Putnam
Emerging
Markets
Fund*
SEMIANNUAL REPORT
February 28, 1997
* Formerly Putnam Emerging Growth Fund
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* According to Lipper Analytical Services, an independent ranking firm, Putnam
Emerging Markets Fund's class A shares ranked 15 out of 96 emerging markets
funds (top 16%) for 1-year performance as of March 31, 1997.*
* "We believe that emerging markets represent an exceptional long-term
opportunity for investors willing to wait out short-term fluctuations in
performance."
-- Peter Grant, fund manager
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
16 Financial statements
* Lipper Analytical Services, an independent research organization, ranks
funds according to total return performance. Rankings vary over time and do
not reflect the effects of sales charges. Performance for other class shares
will vary. The fund was not ranked over a longer time period.
Past performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
This is Putnam Emerging Markets Fund's first report to shareholders drawn from
the public at large. But this is not a brand new fund. It has been investing
in companies from within the world's emerging economies since December 1995.
Satisfied that the fund met our own strict standards and that it filled a need
within the investment community, we brought it to the marketplace in October
1996. We have been gratified by its reception, and we extend a warm welcome to
the fund's new shareholders.
I am also pleased to welcome Tom Haslett as co-fund manager. Tom is the CIO of
Putnam's Emerging Markets Group, and joined Putnam from Montgomery Securities
with 14 years of investment experience.
In the report that follows, fund managers Peter Grant and Tom Haslett review
performance in the first half of fiscal 1997 and discuss prospects for the
second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 16, 1997
Report from the Fund Managers
Thomas R. Haslett
J. Peter Grant
With this semiannual report, we are pleased to detail strong performance for
Putnam Emerging Markets Fund. Over the six months ended February 28, 1997,
your fund's class A shares gained 13.64% at net asset value and added 7.07% at
public offering price. By comparison, the Morgan Stanley Capital International
Emerging Markets Index rose 10.63% over the same period. For performance for
other share classes, please turn to page 8 of this report.
Your fund's successful start is a reflection of strong performance for
companies in emerging markets as well as our ability to research and evaluate
diverse companies and countries. With a number of developing countries from
Latin America to Eastern Europe to Asia experiencing economic expansion and
inflows of foreign capital positive, overall conditions may persist in the
months ahead. Nevertheless, it is important to be prepared for a measure of
volatility -- in general, because investing in emerging markets entails risks,
and in particular, because strong returns in many markets in 1996 have made
some markets moderately expensive.
* LATIN AMERICA'S STRENGTH NECESSITATES SOME REPOSITIONING
Beginning early in 1996 and continuing throughout your fund's fiscal year, we
established relatively large positions in several Latin American markets. We
had identified a very attractive combination of rising economic growth,
inexpensive stock prices, and signs that investors were returning to the
region. The resulting positive view was borne out as stock markets across
Latin America thrived, boosting your fund's performance.
Brazil has had a particularly vibrant market over the semiannual period.
Significantly, Brazil's government greatly encourages international
investment, maintains a strong pro-business stance, and facilitates
privatizations. Already huge privatizations in the electricity sector have
brought a major inflow of capital into Brazil. The stock prices of such
companies as Telebras, Electrobras, and Petrobras -- so-called Bras stocks
- -- have risen rapidly; your fund has participated in this growth. Now we
anticipate that investors may begin to rotate out of Bras stocks and into
other sectors such as banking. We have thus started to position the fund to
take advantage of this potential shift.
Elsewhere in Latin America, Argentina's Banco de Galicia, a banking and
financial services company, was a strong performer for your fund. In Mexico,
stocks of bottling companies were particularly robust, with Panamerican
Beverages -- dominating its regional market -- doing quite well. Also in
Mexico, we own shares of Industrias Penoles, a gold mining company. Penoles is
an export-oriented enterprise and thus derives much of its earnings in solid
currencies such as the U.S. dollar, which would help to protect the company in
the event of a decline in the value of the peso. While these stocks, along
with others discussed in this report, were viewed favorably at the end of the
fiscal period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
* STRONG COMPANIES IDENTIFIED IN BOTH THRIVING AND WEAKER MARKETS
As with Brazil, Hong Kong's recent strength means some reassessment is in
order. The fund's holdings in Hong Kong have performed well, but we now
believe that with the turnover of sovereignty to China fast approaching, this
market's upside potential may be limited.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: COUNTRY ALLOCATION]
COUNTRY ALLOCATION*
Brazil 11.1%
Malaysia 9.8%
Hong Kong 7.0%
Mexico 6.5%
Indonesia 5.8%
Philippines 5.8%
Footnote reads:
* Based on net assets as of 2/28/97. Holdings will vary over time.
