (6,178,614)  (1,454,384) 
Class B  (37,432)  (11,687) 
Class C  (86,535)  (26,184) 
Class R  (193,987)  (50,663) 
Class R6  (258,635)  (59,289) 
Class Y  (585,114)  (160,933) 
Decrease from capital share transactions (Note 4)  (15,422,582)  (38,187,992) 
Total increase (decrease) in net assets  89,174,996  (15,587,426) 
 
NET ASSETS     
Beginning of year  326,805,944  342,393,370 
End of year  $415,980,940  $326,805,944 

 

The accompanying notes are an integral part of these financial statements.

34 International Capital Opportunities Fund 

 

 

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International Capital Opportunities Fund 35 

 

 

Financial highlights (For a common share outstanding throughout the period)

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS          RATIOS AND SUPPLEMENTAL DATA   
                        Ratio of  Ratio of net   
  Net asset    Net realized      From            expenses  investment   
  value,    and unrealized  Total from  From net  net realized    Non-recurring  Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss) on  investment  investment  gain on  Total  reimburse­-  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  investments­  operations­  income­  investments­  distributions  ments­  of period­  value (%)b  (in thousands)  (%)c  net assets (%)  (%) 
Class A                             
August 31, 2021­  $37.10­  .37­  13.74­  14.11­  (.35)  (1.51)  (1.86)  —­  $49.35­  38.96­  $347,964­  1.48­  .86­  36­ 
August 31, 2020  34.55­  .15­  2.93­  3.08­  (.34)  (.19)  (.53)  —­  37.10­  8.83­  272,957­  1.54­  .42­  44­ 
August 31, 2019  41.27­  .17­  (3.72)  (3.55)  —­  (3.17)  (3.17)  —­e,g  34.55­  (7.69)  278,379­  1.50­  .48­  42­ 
August 31, 2018  40.19­  .51­  1.73­  2.24­  (.97)  (.19)  (1.16)  —­  41.27­  5.54­  347,828­  1.37­  1.22­  44­ 
August 31, 2017  33.90­  .38­  6.73­  7.11­  (.82)  —­  (.82)  —­d,e  40.19­  21.59­  346,173­  1.29­  1.07­  103­ 
Class B                             
August 31, 2021­  $36.52­  .03­  13.56­  13.59­  —­  (1.51)  (1.51)  —­  $48.60­  37.95­  $1,600­  2.23­  .07­  36­ 
August 31, 2020  34.27­  (.13)  2.91­  2.78­  (.34)  (.19)  (.53)  —­  36.52­  8.02­  1,750­  2.29­  (.38)  44­ 
August 31, 2019  41.26­  (.11)  (3.71)  (3.82)  —­  (3.17)  (3.17)  —­e,g  34.27­  (8.40)  2,480­  2.25­  (.29)  42­ 
August 31, 2018  40.16­  .21­  1.71­  1.92­  (.63)  (.19)  (.82)  —­  41.26­  4.74­  4,073­  2.12­  .52­  44­ 
