Putnam
Emerging
Growth
Fund
SEMIANNUAL REPORT
February 29, 1996
The following report contains a list of your fund's portfolio holdings
and complete financial statements for the period from December 28, 1995
(commencement of operations) to February 29, 1996. Once the fund has
been in operation for a longer period, we expect to provide additional
details, including fund strategy, performance, and managers' outlook.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 29, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (97.0%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Argentina (2.9%)
- ------------------------------------------------------------------------------------------------
13,500 Astra CIA Argentina de Petro $23,232
12,000 Cresud S.A. 20,890
800 Inversiones Y Represent ADR + 21,900
----------
66,022
Brazil (15.1%)
- ------------------------------------------------------------------------------------------------
3,420 Banco Bradesco BRC 0.072 NPV (No Par Value) pfd. +
(Preferred Stock) 38,737
150 Brasmotor S.A. 39,466
70 Cia Cervejaria Brahma BRC 7.41 NPV pfd.
(Preferred Stock) 31,644
4 Cia Cervejaria Brahma Rights 3/29/96 1,193
1,300 Comp Energetica De Minas Gerais (Cemig) ADS 32,988
2,100 Compania Brasileira de Petroleo Ipiranga 21,973
90 Coteminas Cia Tecidos Norte de Minas BRC 8.65 NPV pfd.
(Preferred Stock) 35,655
1,500 Lojas Americanas S.A. BRC 0.2342 NPV pfd.
(Preferred Stock) 36,570
600 Telebras Co. ADR 31,200
500 Telemig (Telec De Minas Gerais) 33,523
3,500 Usiminas Siderurg Minas GDR 37,188
----------
340,137
Chile (2.6%)
- ------------------------------------------------------------------------------------------------
1,800 Banco Osorno y La Union ADR 25,875
400 Compania de Telecomunicaciones de Chile S.A. ADS 33,100
----------
58,975
Columbia (1.0%)
- ------------------------------------------------------------------------------------------------
1,300 Banco Industrial Colombiano ADR 23,725
Hong Kong (13.2%)
- ------------------------------------------------------------------------------------------------
50,000 Chen Hsong Holdings 28,457
3,000 Cheung Kong Holdings Ltd. 20,858
7,000 Citic Pacific Ltd. 27,254
12,000 Consolidated Electric Power Asia Ltd. 22,119
22,000 First Pacific Co., Ltd. 31,445
5,000 Guoco Group Ltd. 26,646
2,000 HSBC Holdings PLC 32,079
15,000 Hong Kong Telecommunications Ltd. 29,395
18,000 New World Infrastructure Ltd. + 38,766
26,000 Shun Tak Holdings Ltd. 19,170
11,000 Varitronix International Ltd. 21,200
----------
297,389
Hungary (2.3%)
- ------------------------------------------------------------------------------------------------
1,600 Gideon Richter Ltd. GDR $50,400
India (7.5%)
- ------------------------------------------------------------------------------------------------
2,000 Ashok Leyland Ltd. GDR 22,500
1,100 East India Hotels Ltd. GDR + 22,550
3,800 Gujarat Narmada Valley Fertilizers + 25,650
5,320 India Cements Ltd. GDR 29,260
1,000 Indian Hotels, Ltd. GDR + 21,000
1,700 Indian Petrochemicals Corp. Ltd. ADR + 26,350
1,700 Tata Engineering & Locomotive Co. Ltd. GDR + 22,100
----------
169,410
Indonesia (6.8%)
- ------------------------------------------------------------------------------------------------
5,000 Astra International (Registered) 8,315
8,500 PT Bank Internasional Indonesia 35,708
2,000 PT Gudang GAram (Registered) 24,190
11,000 PT Matahari Putra Prima 23,758
14,700 PT Mulia Industrindo (Registered) 27,940
3,000 Sampoerna Industries (Registered) 32,754
----------
152,665
Luxembourg (1.7%)
- ------------------------------------------------------------------------------------------------
1,000 Millicom International Cellular S.A. + 37,875
Malaysia (5.1%)
- ------------------------------------------------------------------------------------------------
11,000 Leader Universal 23,312
12,000 Malayawata Steel Berhad 19,780
6,000 Maruichi Malaysia 20,251
11,000 Southern Bank Berhad (Registered) 24,176
11,000 Star Publications 26,550
----------
114,069
Mexico (4.9%)
- ------------------------------------------------------------------------------------------------
6,500 Apasco S.A. 28,266
8,700 Cemex S.A. 29,763
20,000 Cifra S.A. de CV Class C + 23,000
700 Panamerican Beverages Inc. 28,350
----------
109,379
Pakistan (4.0%)
- ------------------------------------------------------------------------------------------------
1,300 Hubco Power GDR 27,950
2,000 Pakistan State Oil 20,369
400 Pakistan Telecomm Ltd. 144A GDR + 42,600
----------
90,919
Philippines (10.8%)
- ------------------------------------------------------------------------------------------------
55,000 Bankard, Inc. + $26,847
60,000 DMCI Holdings, Inc. 37,328
41,000 Fil-Estate Land, Inc. 37,672
48,000 Filinvest Development Corp. 39,510
65,000 Filinvest Land, Inc. + 27,996
