Putnam
American
Renaissance
Fund
SEMIANNUAL REPORT
January 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
The following report contains a list of your fund's portfolio holdings and
complete financial statements for the six months ended 1/31/97. Additional
details, including fund strategy, performance, and managers' outlook, will be
provided in the annual report, which will cover the 12 months ended 7/31/97.
<TABLE>
<CAPTION>
Portfolio of investments owned
January 31, 1997 (Unaudited)
COMMON STOCKS (97.0%) *
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace (1.9%)
- ---------------------------------------------------------------------------------------------------------
600 Boeing Co. $64,275
Apparel (1.2%)
- ---------------------------------------------------------------------------------------------------------
600 Nike, Inc. Class B 40,725
Chemicals (2.7%)
- ---------------------------------------------------------------------------------------------------------
1,900 Praxair, Inc. 88,112
Computer Software (7.0%)
- ---------------------------------------------------------------------------------------------------------
1,000 Computer Associates Intl., Inc. 45,375
1,200 Microsoft Corp. + 122,400
1,100 Parametric Technology Corp. + 63,525
----------
231,300
Computers (1.9%)
- ---------------------------------------------------------------------------------------------------------
1,700 EMC Corp. + 64,388
Consumer Products (7.1%)
- ---------------------------------------------------------------------------------------------------------
1,100 Gillette Co. 89,650
900 Kimberly-Clark Corp. 87,750
500 Procter & Gamble Co. 57,750
----------
235,150
Cosmetics (1.5%)
- ---------------------------------------------------------------------------------------------------------
800 Avon Products, Inc. 50,200
Electronics and Electrical Equipment (3.4%)
- ---------------------------------------------------------------------------------------------------------
1,100 General Electric Co. 113,300
Entertainment (2.0%)
- ---------------------------------------------------------------------------------------------------------
900 Disney (Walt) Productions, Inc. 65,925
Finance (4.2%)
- ---------------------------------------------------------------------------------------------------------
1,200 American Express Co. 74,850
1,600 Federal National Mortgage Association 63,200
----------
138,050
Food and Beverages (7.2%)
- ---------------------------------------------------------------------------------------------------------
900 Campbell Soup Co. 74,700
600 Coca-Cola Co. 34,725
1,700 Coca-Cola Enterprises, Inc. 96,688
500 Pioneer Hi-Bred International, Inc. 33,688
----------
239,801
Health Care Information Systems (1.7%)
- ---------------------------------------------------------------------------------------------------------
900 HBO & Co. 56,362
Health Care Services (4.4%)
- ---------------------------------------------------------------------------------------------------------
1,200 Cardinal Health, Inc. 75,150
1,600 Healthsouth Rehabilitation Corp. + 69,800
----------
144,950
Household Products (1.1%)
- ---------------------------------------------------------------------------------------------------------
300 Clorox Co. 35,588
Insurance (4.9%)
- ---------------------------------------------------------------------------------------------------------
500 Aetna Inc. 39,500
500 American International Group, Inc. 60,562
1,200 Travelers Group Inc. 62,850
----------
162,912
Lodging (1.6%)
- ---------------------------------------------------------------------------------------------------------
1,000 Marriott International, Inc. 53,125
Medical Supplies and Devices (1.6%)
- ---------------------------------------------------------------------------------------------------------
800 Boston Scientific Corp. + 54,600
Networking Equipment (3.2%)
- ---------------------------------------------------------------------------------------------------------
900 Cascade Communications Corp. + 35,775
1,000 Cisco Systems, Inc. + 69,750
----------
105,525
Office Equipment (1.1%)
- ---------------------------------------------------------------------------------------------------------
800 Ikon Office Solutions, Inc. 35,300
Oil and Gas (2.3%)
- ---------------------------------------------------------------------------------------------------------
700 Schlumberger Ltd. 77,788
Pharmaceuticals and Biotechnology (13.0%)
- ---------------------------------------------------------------------------------------------------------
1,800 Abbott Laboratories 97,875
1,700 Merck & Co., Inc. 154,275
1,600 Pfizer, Inc. 148,600
400 Warner-Lambert Co. 32,200
----------
432,950
Photography (2.1%)
- ---------------------------------------------------------------------------------------------------------
800 Eastman Kodak Co. 69,400
Publishing (3.7%)
- ---------------------------------------------------------------------------------------------------------
800 Gannett Co., Inc. 61,300
1,600 Tribune Co. 61,200
----------
122,500
Retail (5.0%)
- ---------------------------------------------------------------------------------------------------------
1,100 CVS Corp. 47,575
1,300 Sears, Roebuck & Co. 62,400
1,400 TJX Cos., Inc. (The) 55,650
----------
165,625
Semiconductors (6.0%)
- ---------------------------------------------------------------------------------------------------------
900 Intel Corp. 146,025
700 Texas Instruments, Inc. 54,862
----------
200,887
Telecommunication Equipment (2.8%)
- ---------------------------------------------------------------------------------------------------------
500 Northern Telecom Ltd. (Canada) 36,813
1,400 Tellabs, Inc. + 57,662
----------
94,475
Telephone Services (1.7%)
- ---------------------------------------------------------------------------------------------------------
1,400 Sprint Corp. 57,050
Tobacco (0.7%)
- ---------------------------------------------------------------------------------------------------------
200 Philip Morris Cos., Inc. 23,775
----------
Total Common Stocks (cost $2,682,704) $3,224,038
SHORT-TERM INVESTMENT (3.0%) * (cost $100,015)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