Elsewhere in Asia, your fund owns shares of Petron Corp., an oil company with
dominant market share in the Philippines. Petron is partly owned by Saudi
Arabia's Aramco, which makes supply problems unlikely. In Malaysia, United
Engineers owns and operates the country's major north/south toll road. While
the fund does not have major direct exposure to mainland China, we have
purchased shares of Qingling Motors Co., a maker of light commercial vehicles.
The company is experiencing strong unit growth with excellent profit margins.
We believe Korea Mobile Telecommunications offers an excellent combination of
growth and value. In 1996, KMT's growth in earnings per share rose about 8%
- -- hardly a dramatic increase. However, the company's earnings before
depreciation, interest, and taxes (EBDIT) increased more than 100% in 1996. We
know that for tax reasons the company uses a number of accounting techniques
to underplay its profitability. This makes KMT a very attractively priced
stock. But the stock is not just inexpensive; it is also fast growing. KMT
witnessed a 76% jump in cellular subscribers in 1996.
Outside of Asia, we are cautious toward South Africa currently, since
political, currency, and economic conditions have been troubled and have led
to a weak market. Nevertheless, we believe there are a number of South African
companies with solid prospects, most notably fund holding Sasol Ltd. Sasol is
a superbly managed company with an efficient method of converting coal to oil
- -- perfected during the days of the oil producers' boycott of South Africa.
Sasol also has the benefit of reaping earnings in hard currency, while paying
its costs in the weak South African rand. Despite our negative near-term
outlook for the country, therefore, our evaluation of Sasol is positive.
* PUTNAM'S OUTLOOK: SHORT-TERM POSITIVE, LONGER-TERM STRONG
After strong growth in markets in Asia and Latin America, we have taken
advantage of opportunities in Eastern Europe and Russia. However, last year
brought major market rallies in many markets in this area as well, and so
equity valuations are somewhat extended. We have taken a small position in
Israel's stock market and are searching India for attractive companies that
serve that country's massive middle class.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Alfa S.A. (Mexico)
Diversified operations
Compania de Tele Chile (Chile)
Telecommunications
Tatneft (Russia)
Oil and gas
PT Telekomunikasi Indonesia (Indonesia)
Telecommunications
Centrais Electricas de Santa Catarina (Brazil)
Electricity
Centrais Electricas Bras (Brazil)
Electricity projects
Banco Bradesco (Brazil)
Commercial banking
Swire Pacific Ltd. (Hong Kong)
Diversified operations
IOI Corp. (Malaysia)
Agricultural operations
Multicanal Participacoes (Brazil)
Cable television
Footnote reads:
These holdings represent 16.7% of the fund's assets as of 2/28/97.
Portfolio holdings will vary over time.
We believe in the exceptional potential of emerging markets. Over the long
term, investing in these markets means an opportunity to benefit from vibrant
economies and companies. In the near term, the investing environment appears
quite positive in a number of emerging markets, from Latin America to Asia.
