PUTNAM
GLOBAL
UTILITIES
FUND
SEMIANNUAL REPORT
MARCH 31, 1995
[BALANCED SCALES LOGO]
BOSTON * TOKYO * LONDON<PAGE>
FROM THE CHAIRMAN
Dear Shareholder:
In a particularly challenging period for most global investments,
Putnam Global Utilities Fund was able to withstand some of the
turmoil. The fledgling fund completed its first fiscal reporting
period from the start of operations on January 11, 1995,
through March 31, 1995 with a return of 4.97% at net
asset value (NAV).
Although your fund may invest a certain percentage of its assets
in equity securities of U.S. utility companies, it is designed to
invest primarily in foreign utility companies. While this period
was characterized by renewed strength in the U.S. stock market,
it was a difficult time for most emerging markets globally, such
as Latin America and Asia.
> MANAGING RISK IN A SPECIALIZED, GLOBALLY DIVERSE
PORTFOLIO
Fund Manager Sheldon Simon, aware of such inherent risks of
foreign investing as higher volatility, political uncertainties,
and currency fluctuations, closely monitors the fund s portfolio
on a daily basis. However, the fund s emphasis on areas of the
market Sheldon believes offers current income and outstanding
capital growth potential may increase its risk level. To offset
this potential risk while enabling the fund to pursue its
objective successfully, Sheldon has broadly diversified the
fund s holdings, emphasizing large-capitalization electric and
telecommunications companies.
Despite the recent lackluster performance of the emerging
markets, Sheldon believes utilities in these markets still hold
potential for superior total return over the long term. During
the period, the fund invested in emerging markets to a greater
degree than it did in mature markets worldwide.
Sheldon has found Asia to be a region with plentiful growth
opportunities, yet less political risk than some other parts of
the world. He sought out newly privatized companies, particularly
those recently sold by governments in Europe, since these tend to
provide attractive valuation.
Besides these emerging markets in Europe, Latin America, and
Asia, the fund had exposure to the more mature markets of Europe
and the United Kingdom.
> TARGETING LONG-TERM GROWTH POTENTIAL
During your fund s first months, its performance was clearly
helped by the decline in the U.S. dollar, as, in general, the
value of the fund s foreign stock holdings declined in terms of
local currencies. Sheldon targeted domestic stocks that had
greater growth potential than those typically held by Putnam
Utilities Growth and Income Fund, which he also manages. In
managing Putnam Global Utilities Fund, Sheldon emphasizes owning
securities of companies that exhibit a combination of strong
growth potential and expense reduction for increased levels of
profitability.
While three months is an insufficient time period in which to
evaluate the merits of long-term growth investing, we are,
nonetheless, pleased that the fund is off to a promising start.
Any investment approach has inherent risks, but we anticipate
that, as Sheldon follows the methodology outlined above, the fund
has the potential to provide long-term investors with ample
rewards.
We would like to take this opportunity to thank you for
participating in the incubated funds program. By providing a
new fund with an incubation period, the program enables us to
establish a track record and to evaluate critically the results
of its particular investment approach. This would not be possible
without your participation.
Respectfully yours,
/S/George Putnam
May 12, 1995
The views expressed throughout this report are exclusively those
of Putnam Management. They are not meant as investment advice.
Although the described holdings were viewed favorably as of March
31, 1995, there is no guarantee the fund will continue to hold
these securities in the future.<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund s
performance. 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 back into the
fund. For comparative purposes, we show how the fund performed
relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIOD ENDED 3/31/95
STANDARD MSCI
FUND & POOR S EAFE
NAV POP 500 INDEX INDEX
LIFE OF FUND
(since 1/11/95) 4.97% -1.05% 9.73% 1.86%
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. POP assumes maximum
5.75% sales charge. Performance data represent past results and
an expense limitation currently in effect. Without the expense
limitation, the fund s total return would have been lower.
Investment returns and principal value will fluctuate so an
investor s shares, when sold, may be worth more or less than
their original cost. The short-term results of a relatively new
fund are not necessarily indicative of its long-term prospects.
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund s assets,
minus any liabilities, divided by the number of outstanding
shares, not including any initial or contingent deferred sales
charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase.
POP performance figures shown here assume the maximum 5.75% sales
charge.
COMPARATIVE BENCHMARKS
THE EUROPE, AUSTRALIA AND THE FAR EAST (EAFE) component of the
Morgan Stanley Capital International World Index is an unmanaged
list of international equity securities, excluding U.S., with all
values expressed in U.S. dollars. The Europe component of the
World Index is an unmanaged list of 639 companies representing 13
European countries, with values expressed in
U.S. dollars.