August 31, 2017  33.80­  .11­  6.76­  6.87­  (.51)  —­  (.51)  —­d,e  40.16­  20.70­  5,520­  2.04­  .32­  103­ 
Class C                             
August 31, 2021­  $36.28­  .02­  13.47­  13.49­  (.02)  (1.51)  (1.53)  —­  $48.24­  37.93­  $3,626­  2.23­  .05­  36­ 
August 31, 2020  34.04­  (.13)  2.90­  2.77­  (.34)  (.19)  (.53)  —­  36.28­  8.04­  3,879­  2.29­  (.38)  44­ 
August 31, 2019  41.01­  (.10)  (3.70)  (3.80)  —­  (3.17)  (3.17)  —­e,g  34.04­  (8.40)  5,553­  2.25­  (.29)  42­ 
August 31, 2018  39.96­  .26­f  1.65­  1.91­  (.67)  (.19)  (.86)  —­  41.01­  4.74­  8,491­  2.12­  .64­f  44­ 
August 31, 2017  33.65­  .12­  6.72­  6.84­  (.53)  —­  (.53)  —­d,e  39.96­  20.72­  24,301­  2.04­  .34­  103­ 
Class R                             
August 31, 2021­  $36.36­  .26­  13.46­  13.72­  (.24)  (1.51)  (1.75)  —­  $48.33­  38.60­  $11,426­  1.73­  .62­  36­ 
August 31, 2020  33.95­  .06­  2.88­  2.94­  (.34)  (.19)  (.53)  —­  36.36­  8.57­  8,766­  1.79­  .17­  44­ 
August 31, 2019  40.72­  .08­  (3.68)  (3.60)  —­  (3.17)  (3.17)  —­e,g  33.95­  (7.93)  9,914­  1.75­  .22­  42­ 
August 31, 2018  39.66­  .41­  1.70­  2.11­  (.86)  (.19)  (1.05)  —­  40.72­  5.28­  15,380­  1.62­  1.00­  44­ 
August 31, 2017  33.44­  .29­  6.65­  6.94­  (.72)  —­  (.72)  —­d,e  39.66­  21.31­  17,974­  1.54­  .84­  103­ 
Class R6                             
August 31, 2021­  $37.45­  .56­  13.86­  14.42­  (.51)  (1.51)  (2.02)  —­  $49.85­  39.53­  $16,396­  1.08­  1.28­  36­ 
August 31, 2020  34.72­  .31­  2.95­  3.26­  (.34)  (.19)  (.53)  —­  37.45­  9.31­  11,393­  1.11­  .86­  44­ 
August 31, 2019  41.29­  .33­  (3.73)  (3.40)  —­  (3.17)  (3.17)  —­e,g  34.72­  (7.30)  11,955­  1.06­  .92­  42­ 
August 31, 2018† ­  42.19­  .13­  (1.03)  (.90)  —­  —­  —­  —­  41.29­  (2.13)*  12,695­  .27*  .32*  44­ 
Class Y                             
August 31, 2021­  $37.29­  .49­  13.81­  14.30­  (.44)  (1.51)  (1.95)  —­  $49.64­  39.32­  $34,969­  1.23­  1.12­  36­ 
August 31, 2020  34.64­  .22­  2.96­  3.18­  (.34)  (.19)  (.53)  —­  37.29­  9.09­  28,060­  1.29­  .61­  44­ 
August 31, 2019  41.27­  .28­  (3.74)  (3.46)  —­  (3.17)  (3.17)  —­e,g  34.64­  (7.46)  30,794­  1.25­  .77­  42­ 
August 31, 2018  40.19­  .64­  1.70­  2.34­  (1.07)  (.19)  (1.26)  —­  41.27­  5.79­  34,311­  1.12­  1.54­  44­ 
August 31, 2017  33.91­  .50­  6.69­  7.19­  (.91)  —­  (.91)  —­d,e  40.19­  21.90­  54,499­  1.04­  1.40­  103­ 