56,000 International Container Terminal Services Inc. + 35,375
72,000 Marsman & Co., Inc. Class B 39,280
----------
244,008
Portugal (3.7%)
- ------------------------------------------------------------------------------------------------
3,000 Investec Consultadoria International + 64,014
3,400 Portucel Industrial Empresa S.A. 144A ADS + 18,275
----------
82,289
Russia (1.5%)
- ------------------------------------------------------------------------------------------------
1,300 AO Mosenergo 144A + 9,263
1,400 Lukoil Oil Co. ADR 23,800
----------
33,063
Singapore (1.6%)
- ------------------------------------------------------------------------------------------------
6,000 Far East Levingston Shipbuilding Ltd. 35,704
South Africa (5.5%)
- ------------------------------------------------------------------------------------------------
2,900 Energy Africa 144A 34,800
4,000 Malbak Ltd. GDR + 22,000
1,200 Nedcor Ltd. GDR + 20,100
3,000 Sasol Ltd. 25,969
600 South African Breweries Ltd. 20,930
----------
123,799
Thailand (6.8%)
- ------------------------------------------------------------------------------------------------
4,000 Bank of Ayudhya PLC 27,460
9,000 CMIC Finance & Securities Co. Ltd. 30,357
9,000 Central Pattana PLC 35,714
24,800 Siam City Bank PLC (Registered) 34,444
6,000 Siam Makro Public Co., Ltd + 25,952
----------
153,927
----------
Total Common Stocks (cost $2,026,446) $2,183,755
Investment Funds (1.4%)* (cost $32,831)
Number of Shares VALUE
- ------------------------------------------------------------------------------------------------
44,000 Ruam Pattana Fund II (Thailand) $30,556
----------
Total Investments (cost $2,059,277) *** $2,214,311
- ------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $2,251,844.
*** The aggregate identified cost for federal income tax purposes is $2,059,277, resulting in gross
unrealized appreciaton and depreciation of $209,364 and $54,330, respectively, or net unrealized
appreciation of $155,034.
+ Non-income-producing security.
ADR, ADS, or GDR after the name of a holding stands for American Depoitory Receipt, American Depository
Shares or Global Depository Receipt, respectively, 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.
</TABLE>
Statement of assets and liabilities
February 29,1996 (Unaudited)
- ----------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------
Investments in securities, at value
(identified cost $ 2,059,277) (Note 1) $2,214,311
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Cash 79,517
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Dividends and other receivables 4,265
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Receivable for shares of the fund sold 100
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Receivable for securities sold 17,388
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Receivable from Manager (Note 3) 1,489
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Unamortized organization expenses (Note 1) 3,658
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Total assets 2,320,728
Liabilities
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Payable for securities purchased 57,594
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Payable for compensation of Trustees (Note 3) 206
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Payable for investor servicing and custodian fees (Note 3) 2,060
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Payable for organizational expenses (Note 1) 3,662
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Other accrued expenses 5,362
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Total liabilities 68,884
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Net assets $2,251,844
Represented by
- ----------------------------------------------------------------------
Paid-in-capital (Notes 2 and 5) 2,096,184
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Undistributed net investment income (Note 1) 1,252
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Accumulated net realized loss on investments (Note 1) (618)
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Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 155,026
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Total -- Representing net assets applicable to
capital shares outstanding $2,251,844
Computation of net asset value and offering price
- ----------------------------------------------------------------------
Net asset value and redemption price per share
($2,251,844 divided by 246,364 shares) $9.14
- ----------------------------------------------------------------------
Offering price per share (100/94.25 of $9.14)* $9.70
- ----------------------------------------------------------------------
* 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.