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks
that are frequently used as a general measure of stock market
performance. The index assumes reinvestment of all distributions
and does not take into account brokerage commissions or other
costs. The fund s portfolio contains securities that do not match
those in the index.
Both indexes assume reinvestment of all distributions and do not
take into account brokerage commissions or other costs. The
fund s portfolio contains securities that differ from those in
the indexes. Investment in the fund is subject to special
international risks, such as currency fluctuations and political
developments.<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1995 (Unaudited)
COMMON STOCKS(86.6%)*
NUMBER OF SHARES Value
ELECTRIC UTILITIES(40.5%)
1,500 CMS Energy Corp. $35,068
1,600 Central Costanera 144A
ADR(Argentina) 46,400
1,600 Central Puerto 144A ADR
(Argentina) 26,400
2,300 Chilgener S.A., ADR(Chile) 57,500
5,000 China Power & Light Co.
(Hong Kong) 24,251
1,500 Compania Boliviana Energia
ADR(Bolivia) 36,000
4,300 East Midlands Electricity
PLC(United Kingdom) 42,004
1,000 Empresa Nacional De
Electricidad ADR(Chile) 22,000
400 Empresa Nacional de
Electricidad ADR(Spain) 16,950
7,500 Hong Kong Electric Holdings
Ltd.(Hong Kong) 24,009
3,800 Huaneng Power International,
Inc. ADR(China) 60,325
12,000 Iberdola S.A.(Spain) 71,174
1,000 Korea Electric Power Co.
ADR(Korea) 20,625
2,500 Pinnacle West Capital Corp. 52,187
7,600 Scottish Power PLC
(United Kingdom) 39,521
3,800 Shandong Huaneng Power
ADR(Hong Kong) 34,200
2,100 Southern Electric PLC
(United Kingdom) 19,901
628,515
GAS PIPELINES(9.6%)
1,300 Enron Corp. 42,900
4,700 Transportadora Gas Sur-
ADR(Argentina) 42,770
4,300 Westcoast Energy, Inc. 63,962
149,632
COMMON STOCKS (continued)
NUMBER OF SHARES Value
GAS UTILITIES(8.3%)
500 British Gas PLC ADR
(United Kingdom) $ 23,375
1,300 K N Energy, Inc. 31,200
3,000 Pacific Enterprises 74,250
128,825
TELEPHONE SERVICES(24.9%)
1,600 Empresas Telex-Chile
SA ADR(Chile) 11,600
1,000 GTE Corp. 33,250
2,100 MCI Communications Corp. 43,312
1,000 NYNEX Corp. 39,625
1,300 Royal PTT N.V. 144A
ADR(Netherlands) 45,012
2,600 Sprint Corp. 78,650
2,500 Tele Danmark A/S ADR
(Denmark) 66,250
10,000 Telekom Malaysia
(Malaysia) 69,211
386,910
WATER UTILITIES(3.3%)
5,100 Welsh Water PLC
(United Kingdom) 50,563
TOTAL COMMON STOCKS
(cost $1,348,429) $1,344,445
CONVERTIBLE PREFERRED STOCKS(4.7%)*
(cost $70,441)
NUMBER OF SHARES Value
1,300 Philippine Long District
Telephone Co.
$7.00 cv. pfd.(Phillipines) $ 73,287
SHORT-TERM INVESTMENTS(10.0%)*
(cost $154,732 )
Principal Amount Value
$155,000 Federal Home Loan
Mortgage Corp. 5.94s,to 6s,
with various due dates to
April 25, 1995 $ 154,732
TOTAL INVESTMENTS
(cost $1,573,602)*** $1,572,464
Notes
*Percentages indicated are based on net assets of $1,553,149,
which correspond to a netasset value per share of $8.45.
Non-income-producing security.
*** The aggregate identified cost on a tax basis is $1,573,602,
resulting in gross unrealized appreciation and depreciation of
$57,029 and $58,167, respectively, or net unrealized depreciation
of $1,138.