 

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.

36 International Capital Opportunities Fund  International Capital Opportunities Fund 37 

 

 

Financial highlights cont.

* Not annualized.

† For the period May 22, 2018 (commencement of operations) to August 31, 2018.

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, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

d Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Haidar Capital Management/Haidar Capital Advisors which amounted to less than $0.01 per share outstanding on February 15, 2017.

e Amount represents less than $0.01 per share.

f The net investment income ratio and per share amount shown for the period ending August 31, 2018 may not correspond with the expected class specific differences for the period due to the timing of redemptions out of the class.

g Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Canadian Imperial Holdings, Inc. and CIBC World Market Corp. which amounted to less than $0.01 per share outstanding on March 6, 2019.

The accompanying notes are an integral part of these financial statements.

38 International Capital Opportunities Fund 

 

 

Notes to financial statements 8/31/21

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from September 1, 2020 through August 31, 2021.

Putnam International Capital Opportunities Fund (the fund) is a diversified series of Putnam Investment Funds (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek long-term capital appreciation. The fund invests mainly in common stocks (growth or value stocks or both) of small and midsize companies outside the United States that Putnam Management believes have favorable investment potential. For example, the fund may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. The fund may also consider other factors that Putnam Management believes will cause the stock price to rise. The fund invests mainly in developed countries, but may invest in emerging markets. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also use derivatives such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.

The fund offers class A, class B, class C, class R, class R6 and class Y shares. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A shares generally are not subject to a contingent deferred sales charge, and class R, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge 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 a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately eight years. Prior to March 1, 2021, class C shares generally converted to class A shares after approximately ten years. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C and class R shares, but do not bear a distribution fee, and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R6 and class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Amended and Restated Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

International Capital Opportunities Fund 39 

 

 

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). 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. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

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, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

Many securities markets and exchanges outside the U.S. close prior to the scheduled 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 scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. 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. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

40 International Capital Opportunities Fund 

 

 

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income, net of any applicable withholding taxes, if any, and including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is 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 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 assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk.

The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. 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 when the contract matures or by delivery of the currency. 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. Risks may exceed amounts recognized on the Statement of assets and liabilities.

Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral pledged to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

With respect to ISDA Master Agreements, termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term or short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs

International Capital Opportunities Fund 41 

 

 

resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund had a net liability position of $1,550,776 on open derivative contracts subject to the Master Agreements. Collateral pledged by the fund at period end for these agreements totaled $1,364,952 and may include amounts related to unsettled agreements.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund had no securities out on loan.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate for the committed line of credit and 1.30% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from foreign currency gains and losses, from

42 International Capital Opportunities Fund 

 

 

unrealized gains and losses on passive foreign investment companies, and from redesignation of taxable distributions. 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. At the close of the reporting period, the fund reclassified $1,892,368 to increase undistributed net investment income and $1,892,368 to decrease accumulated net realized gain.

Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:

Unrealized appreciation  $110,163,047 
Unrealized depreciation  (21,578,639) 
Net unrealized appreciation  88,584,408 
Undistributed long-term gains  18,308,969 
Undistributed short-term gains  6,732,088 
Cost for federal income tax purposes  $329,416,336 

 

Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:

1.080%  of the first $5 billion,  0.880%  of the next $50 billion, 
1.030%  of the next $5 billion,  0.860%  of the next $50 billion, 
0.980%  of the next $10 billion,  0.850%  of the next $100 billion and 
0.930%  of the next $10 billion,  0.845%  of any excess thereafter. 

 

In addition, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and dividing the result by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the S&P Developed Ex-U.S. SmallCap Index each measured over the performance period. The maximum annualized performance adjustment rate is +/–0.21%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the thirty-six month performance period. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.

Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.

For the reporting period, the management fee represented an effective rate (excluding the impact of any expense waiver in effect) of 0.921% of the fund’s average net assets, which included an effective base fee of 0.912% and an increase of 0.009% ($31,551) based on performance.

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Putnam Management has contractually agreed, through December 30, 2022, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.

The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.

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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:

Class A  $632,560  Class R6  6,771 
Class B  3,512  Class Y  62,041 
Class C  7,682  Total  $732,709 
Class R  20,143     

 

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $472 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $261, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

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 and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense

44 International Capital Opportunities Fund 

 

 

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 Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (Maximum %) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (Approved %) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:

  Maximum %  Approved %  Amount 
Class A  0.35%  0.25%  $779,186 
Class B  1.00%  1.00%  17,199 
Class C  1.00%  1.00%  37,537 
Class R  1.00%  0.50%  49,647 
Total      $883,569 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $18,048 from the sale of class A shares and received $660 and $62 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $76 on class A redemptions.