100,000 Interest in $718,546,000 joint repurchase agreement
January 31, 1997 with Morgan (J.P.) & Co ., Inc. due
February 3, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $100,046 for an
effective yield of 5.50% $ 100,015
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $2,782,719) $3,324,053
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,323,693
*** The aggregate identified cost on a tax basis is $2,782,719, resulting in gross unrealized appreciation
and depreciation of $595,632 and $54,298, respectively, or net unrealized appreciation of $541,334
+ Non-income-producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
January 31, 1997 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,782,719) (Note 1) $3,324,053
- -----------------------------------------------------------------------------------
Cash 5,484
- -----------------------------------------------------------------------------------
Dividends and other receivables 2,647
- -----------------------------------------------------------------------------------
Receivable for shares of the fund sold 16,577
- -----------------------------------------------------------------------------------
Receivable for securities sold 136,132
- -----------------------------------------------------------------------------------
Receivable from Manager (Note 2) 288
- -----------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 7,379
- -----------------------------------------------------------------------------------
Total assets 3,492,560
Liabilities
- -----------------------------------------------------------------------------------
Payable for securities purchased 146,820
- -----------------------------------------------------------------------------------
Payable for shares of the fund repurchased 20
- -----------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 622
- -----------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 27
- -----------------------------------------------------------------------------------
Payable for administrative services (Note 2) 13
- -----------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 8,843
- -----------------------------------------------------------------------------------
Other accrued expenses 12,522
- -----------------------------------------------------------------------------------
Total liabilities 168,867
- -----------------------------------------------------------------------------------
Net Assets $3,323,693
Represented by
- -----------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $2,669,966
- -----------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (6,319)
- -----------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 118,712
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investments 541,334
- -----------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,323,693
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------
Net asset value per share ($3,323,693 divided by 301,635 shares) $11.02
- -----------------------------------------------------------------------------------
Offering price per share (100/94.25 of $11.02)* $11.69
- -----------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended January 31, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends $ 16,730
- --------------------------------------------------------------------------------------------------
Interest 413
- --------------------------------------------------------------------------------------------------
Total investment income 17,143
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 10,552
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,985
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 782
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 20
- ----------------------------------------------------------------------------------------------
Reports to shareholders 2,990
- --------------------------------------------------------------------------------------------------
Registration fees 224
- --------------------------------------------------------------------------------------------------
Auditing 11,983
- --------------------------------------------------------------------------------------------------
Legal 2,313
- --------------------------------------------------------------------------------------------------
Postage 87
- --------------------------------------------------------------------------------------------------
Other 5
- --------------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (15,844)
- --------------------------------------------------------------------------------------------------
Total expenses 15,097
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (971)
- --------------------------------------------------------------------------------------------------
Net expenses 14,126
- --------------------------------------------------------------------------------------------------
Net investment income 3,017
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 191,738
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 378,642
- --------------------------------------------------------------------------------------------------
Net gain on investments 570,380
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $573,397
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
October 2, 1995
(Commencement
Six months ended of operations) to
January 31 July 31
1997* 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------
Net investment income $ 3,017 $ 7,280
- ---------------------------------------------------------------------------------------
Net realized gain on investments 191,738 247,617
- ---------------------------------------------------------------------------------------
Net unrealized appreciation of investments 378,642 162,692
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 573,397 417,589
- ---------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------
From net investment income (9,336) (8,637)
- ---------------------------------------------------------------------------------------
From net realized gain on investments (317,426) (3,217)
- ---------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 430,516 240,807