And wherever there are opportunities in emerging markets, we will continue to
apply Putnam's rigorous research process and team approach.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 2/28/97, there is no guarantee the fund will continue to hold
these securities in the future. Foreign investments are subject to certain
risks, such as currency fluctuations, economic instability, and political
developments, that are not present with domestic investments. Additional risks
including illiquidity and volatility may be associated with emerging markets
securities.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Emerging Markets Fund is designed for investors seeking
capital appreciation through common stocks of companies operating primarily in
developing economies.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 2/28/97
Class A Class B Class M
(inception date) (12/28/9) (10/30/9) (10/30/96)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 13.64% 7.07% -- -- -- --
- ------------------------------------------------------------------------------
1 year 27.81 20.43 -- -- -- --
- ------------------------------------------------------------------------------
Life of class 37.43 29.51 17.08% 12.08% 17.19% 13.10%
Annual average 31.23 24.73 -- -- -- --
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/97
MSCI
Emerging Consumer
Markets Price Index
- ------------------------------------------------------------------------------
6 months 10.63% 1.14%
- ------------------------------------------------------------------------------
1 year 13.80 2.71
- ------------------------------------------------------------------------------
Life of class A 17.46 3.65
Annual average 14.83 3.11
- ------------------------------------------------------------------------------
Life of class B and M 12.88 0.50
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance,
and will differ for each share class. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment returns
and principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost. POP assumes 5.75% maximum
sales charge for class A shares and 3.50% for class M shares. CDSC for class B
shares assumes the applicable sales charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 2/28/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.015 $0.013 $0.014
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term -- -- --
- ------------------------------------------------------------------------------
Short-term 0.119 0.119 0.119
- ------------------------------------------------------------------------------
Total $0.134 $0.132 $0.133
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
08/31/96 $10.28 $10.91 -- -- --
- ------------------------------------------------------------------------------
10/30/96 -- -- $9.95 $9.95 $10.31
- ------------------------------------------------------------------------------
02/28/97 11.53 12.23 11.50 11.51 11.93
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (12/28/9) (10/30/9) (10/30/96)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------
6 months 10.09% 3.73% -- -- -- --
- -----------------------------------------------------------------------------
1 year 20.91 13.97 -- -- -- --
- -----------------------------------------------------------------------------
Life of class 33.14 25.47 13.41% 8.41% 13.53% 9.56%
Annual average 25.50 19.73 -- -- -- --
- -----------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance,
and will differ for each share class. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment returns
and principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
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 for class A shares and 3.50%
for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of the
redemption of class B shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1% during
the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
Morgan Stanley Capital International (MSCI) Emerging Markets Index* is a an
unmanaged list of equity securities from emerging markets with all values
expressed in U.S. dollars.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in the
fund do not match those in the indexes and performance of the fund will
differ. It is not possible to invest directly in an index.
Portfolio of investments owned
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (81.6%) *
NUMBER OF SHARES VALUE
Argentina (5.5%)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
24,500 Banco De Galicia y Buenos Aires Class B ADR $ 578,813
115,900 Cresud S.A. 226,095
8,600 Inversiones Y Represent ADR 310,675
17,000 Telefonica de Argentina S.A. ADR 537,625
21,800 YPF S.A. ADR 583,150
--------------
2,236,358
Brazil (11.1%)
- ---------------------------------------------------------------------------------------------------------
20,000 Brazil Realty S.A. GDR + 470,000
1,500 Centrais Electricas Bras S. A. 659,435
495,000 Centrais Electricas de Santa Catarina S.A. + 687,696
9,700 Comp Energetica De Minas Gerais (Cemig)
144A ADS 388,000
15,100 Compania Siderurgica Nacional 556,066
1,650 Eletropaulo-Eletricidade de Sao Paulo S.A. Class B + 320,297
6,000 Globex Utilidades S.A. + 121,039
450 Light Participacoes S.A. + 133,214
48,962 Multicanal Participacoes S.A. ADR + 624,266
14,700 Uniao de Bancos Brasileiros S.A. + 580,363
--------------
4,540,376
Canada (0.2%)
- ---------------------------------------------------------------------------------------------------------
7,000 Indochina Goldfields Ltd. 144A + 96,483
Chile (2.6%)
- ---------------------------------------------------------------------------------------------------------
25,000 Compania de Tele Chile ADS 731,250
11,000 Santa Isabel S.A. ADR + 330,000
--------------
1,061,250
Germany (0.2%)
- ---------------------------------------------------------------------------------------------------------
2,100 Millicom International Cellular S.A. + 80,850
Guatemala (0.2%)
- ---------------------------------------------------------------------------------------------------------
2,500 Basic Petroleum International, Ltd. + 87,188
Hong Kong (7.0%)
- ---------------------------------------------------------------------------------------------------------
4,000 Asia Satellite Telecommunications Holdings Ltd.