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:

  Cost of purchases  Proceeds from sales 
Investments in securities (Long-term)  $130,097,227  $158,934,514 
U.S. government securities (Long-term)  —  — 
Total  $130,097,227  $158,934,514 

 

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Note 4: Capital shares

  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class A  Shares  Amount  Shares  Amount 
Shares sold  253,984  $11,107,228  308,338  $11,052,352 
Shares issued in connection with         
reinvestment of distributions  301,048  12,514,561  100,989  3,967,837 
  555,032  23,621,789  409,327  15,020,189 
Shares repurchased  (861,854)  (36,557,457)  (1,109,682)  (39,071,251) 
Net decrease  (306,822)  $(12,935,668)  (700,355)  $(24,051,062) 

 

International Capital Opportunities Fund 45 

 

 

  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class B  Shares  Amount  Shares  Amount 
Shares sold  877  $38,139  536  $19,731 
Shares issued in connection with         
reinvestment of distributions  1,564  64,340  859  33,409 
  2,441  102,479  1,395  53,140 
Shares repurchased  (17,439)  (742,798)  (25,839)  (902,036) 
Net decrease  (14,998)  $(640,319)  (24,444)  $(848,896) 
 
  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class C  Shares  Amount  Shares  Amount 
Shares sold  6,944  $301,665  7,646  $264,857 
Shares issued in connection with         
reinvestment of distributions  3,680  150,280  1,885  72,771 
  10,624  451,945  9,531  337,628 
Shares repurchased  (42,383)  (1,773,953)  (65,710)  (2,309,956) 
Net decrease  (31,759)  $(1,322,008)  (56,179)  $(1,972,328) 
 
      YEAR ENDED 8/31/20 * 
Class M      Shares  Amount 
Shares sold      217  $7,721 
Shares issued in connection with reinvestment of distributions    —  — 
      217  7,721 
Shares repurchased      (97,368)  (3,689,997) 
Net decrease      (97,151)  $(3,682,276) 
 
  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class R  Shares  Amount  Shares  Amount 
Shares sold  85,519  $3,714,595  76,212  $2,615,284 
Shares issued in connection with         
reinvestment of distributions  9,497  387,275  3,718  143,417 
  95,016  4,101,870  79,930  2,758,701 
Shares repurchased  (99,711)  (4,204,796)  (130,839)  (4,564,800) 
Net decrease  (4,695)  $(102,926)  (50,909)  $(1,806,099) 
 
  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  57,299  $2,566,188  32,246  $1,143,237 
Shares issued in connection with         
reinvestment of distributions  14,293  598,445  4,294  169,772 
  71,592  3,164,633  36,540  1,313,009 
Shares repurchased  (46,904)  (1,994,968)  (76,618)  (2,782,671) 
Net increase (decrease)  24,688  $1,169,665  (40,078)  $(1,469,662) 

 

46 International Capital Opportunities Fund 

 

 

  YEAR ENDED 8/31/21  YEAR ENDED 8/31/20 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  122,507  $5,368,078  247,329  $9,127,807 
Shares issued in connection with         
reinvestment of distributions  29,107  1,214,935  10,881  428,941 
  151,614  6,583,013  258,210  9,556,748 
Shares repurchased  (199,661)  (8,174,339)  (394,732)  (13,914,417) 
Net decrease  (48,047)  $(1,591,326)  (136,522)  $(4,357,669) 

 

* Effective November 25, 2019. The fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.

Note 5: Affiliated transactions

Transactions during the reporting period with any company which is under common ownership or control were as follows:

          Shares 
          outstanding 
          and fair 
  Fair value as  Purchase  Sale  Investment  value as 
Name of affiliate  of 8/31/20  cost  proceeds  income  of 8/31/21 
Short-term investments           
Putnam Short Term           
Investment Fund*  $2,630,050  $83,693,875  $82,673,422  $5,110  $3,650,503 
Total Short-term           
investments  $2,630,050  $83,693,875  $82,673,422  $5,110  $3,650,503 

 

* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.