- ---------------------------------------------------------------------------------------
Total increase in net assets 677,151 646,542
- ---------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------
Beginning of period 2,646,542 2,000,000
- ---------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $6,319 and $-, respectively) $3,323,693 $2,646,542
- ---------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the period
October 2, 1995
Six months ended (Commencement
January 31 of operations)
(Unaudited) to July 31,
- --------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.15 $8.50
- --------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------
Net investment income .01(a) .03(a)
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.09 1.67
- --------------------------------------------------------------------------------------------------
Total from investment operations 2.10 1.70
- --------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------------------------------
From net investment income (.04) (.04)
- --------------------------------------------------------------------------------------------------
From net realized gain on investments (1.19) (.01)
- --------------------------------------------------------------------------------------------------
Total distributions (1.23) (.05)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $11.02 $10.15
- --------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 21.35* 20.08*
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,324 $2,647
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .50*(a) .89*(a)
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .10*(a) .30*(a)
- --------------------------------------------------------------------------------------------------
Portfolio turnover (%) 71.27* 151.15*
- --------------------------------------------------------------------------------------------------
Average commission rate paid $.0470 $.0414
- --------------------------------------------------------------------------------------------------
* Not annualized
(a) Reflects an expense limitation in effect during the period (See Note 2).
As a result of such limitation, expenses of the fund for the period
ended January 31, 1997 and July 31, 1996 reflect a reduction
of $ 0.05 and $0.11 per share respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset
arrangements (See Note 2).
</TABLE>
Notes to financial statements
January 31, 1997 (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
fund seeks capital appreciation by investing primarily in stocks of
well-established, large-capitalization companies that Putnam Investment
Management, Inc. ("Putnam Management"), the fund's manager, a
wholly-owned subsidiary of Putnam Investments, Inc. believes will
benefit from major long-term economic trends, business conditions,
and/or consumer behavior.
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 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.
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 Management. 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.
E) 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.
F) 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 at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
G) 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.
H) 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 $8,843. 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: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion, and 0.43% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through June 30, 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 1.00% 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 PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended January 31, 1997, fund expenses were reduced by
$971 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 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 an annual Trustees fee of $108 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 has 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 a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. 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 Plan provides for 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. The fund is not currently making any
payments pursuant to the Plan.
For the period ended January 31, 1997, Putnam Mutual Funds Corp., acting
as underwriter received no commissions from the sale of shares of the
fund.
Note 3
Purchase and sales of securities
During the six months ended January 31, 1997, purchases and sales of
investment securities other than short-term investments aggregated
$2,484,508 and $2,443,162, 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
For the six months ended January 31, 1997, there was an unlimited number
of shares of beneficial interest authorized. Transactions in capital
shares were as follows:
Six months ended
January 31, 1997
- ------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------
Shares sold 14,582 $162,029
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 31,316 326,432
- ------------------------------------------------------------
45,898 488,461
Shares
repurchased (5,130) (57,945)
- ------------------------------------------------------------
Net increase 40,768 $430,516
- ------------------------------------------------------------
For the period
October 2, 1995
(commencement of
operations) to
July 31, 1996
- ------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------
Shares sold 26,969 $254,618
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution -- --
- ------------------------------------------------------------
26,969 254,618
Shares
repurchased (1,396) (13,811)
- ------------------------------------------------------------
Net increase 25,573 $240,807
- ------------------------------------------------------------
At January 31, 1997, Putnam Management owned 264,462 shares
of the fund (87.68% of shares outstanding) valued at
$2,914,371.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Carol McMullen
Vice President and Fund Manager
Jeffrey R. Lindsey
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 American
Renaissance 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 principal
amount invested.
31267-2AP 4/97