ADR after the name of a foreign holding stands for American
Depository Receipt, representing ownership of foreign securities
on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
ASSETS
Investments in securities, at value
(identified cost $1,573,602) (Note 1) $ 1,572,464
Cash 2,142
Dividends and interest receivable 1,334
Receivable from Manager (Note 3) 6,548
Unamortized organization expense (Note 1) 6,150
TOTAL ASSETS 1,588,638
LIABILITIES
Payable for securities purchased 22,685
Payable for organization expense (Note 1) 6,425
Payable for investor servicing and custodian fees (Note 3)2,637
Payable for administrative services (Note 3) 10
Payable for compensation of Trustees (Note 3) 24
Other accrued expenses 3,708
TOTAL LIABILITIES 35,489
NET ASSETS $1,553,149
REPRESENTED BY
Paid-in capital (Notes 1, 2 and 5) $1,559,969
Undistributed net investment income (Note 1) 10,363
Accumulated net realized loss
on investment transactions (Note 1) (16,045)
Net unrealized depreciation of investments (1,138)
TOTAL REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $1,553,149
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per share
($1,553,149 divided by 183,768 shares) $8.45
Offering price per share (100/94.25 of $8.45)* $8.97
*On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF OPERATIONS
For the period January 11, 1995 (commencement of operations)
to March 31, 1995 (Unaudited)
INVESTMENT INCOME
Dividends (net of foreign tax $676) $ 8,229
Interest 2,271
TOTAL INVESTMENT INCOME 10,500
EXPENSES:
Compensation of Manager (Note 3) 2,875
Investor servicing and custodian fees (Note 3) 2,637
Compensation of Trustees (Note 3) 24
Reports to shareholders 72
Auditing 2,893
Legal 723
Postage 12
Registration fees 39
Administrative services (Note 3) 10
Amortization of organization expense (Note 1) 275
Fees waived by Manager (Note 3) (9,423)
TOTAL EXPENSES 137
NET INVESTMENT INCOME 10,363
Net realized loss on investments (Notes 1 and 4) (16,045)
Net unrealized depreciation
of investments during the period (1,138)
NET LOSS IN INVESTMENT TRANSACTIONS (17,183)
NET DECREASE IN NET ASSETS
RESULTING FORM OPERATIONS $ (6,820)
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period
January 11, 1995
(commencement
of operations) to
March 31, 1995*
INCREASE IN NET ASSETS
Operations:
Net investment income $10,363
Net realized loss on investments (16,045)
Net unrealized depreciation of investments (1,138)
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS (6,820)
Increase from capital share transactions (Note 4) 59,969
TOTAL INCREASE IN NET ASSETS 53,149
NET ASSETS:
Beginning of period 1,500,000
END OF PERIOD (including undistributed
net investment income of $10,363) $1,553,149
* Unaudited.
See Note 2
The accompanying notes are an integral part of these financial
statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
January 11, 1995
(commencement
of operations) to
March 31, 1995*
NET ASSET VALUE, BEGINNING OF PERIOD $8.05
INVESTMENT OPERATIONS:
Net investment income .06(a)
Net realized and unrealized
loss on investments .34(a)
TOTAL FROM INVESTMENT OPERATIONS .40(a)
LESS DISTRIBUTIONS
NET ASSET VALUE, END OF PERIOD $8.45
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(b) 4.97(c)
NET ASSETS, END OF PERIOD (in thousands) $1,553
Ratio of expenses to average net assets (%) .01(c)
Ratio of net investment income
to average net assets (%) .70(c)
Portfolio turnover (%) 8.84(c)
*Unaudited.
Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the
period.
(a)Reflects an expense limitation in effect during the period
(See Note 3). As a result of such limitation, expenses for the
fund reflect a reduction of $0.02 per share.
(b)Total investment return assumes dividend reinvestment and does
not reflect the effects of sales charges.
(c)Not annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
NOTE 1
SIGNIGICANT ACCOUNTING POLICIES
The fund is a series of Putnam Investment Funds (the Trust )
which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment
company. The objective of the fund is to seek capital growth and
current income by investing primarily in equity securities issued
by companies in the utilities industries.
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
A) SECURITY VALUATION Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are
reported as in the case of some securities traded
over-the-counter-the last reported bid price, except that certain
U.S. government obligations are stated at the mean between the
bid and asked prices. Market quotations are not considered to be
readily available for long term corporate bonds and notes; such
investments are stated at fair market value on the basis of
valuations furnished by a pricing service, approved by the
Trustees. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates
market value, and other investments are stated at fair market
value following procedures approved by the Trustees.
B) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the
ex-dividend date.
Discount on zero coupon and stepped-coupon bonds is according to
the effective yield method.
C) FEDERAL TAXES It is the policy of the fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation on securities
held and excise tax on income and capital gains.
D) DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders
will be recorded by the fund on the ex-dividend date. The fund
will distribute any net investment income at least quarterly and
any net realized gains at least annually. The amount and
character of income and gains to be distributed will be
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These
differences include treatment of post-October losses, payment
in-kind and market discount. Reclassifications will be made to
the fund s capital accounts to reflect income and gains available
for distribution (or available capital loss carryovers) under
income tax regulations.
E) EXPENSES OF THE TRUST Expenses directly charged or
attributable to the fund will be paid from the assets of the
fund. Generally, expenses of the Trust will be allocated 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.
F) UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the
fund in connection with its organization, its registration with
the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $6,425.
These expenses are being amortized on a straight line basis over
a five-year period.
NOTE 2
INITIAL CAPITALIZATION
AND OFFERING PRICE
OF SHARES
The fund was established as a series of Putnam Investment Funds,
which is a Massachusetts business trust under the laws of
Massachusetts on October 31, 1994.
During the period October 31, 1994 to January 11, 1995, the fund
had no operations other than those related to organizational
matters, including the initial capital contribution of $20,000
and the issuance of 2,353 shares to Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc. on December
13, 1994. On January 3, 1995, Putnam Mutual Funds Corp. made a
subsequent capital contribution of $1,480,000 and received
174,118 shares. There were no additional transactions until
regular investment operations commenced on January 11, 1995.
At March 31, 1995 Putnam Investments Management, Inc. owned
176,471 shares of the fund (96.0% of shares outstanding), valued
at $1,491,180.
NOTE 3
MANAGEMENT FEE,
ADMINISTRATIVE
SERVICES, AND
OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment
advisory services is paid quarterly based on the average net
assets of the fund for the quarter. Such fee is based on the
following annual rates: 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the
next $500 million, 0.60% of the next $5 billion, 0.575% of the
next $5 billion, 0.555% of the next $5 billion, 0.54% of the next
$5 billion, and 0.53% thereafter, subject, under current law, to
reduction in any year to the extent that expenses (exclusive of
distribution fees, brokerage, interest and taxes) of the fund
exceed 2.5% of the first $30 million of average net assets, 2%
of the next $70 million and 1.5% of any amount over $100 million
and by the amount of certain brokerage commissions and fees
(less expense) received by affiliates of the Manager on the
fund s portfolio transactions.
Through December 31, 1995, the fund s Manager has agreed to limit
the fund s expenses to the extent that expenses (exclusive of
brokerage, interest, taxes, deferred organizational and
extraordinary expenses and distribution fees) exceed an annual
rate of 0.60% of the fund s average net assets.
The fund also reimburses the Manager 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.
Trustees of the fund receive an annual Trustee s fee of $100 and
an additional fee for each Trustees meeting attended. Trustees
who are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the fund s assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided
by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement
of Operations for the period January 11, 1995 (commencement of
operations) to March 31, 1995 have been reduced by credits
allowed by PFTC.
The fund has adopted a distribution plan with pursuant to Rule
12b-1 under the Investment Company Act of 1940, although the fund
is not currently making any payments pursuant to this plan. The
purpose of the plan is to compensate Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred by it in distributing shares of
the fund. The Trustees have approved payment by the fund to
Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of the
fund s average net assets.
During the period January 11, 1995 (commencement of operations)
to March 31, 1995, Putnam Mutual Funds Corp., acting as the
underwriter, received no net commissions from the sale of shares
of the fund.
NOTE 4
PURCHASES AND
SALES OF SECURITIES
During the period January 11, 1995 (commencement of operations)
to March 31, 1995, purchases and sales of investment securities
other than short-term investments aggregated $1,548,275 and
$113,329, respectively. There were no purchases and sales of
U.S. government obligations. In determining the net gain or loss
on securities sold, the cost of securities has been determined on
the identified cost basis.
NOTE 5
CAPITAL SHARES
For the period January 11, 1995 (commencement of operations) to
March 31, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
January 11, 1995
(commencement
of operations) to
March 31, 1995
Shares Amount
Shares sold 7,309 $60,069
Shares repurchased (12) (100)
Net increase 7,297 $59,969
<PAGE>
FUND INFORMATION
INVESTMENT
MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust
Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Sheldon Simon
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
Global Utilities Fund. It may also be used as sales literature
when preceded or accompanied by the current prospectus, which
gives details of sales charges, investment objectives, and
operating policies of the fund. For more information or to
request a prospectus, call toll free 1-800-225-1581.