Beginning in January 2020, global financial markets have experienced, and may continue to experience, significant volatility resulting from the spread of a virus known as Covid–19. The outbreak of Covid–19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of Covid–19 have adversely affected, and may continue to adversely affect, the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the fund’s performance.

International Capital Opportunities Fund 47 

 

 

Note 7: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:

Forward currency contracts (contract amount)  $282,400,000 

 

The following is a summary of the fair value of derivative instruments as of the close of the reporting period:

 

Fair value of derivative instruments as of the close of the reporting period   
  ASSET DERIVATIVES  LIABILITY DERIVATIVES 
Derivatives not         
accounted for as  Statement of    Statement of   
hedging instruments  assets and    assets and   
under ASC 815  liabilities location  Fair value  liabilities location  Fair value 
Foreign exchange         
contracts  Receivables  $2,275,122  Payables  $3,133,691 
Total    $2,275,122    $3,133,691 

 

The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):

 

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments   
Derivatives not accounted for as  Forward currency   
hedging instruments under ASC 815  contracts  Total 
Foreign exchange contracts  $563,455  $563,455 
Total  $563,455  $563,455 

 

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) 
on investments     
Derivatives not accounted for as  Forward currency   
hedging instruments under ASC 815  contracts  Total 
Foreign exchange contracts  $(2,252,637)  $(2,252,637) 
Total  $(2,252,637)  $(2,252,637) 

 

48 International Capital Opportunities Fund 

 

 

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International Capital Opportunities Fund 49 

 

 

Note 8: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.

  Bank of
America N.A.		 Barclays Bank
 PLC		 Citibank, N.A. Goldman
Sachs
International		 HSBC Bank
USA, National
Association		 JPMorgan
Chase Bank
N.A.		 Morgan
Stanley & Co.
 International
PLC		 NatWest
Markets PLC		 State Street
Bank and
Trust Co.		 Toronto-
 Dominion
Bank		 UBS AG WestPac
Banking Corp.		 Total
Assets:                           
Forward currency contracts#  $97,536  $397,357  $289,798  $203,172  $61,599  $338,291  $202,345  $9,625  $308,078  $13,393  $327,021  $26,907  $2,275,122 
Total Assets  $97,536  $397,357  $289,798  $203,172  $61,599  $338,291  $202,345  $9,625  $308,078  $13,393  $327,021  $26,907  $2,275,122 
Liabilities:                           
Forward currency contracts#  212,231  76,654  414,769  20,580  168,787  1,246,905  219,826  —  383,382  24,400  147,734  218,423  3,133,691 
Total Liabilities  $212,231  $76,654  $414,769  $20,580  $168,787  $1,246,905  $219,826  $—  $383,382  $24,400  $147,734  $218,423  $3,133,691 
Total Financial and Derivative Net Assets  $(114,695)  $320,703  $(124,971)  $182,592  $(107,188)  $(908,614)  $(17,481)  $9,625  $(75,304)  $(11,007)  $179,287  $(191,516)  $(858,569) 
Total collateral received (pledged)†##  $(111,000)  $320,703  $(60,000)  $182,592  $(107,188)  $(908,614)  $(1,000)  $—  $(75,304)  $—  $179,287  $—   
Net amount  $(3,695)  $—  $(64,971)  $—  $—  $—  $(16,481)  $9,625  $—  $(11,007)  $—  $(191,516)   
Controlled collateral received (including                           
TBA commitments)**  $—  $417,473  $—  $240,000  $—  $—  $—  $—  $—  $—  $200,000  $—  $857,473 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including                           
TBA commitments)**  $(111,000)  $—  $(60,000)  $—  $(122,000)  $(948,963)  $(1,000)  $—  $(121,989)  $—  $—  $—  $(1,364,952) 

 

** Included with Investments in securities on the Statement of assets and liabilities.

† Additional collateral may be required from certain brokers based on individual agreements.