ADR + 105,000
115,000 Cheung Kong Infrastructure Holdings + 325,262
152,000 Great Eagle Holdings Ltd. + 570,270
102,000 Guoco Group Ltd. 571,716
200 Hong Kong Telecommunications Ltd. 345
210,000 New World Infrastructure Ltd. + 623,789
75,000 Swire Pacific Ltd. Class A 644,130
--------------
2,840,512
Hungary (0.3%)
- ---------------------------------------------------------------------------------------------------------
2,000 Gedeon Richter GDR 135,501
India (2.2%)
- ---------------------------------------------------------------------------------------------------------
10,750 East India Hotels Ltd. GDR 188,125
40,800 Gujarat Ambuja Cements Ltd. 346,800
19,100 State Bank of India 144A GDR + 382,000
--------------
916,925
Indonesia (5.8%)
- ---------------------------------------------------------------------------------------------------------
714,640 PT Bank Internasional Indonesia 596,782
39,000 PT Gudang Garam 190,116
9,700 PT Pasifik Satelit Nusantara ADR + 143,075
21,000 PT Telekomunikasi Indonesia ADR + 721,875
38,500 Sampoerna International Finance 191,296
180,000 PT Semen Gresik 531,737
--------------
2,374,881
Israel (1.1%)
- ---------------------------------------------------------------------------------------------------------
100,000 Bank Hapoalim Ltd. + 192,187
2,800 Tadiran Ltd. + 77,776
51,300 Super Sol Ltd. + 160,634
--------------
430,597
Malaysia (9.8%)
- ---------------------------------------------------------------------------------------------------------
98,000 Arab Malaysian Corp. Berhad 596,453
101,000 DCB Holdings 405,058
192,000 IJM Corp. Berhad 514,631
348,000 IOI Corp. 628,392
225,000 Multi-Purpose Holdings Berhad 535,067
90,000 Perusahaan Otomobil Nasional Berhad 594,921
86,000 Technology Resources Industries Berhad + 201,048
57,000 United Engineers Ltd. 526,118
--------------
4,001,688
Mexico (6.5%)
- ---------------------------------------------------------------------------------------------------------
124,500 Cemex, S.A. de C.V. Class B 545,571
125,000 Fomento Economico Mexicano, S.A. de C.V. Class B 534,363
20,000 Grupo Imsa S.A. ADR + 472,500
128,700 Industrias Penoles S.A. 591,566
8,600 Panamerican Beverages, Inc. Class A 484,825
--------------
2,628,825
Morocco (0.2%)
- ---------------------------------------------------------------------------------------------------------
5,000 Banque Marocaine Du Commerce Exterieur
144A GDR 85,000
Pakistan (--%)
- ---------------------------------------------------------------------------------------------------------
1,650 Pakistan State Oil 12,824
Peru (0.1%)
- ---------------------------------------------------------------------------------------------------------
2,500 Telefonica del Peru S.A. ADR 55,000
Philippines (5.8%)
- ---------------------------------------------------------------------------------------------------------
1,533,000 Belle Corp. + 489,627
547,700 Fil-Estate Land, Inc. 447,739
572,500 International Container Terminal Services Inc. + 348,289
77,000 Manila Electric Co. Class B 611,901
1,187,800 Petron Corp. 474,217
--------------
2,371,773
Portugal (1.3%)
- ---------------------------------------------------------------------------------------------------------
9,000 Investec Consultadoria International + 328,622
2,700 Telecel-Comunicacaoes Pessoais S.A. + 216,000
--------------
544,622
Russia (5.3%)
- ---------------------------------------------------------------------------------------------------------
10,000 AO Mosenergo 144A ADS + 405,000
9,000 Lukoil Oil Co. ADR 535,500
125,000 Rostelecom + 493,750
10,000 Tatneft 144A ADR + 730,000
--------------
2,164,250
Singapore (1.5%)
- ---------------------------------------------------------------------------------------------------------
50,000 Far East Levingston Shipbuilding Ltd. 205,335
50,000 Overseas Union Bank Ltd. 389,610
--------------
594,945
South Africa (4.6%)
- ---------------------------------------------------------------------------------------------------------
17,600 Energy Africa Ltd. 400,400
93,500 Gencor Ltd. 405,205
312,642 SA Iron & Steel Industrial Corp. 237,458
46,000 Randgold & Exploration Co., Ltd. 387,915
36,842 Sasol Ltd. 399,159
1,316 South African Breweries, Ltd. 39,393
--------------
1,869,530
South Korea (3.6%)
- ---------------------------------------------------------------------------------------------------------
9,000 Hyundai Electronics Industries Co. + 375,869
2,520 Kookmin Bank 42,615
19,000 Kookmin Bank GDR 332,500
10,700 Korea Electric Power Corp. + 307,841
31,900 Korea Mobile Telecommunications ADR + 394,763
--------------
1,453,588
Taiwan (2.7%)
- ---------------------------------------------------------------------------------------------------------
23,400 Advanced Semiconductor Engineering GDR 292,500
29,200 China Steel Corp. GDR 538,740
21,800 Yageo Corp 144A + 267,050
--------------
1,098,290
Thailand (2.1%)
- ---------------------------------------------------------------------------------------------------------
17,800 Advanced Info Service Public Co., Ltd. 171,901
30,000 Bangkok Bank Public Co. Ltd. 264,225
27,400 Central Pattana Public Co. Ltd. 86,793
73,700 Industrial Finance Corp. 195,019
33,200 Siam Makro Public Co. + 150,052
--------------
867,990
United Kingdom (1.4%)