Statement of operations
For the period December 28, 1995 (commencement of operations)
to February 29, 1996 (Unaudited)
- ------------------------------------------------------------------------
Investment Income
- ------------------------------------------------------------------------
Dividends (net of foreign tax of $112) $ 5,066
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Interest 2,329
- ------------------------------------------------------------------------
Total investment income 7,395
Expenses:
- ------------------------------------------------------------------------
Compensation of Manager (Note 3) 4,544
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Investor servicing and custodian fees (Note 3) 2,926
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Compensation of Trustees (Note 3) 206
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Reports to shareholders 106
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Auditing 2,806
- ------------------------------------------------------------------------
Legal 2,238
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Postage 68
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Registration Fees 137
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Amortization of organization expenses (Note 1) 4
- ------------------------------------------------------------------------
Administrative services (Note 3) 6
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Fees waived by Manager (Note 3) (6,033)
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Total expenses 7,008
- ------------------------------------------------------------------------
Expense reduction (Note 3) (865)
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Net expenses 6,143
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Net investment income 1,252
- ------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 4) (618)
- ------------------------------------------------------------------------
Net unrealized depreciation of foreign currency translation (8)
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Net unrealized appreciation on investments during the period 155,034
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Net gain on investments 154,408
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Net increase in net assets resulting from operations $155,660
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The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
- -----------------------------------------------------------------------
For the period
December 28, 1995
(commencement
of operations) to
February 29, 1996*
- -----------------------------------------------------------------------
Increase in net assets
- -----------------------------------------------------------------------
Operations:
- -----------------------------------------------------------------------
Net investment income $ 1,252
- -----------------------------------------------------------------------
Net realized loss on investments (618)
- -----------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 155,026
- -----------------------------------------------------------------------
Net increase in net assets resulting from operations 155,660
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Increase from capital share transactions (Note 5) 96,184
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Total increase in net assets 251,844
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Net Assets
- -----------------------------------------------------------------------
Beginning of period 2,000,000
- -----------------------------------------------------------------------
End of period (including undistributed net
investment income of $1,252) $2,251,844
- -----------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------
For the Period
December 28, 1995
(commencement
of operations)
to February 29
1996*
- ------------------------------------------------------------------
Net asset value, beginning of period $8.50
- ------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------
Net investment income .01(c)
- ------------------------------------------------------------------
Net realized and unrealized gain on investments .63
- ------------------------------------------------------------------
Total from investment operations .64
- ------------------------------------------------------------------
Net asset value, end of period $9.14
- ------------------------------------------------------------------
Total investment return at net asset value (%) (a) 7.78(d)
- ------------------------------------------------------------------
Net assets, end of period (in thousands) $2,252
- ------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) .32(c)(d)
- ------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .06(c)(d)
- ------------------------------------------------------------------
Portfolio turnover (%) 2.39(d)
- ------------------------------------------------------------------
* Unaudited
(a) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period
December 28, 1995 (commencement of operations) to February 29,
1996 include amounts paid through expense offset arrangements
(See Note 3).
(c) 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.
(d) Not annualized.
Notes to financial statements
For the period December 28, 1995 (commencement of operations) to
February 29, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is one of a series of Putnam Investment Funds (the "Trust")
which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
objective of the fund is to seek long-term capital appreciation by
investing in common stocks and other equity securities of emerging
market companies.
The following is a summary of significant accounting policies followed
by the fund in the preparation of its financial statements. The
preparation of financial statements are in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported--as in the
case of some securities traded over-the-counter--the last reported bid
price. 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.
) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc., and certain other accounts.
These balances may be invested in one or more repurchase agreements
and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to 102% of the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times equal to at least
102% of the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid 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.
H) 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.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $3,662. These expenses are being amortized
based on projected net asset levels over a five-year period. The fund
will reimburse Putnam Management for the payment of these expenses.
Note 2
Initial capitalization and offering price of shares
The fund was established as a Massachusetts business trust on October
31, 1994. During the period October 31, 1994 to December 28, 1995, the
fund had no operations other than those related to organizational
matters, including the initial capital contribution of $2,000,000, and
the issuance of 235,293 shares to Putnam Mutual Funds Corp., a wholly-
owned subsidiary of Putnam Investments, Inc. on December 28, 1995.
At February 29, 1996, Putnam Investment Management, Inc. owned 235,293
shares of the fund (95.50% of shares outstanding), valued at $2,150,587.
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: 1.20%
of the first $500 million of average net assets, 1.10% of the next $500
million, 1.05% of the next $500 million, 1.00% of the next $5 billion,
0.975% of the next $5 billion, 0.955% of the next $5 billion, 0.94% of
the next $5 billion, and 0.93% of any excess thereafter.
Through July 31, 1996, Putnam Management has agreed to limit its
compensation to the extent that expenses of the fund (exclusive of
brokerage, interest, taxes, deferred organizational and extraordinary
expense, payments under the fund's distribution plan and credits from
Putnam Fiduciary Trust Company ("PFTC"), a wholly-owned subsidiary of
Putnam Investments, Inc., if any) exceed an annual rate of 1.85% of the
fund's average net assets.
The fund reimburses Putnam Management 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 Trustees fee of $100 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 in the fund
and are invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the period December 28, 1995 (commencement of operations) to
February 29, 1996, the fund expenses were reduced by $865 under expense
offset arrangements with PFTC. Investor servicing and custodian fees
reported in the Statement of operations exclude these credits. The fund
could have invested the assets utilized in connection with the expense
offset arrangements in an income-producing asset if it had not entered
into such arrangements.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, although the fund is not
currently making any payments pursuant to the 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 December 28, 1995 (commencement of operations) to
February 29, 1996, 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 December 28, 1995 (commencement of operations) to
February 29, 1996, purchases and sales of investment securities other
than short-term investments aggregated $2,107,210 and $47,315,
respectively. There were no purchases or 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
At February 29, 1996 there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
For the period
December 28, 1995
(commencement of
operations) to
February 29, 1996
- ----------------------------------------------------
Shares Amount
- ----------------------------------------------------
Shares sold 11,071 $96,184
Shares
repurchased -- --
- ----------------------------------------------------
Net increase 11,071 $96,184
- ----------------------------------------------------
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
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
J. Peter Grant
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Emerging
Growth Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For
more information, or to request a prospectus, call toll free: 1-800-225-
1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
24037-2AY 4/96