# Covered by master netting agreement (Note 1).

## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

50 International Capital Opportunities Fund  International Capital Opportunities Fund 51 

 

 

Federal tax information (Unaudited)

Pursuant to §852 of the Internal Revenue Code, as amended, the fund hereby designates $28,214,215 as a capital gain dividend with respect to the taxable year ended August 31, 2021, or, if subsequently determined to be different, the net capital gain of such year.

For the reporting period, total interest and dividend income from foreign countries were $9,719,391, or $1.15 per share (for all classes of shares). Taxes paid to foreign countries were $1,022,622, or $0.12 per share (for all classes of shares).

For the reporting period, the fund hereby designates 50.78%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

For the reporting period, pursuant to §871(k) of the Internal Revenue Code, the fund hereby designates $102,109 of distributions paid as qualifying to be taxed as interest-related dividends, and $5,330,769 to be taxed as short-term capital gain dividends for nonresident alien shareholders.

The Form 1099 that will be mailed to you in January 2022 will show the tax status of all distributions paid to your account in calendar 2021.

52 International Capital Opportunities Fund 

 

 


International Capital Opportunities Fund 53 

 

 


* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.

The address of each Trustee is 100 Federal Street, Boston, MA 02110.

As of August 31, 2021, there were 100 Putnam funds. All Trustees serve as Trustees of all Putnam funds.

Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.

54 International Capital Opportunities Fund 

 

 

Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:

James F. Clark (Born 1974)  Susan G. Malloy (Born 1957) 
Vice President and Chief Compliance Officer  Vice President and Assistant Treasurer 
Since 2016  Since 2007 
Chief Compliance Officer and Chief Risk Officer,  Head of Accounting and Middle Office Services, 
Putnam Investments, and Chief Compliance Officer,  Putnam Investments and Putnam Management 
Putnam Management   
  Denere P. Poulack (Born 1968) 
Nancy E. Florek (Born 1957)  Assistant Vice President, Assistant Clerk, 
Vice President, Director of Proxy Voting and Corporate  and Assistant Treasurer 
Governance, Assistant Clerk, and Assistant Treasurer  Since 2004 
Since 2000   
  Janet C. Smith (Born 1965) 
Michael J. Higgins (Born 1976)  Vice President, Principal Financial Officer, Principal 
Vice President, Treasurer, and Clerk  Accounting Officer, and Assistant Treasurer 
Since 2010  Since 2007 
  Head of Fund Administration Services, 
Jonathan S. Horwitz (Born 1955)  Putnam Investments and Putnam Management 
Executive Vice President, Principal Executive Officer,   
and Compliance Liaison  Stephen J. Tate (Born 1974) 
Since 2004  Vice President and Chief Legal Officer 
  Since 2021 
Richard T. Kircher (Born 1962)  General Counsel, Putnam Investments, 
Vice President and BSA Compliance Officer  Putnam Management, and Putnam Retail Management 
Since 2019   
Assistant Director, Operational Compliance, Putnam  Mark C. Trenchard (Born 1962) 
Investments and Putnam Retail Management  Vice President 
  Since 2002 
  Director of Operational Compliance, Putnam 
  Investments and Putnam Retail Management 

 

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is 100 Federal Street, Boston, MA 02110.

 

International Capital Opportunities Fund 55 

 

 

Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

56 International Capital Opportunities Fund 

 

 

Fund information

Founded over 80 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 manage funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.