- ---------------------------------------------------------------------------------------------------------
184,800 Lonrho PLC 437,592
7,400 Pliva D D GDR 144A 114,700
--------------
552,292
Venezuela (0.5%)
- ---------------------------------------------------------------------------------------------------------
6,600 Compania Anonima Nacional Telefonos de Venezuela
(CANTV) ADR + 209,550
--------------
Total Common Stocks (cost $31,572,512) $ 33,311,088
CONVERTIBLE BONDS AND NOTES (3.8%) *
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
590,000 Alfa S.A. 144A cv. sub. notes 8s, 2000 (Mexico) $749,300
340,000 Formosa Chemicals & Fibre Corp. 144A cv. unsub.
1 3/4s, 2001 (Taiwan) 387,600
410,000 Qingling Motors Co., Ltd. 144A cv. bonds 3 1/2s,
2002 (China) 433,575
--------------
Total Convertible Bonds and Notes
(cost $1,528,768) $ 1,570,475
PREFERRED STOCKS (5.1%) *
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
77,000 Banco Bradesco BRC 0.072 No Par Value
(NPV) pfd. (Brazil) $ 644,781
520 Cia Tecidos Norte de Minas BRC 8.65
NPV pfd. (Brazil) 222,666
3,000 Petroleo Brasileiro S.A. BRC 5.352 S.A.
NPV pfd. (Brazil) 613,760
1,100 Telecomunicacoes do Rio de Janeiro BRC .0386
NPV pfd. (Brazil) 166,476
2,900 Telemig (Telec De Minas Gerais) BRC 2.627 pfd (Brazil) 425,797
--------------
Total Preferred Stocks (cost $1,663,902) $ 2,073,480
INVESTMENT COMPANIES (0.3%) * (cost $114,627) VALUE
- ---------------------------------------------------------------------------------------------------------
5,000 Taiwan Fund, Inc. (Taiwan) $ 125,000
WARRANTS (--%) * (cost $--)+
NUMBER OF WARRANTS EXPIRATION DATE VALUE
- ---------------------------------------------------------------------------------------------------------
25,480 PT Bank Internasional Indonesia (Indonesia) 01/17/00 $ 11,330
SHORT- TERM INVESTMENTS (12.0%) * (cost $4,892,728)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
4,892,000 Interest in $594,385,000 joint repurchase agreement
dated February 28,1997 with Morgan (JP) & Co. Inc.
due March 3, 1997 with respect to various
U.S. Treasury obligations -- maturity value of
$4,894,185 for an effective yield of 5.36% $ 4,892,728
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $39,772,537) *** $ 41,984,101
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Percentages indicated are based on net assets of $40,838,147
*** The aggregate identified cost on a tax basis is $39,774,493,
resulting in gross unrealized appreciation and depreciation of
$3,083,634 and $874,026, respectively, or net unrealized appreciation of
$2,209,608.
+ Non-income-producing security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR, ADS, or GDR after the name of a foreign holding stands for American
Depository Receipts, American Depository Shares or Global Depository
Receipts Shares, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $34,879,809) (Note 1) $37,091,373
- ---------------------------------------------------------------------------------------------------
Repurchase agreement
(identified cost $4,892,728) (Note 1) 4,892,728
- ---------------------------------------------------------------------------------------------------
Cash 2,612,630
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 15,739
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,606,653
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 153,545
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,642
- ---------------------------------------------------------------------------------------------------
Total assets 46,376,310
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 5,117,716
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 369,826
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,732
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,021
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 157
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 17
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 17,292
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 3,662
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 26,740
- ---------------------------------------------------------------------------------------------------
Total liabilities 5,538,163
- ---------------------------------------------------------------------------------------------------
Net assets $40,838,147
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $38,361,812
- ---------------------------------------------------------------------------------------------------
Distributions in excess net investment income (Note 1) (35,670)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 300,440
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 2,211,565
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $40,838,147
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($22,694,692 divided by 1,969,122 shares) $11.53
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.53)* $12.23
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($16,749,635 divided by 1,456,107 shares)** $11.50
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,393,820 divided by 121,088 shares) $11.51
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.51)* $11.93
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more on group sales the
offering price is reduced.