Investment Manager  Trustees  Jonathan S. Horwitz 
Putnam Investment  Kenneth R. Leibler, Chair  Executive Vice President, 
Management, LLC  Liaquat Ahamed  Principal Executive Officer, 
100 Federal Street  Ravi Akhoury  and Compliance Liaison 
Boston, MA 02110  Barbara M. Baumann   
  Katinka Domotorffy  Richard T. Kircher 
Investment Sub-Advisor  Catharine Bond Hill  Vice President and BSA 
Putnam Investments Limited  Paul L. Joskow  Compliance Officer 
16 St James’s Street  George Putnam, III   
London, England SW1A 1ER  Robert L. Reynolds  Susan G. Malloy 
  Manoj P. Singh  Vice President and 
Marketing Services  Mona K. Sutphen  Assistant Treasurer 
Putnam Retail Management     
100 Federal Street  Officers  Denere P. Poulack 
Boston, MA 02110  Robert L. Reynolds  Assistant Vice President, 
  President  Assistant Clerk, and 
Custodian    Assistant Treasurer 
State Street Bank  James F. Clark   
and Trust Company  Vice President, Chief Compliance  Janet C. Smith 
Officer, and Chief Risk Officer  Vice President, 
Legal Counsel    Principal Financial Officer, 
Ropes & Gray LLP  Nancy E. Florek  Principal Accounting Officer, 
  Vice President, Director of  and Assistant Treasurer 
Independent Registered  Proxy Voting and Corporate   
Public Accounting Firm  Governance, Assistant Clerk,  Stephen J. Tate 
PricewaterhouseCoopers LLP  and Assistant Treasurer  Vice President and 
    Chief Legal Officer 
  Michael J. Higgins   
  Vice President, Treasurer,  Mark C. Trenchard 
  and Clerk  Vice President 

 

This report is for the information of shareholders of Putnam International Capital Opportunities 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 putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary 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.

 


Item 2. Code of Ethics:
(a) The fund’s principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund’s investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.

(c) In April 2021, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Employees may invest in the Putnam Exchange Traded Funds (ETFs) with preclearing requirements for certain individuals (ii) All employees must hold Putnam ETFs in an approved Putnam broker (iii) All access persons must report Putnam ETF trades or holdings in the quarterly transaction report or annual holdings report.

Item 3. Audit Committee Financial Expert:
The Funds’ Audit, Compliance and Risk Committee is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Trustees believe that each member of the Audit, Compliance and Risk Committee also possesses a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualifies him or her for service on the Committee. In addition, the Trustees have determined that each of Dr. Hill, Dr. Joskow, and Mr. Singh qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education; in the case of Dr. Joskow, including his experience serving on the audit committees of several public companies and institutions and his education and experience as an economist who studies companies and industries, routinely using public company financial statements in his research. The SEC has stated, and the funds’ amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Risk Committee and the Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services:
The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund’s independent auditor:


Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
August 31, 2021 $61,024 $ — $12,416 $ —
August 31, 2020 $62,753 $ — $11,407 $ —

For the fiscal years ended August 31, 2021 and August 31, 2020, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $277,315 and $357,249 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.

Audit Fees represent fees billed for the fund’s last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees represent fees billed in the fund’s last two fiscal years for services traditionally performed by the fund’s auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.

Tax Fees represent fees billed in the fund’s last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.

Pre-Approval Policies of the Audit, Compliance and Risk Committee. The Audit, Compliance and Risk Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds’ independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.

The Audit, Compliance and Risk Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds’ independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm.

The following table presents fees billed by the fund’s independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2–01 of Regulation S-X.


Fiscal year ended Audit-Related Fees Tax Fees All Other Fees Total Non-Audit Fees
August 31, 2021 $ — $264,899 $ — $ —
August 31, 2020 $ — $345,842 $ — $ —

Item 5. Audit Committee of Listed Registrants
Not applicable

Item 6. Schedule of Investments:
The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:
Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable

Item 11. 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 180 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b) Changes in internal control over financial reporting: Not applicable

Item 12. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies:
Not Applicable

Item 13. Exhibits:
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.

(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and 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.

Putnam Investment Funds
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: October 26, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934 and 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/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer

Date: October 26, 2021
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: October 26, 2021