** Redemption price share is equal to net asset value less any contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 28, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,700) $ 32,340
- --------------------------------------------------------------------------------------------------
Interest 44,007
- --------------------------------------------------------------------------------------------------
Total investment income 76,347
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 71,536
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 12,412
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 985
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 45
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 8,736
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 18,435
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,020
- --------------------------------------------------------------------------------------------------
Reports to shareholders 41,449
- --------------------------------------------------------------------------------------------------
Registration fees 11,669
- --------------------------------------------------------------------------------------------------
Auditing 18,139
- --------------------------------------------------------------------------------------------------
Legal 2,213
- --------------------------------------------------------------------------------------------------
Postage 80
- --------------------------------------------------------------------------------------------------
Other 528
- --------------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (73,076)
- --------------------------------------------------------------------------------------------------
Total expenses 114,171
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (12,732)
- --------------------------------------------------------------------------------------------------
Net expenses 101,439
- --------------------------------------------------------------------------------------------------
Net investment loss (25,092)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 324,989
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 6
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and
liabilities in foreign currencies during the period 9
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 1,869,034
- --------------------------------------------------------------------------------------------------
Net gain on investments 2,194,038
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,168,946
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
December 28, 1995
(commencement
Six months ended of operations) to
February 28, August 31
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (25,092) $ 2,953
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 324,995 102,998
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 1,869,043 342,522
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,168,946 448,473
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (11,345) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (3,758) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (372) --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (90,004) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (34,401) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (3,163) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 35,887,470 476,301
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 37,913,373 924,774
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period $ 2,924,774 $2,000,000
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $35,670 and undistributed
net investment income of $4,897, respectively) $40,838,147 $2,924,774
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------------
Six months
ended For the Period
Per-share February 28 Dec. 28, 1995+
operating performance (Unaudited) to August 31
- ----------------------------------------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.28 $8.50
- ----------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------
Net investment income (.01)(c)(d) .01(c)(d)
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.39 1.77
- ----------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.38 1.78
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------
From net
investment income (.01) --
- ----------------------------------------------------------------------------------------------------------------
From net realized gains
on investments (.12) --
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (.13) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.53 $10.28
- ----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 13.64* 20.94*
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $22,695 $2,925
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .82* 1.25(c)*
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.08)* .11(c)*
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.17* 45.90*
- ----------------------------------------------------------------------------------------------------------------
Average commission
rate paid $.0132 $.0060
- ----------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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
includes amounts paid through expense offset and brokerage service arrangements. (Note 2).
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of $.09 per share for class A for the period ended
August 31, 1996. Expenses for the period ended February 28, 1997 reflect a reduction of
$.06, $.04 and $.05 per share for class A, class B and class M, respectively.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- -----------------------------------------------------------------------------------------------------
For the period
Oct. 30, 1996+
Per-share to February 28
operating performance (Unaudited)
- -----------------------------------------------------------------------------------------------------
1997
- -----------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $9.95
- -----------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------
Net investment income (.03)(c)(d)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.71
- -----------------------------------------------------------------------------------------------------
Total from
investment operations 1.68
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
From net
investment income (.01)
- -----------------------------------------------------------------------------------------------------
From net realized gains
on investments (.12)
- -----------------------------------------------------------------------------------------------------
Total Distributions (.13)
- -----------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.50
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 17.08*
- -----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $16,750
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .80(c)*
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.32)(c)*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.17*
- -----------------------------------------------------------------------------------------------------
Average commission
rate paid $.0132
- -----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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
includes amounts paid through expense offset and brokerage service arrangements. (Note 2).
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of $.09 per share for class A for the period ended
August 31, 1996. Expenses for the period ended February 28, 1997 reflect a reduction of
$.06, $.04 and $.05 per share for class A, class B and class M, respectively.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------------
For the period
Oct. 30, 1996+
Per-share to February 28
operating performance (Unaudited)
- --------------------------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $9.95
- --------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------
Net investment income (.02)(c)(d)
- --------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.71
- --------------------------------------------------------------------------------------------------
Total from
investment operations 1.69
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net
investment income (.01)
- --------------------------------------------------------------------------------------------------
From net realized gains
on investments (.12)
- --------------------------------------------------------------------------------------------------
Total Distributions (.13)
- --------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.51
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 17.19*
- --------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,394
- --------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .72(c)*
- --------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.23)(c)*
- --------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.17*
- --------------------------------------------------------------------------------------------------
Average commission
rate paid $.0132*
- --------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 includes amounts paid through expense offset and
brokerage service arrangements. (Note 2).
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of $.09 per share for class A for the period ended
August 31, 1996. Expenses for the period ended February 28, 1997 reflect a reduction of
$.06, $.04 and $.05 per share for class A, class B and class M, respectively.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
Notes to financial statements
February 28, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam Emerging Markets Fund (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 fund offers class A, class B and class M shares. The fund commenced it's
offering of class B and class M shares on October 30, 1996. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class A
shares, and are subject to a contingent deferred sales charge, if those shares
are redeemed within six years of purchase. Class M shares are sold with a
maximum front-end sales charge of 3.50% and pay an ongoing distribution fee
that is lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with 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 case of some
securities traded over-the-counter -- the last reported bid price. Investments
for which market quotations are not readily available (and in certain
circumstances debt securities which trade on an exchange) are stated fair
stated on the basis of valuations furnished by pricing services approved by
the Trustees, which determines valuations for institutional size trading units
of such securities using methods based on market transactions for comparable
securities and various relationships between securities that are generally
recognized by institutional traders. 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) 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 and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. 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
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to 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. 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 appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
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 nor 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. 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.
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 on projected net
asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
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. 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.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through August 31, 1997, to the extent that
expenses of the fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expense, credits from Putnam Fiduciary Trust
Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. and
payments under the Trust's distribution plan) would 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.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended February 28, 1997, fund expenses were reduced by
$12,732 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive $100 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 certain Putnam funds until distribution in accordance with the 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
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam 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 Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares respectively. The distribution plan became effective October
30, 1996.
For the six months February 28, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $21,030 and $775 from the sale of
class A and class M shares, respectively and $340 in contingent deferred sales
charges from redemptions of class B shares. A deferred sales charge of up to
1% is assessed on certain redemptions of class A shares. For the six months
ended February 28, 1997, Putnam Mutual Funds Corp., acting as underwriter
received no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 28, 1997, purchases and sales of
investment securities other than short-term investments aggregated $37,614,664
and $5,369,808, 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 4
Capital shares
At February 28, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
February 28, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 2,349,397 $25,993,942
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,088 11,080
- ------------------------------------------------------------
2,350,485 26,005,022
Shares
repurchased (665,850) (7,526,644)
- ------------------------------------------------------------
Net increase 1,684,635 $18,478,378
- ------------------------------------------------------------
For the period
December 28, 1995
(commencement of
operations) to
August 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 52,471 $509,698
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
52,471 509,698
Shares
repurchased (3,277) (33,397)
- ------------------------------------------------------------
Net increase 49,194 $476,301
- ------------------------------------------------------------
For the period
October 30, 1996
(commencement of
operations) to
February 28, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 1,542,962 $17,028,751
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 325 3,302
- ------------------------------------------------------------
1,543,287 17,032,053
Shares
repurchased (87,180) (969,817)
- ------------------------------------------------------------
Net increase 1,456,107 $16,062,236
- ------------------------------------------------------------
For the period
October 30,1996
(commencement of
operations) to
February 28, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 152,297 $1,706,207
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 31 318
- ------------------------------------------------------------
152,328 1,706,525
Shares
repurchased (31,240) (359,669)
- ------------------------------------------------------------
Net increase 121,088 $1,346,856
- ------------------------------------------------------------
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
Ronald J. Jackson
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
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Tim Ferguson
Vice President
Brett C. Browchuk
Vice President
J. Peter Grant
Vice President and Fund Manager
Thomas R. Haslett
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 Markets
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. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
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 principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
32137-2AY/2CK/2CL 4/97
