Putnam
New Value
Fund
SEMIANNUAL REPORT
February 28, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam New Value Fund's strategy has held up remarkably well relative to
other value-oriented funds. The fund's class A shares finished in the top
quartile of growth and income funds tracked by Lipper Analytical Services
for the one- and two-year periods ended March 31, 1997.*
* "Although this fund is not a risk monger, it puts a nice twist on an old
investment style."
-- Morningstar, December 20, 1996
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
15 Financial statements
*Lipper rankings are based on total return performance, vary over time, and do
not include the effects of sales charges. The fund's class A shares
(inception 1/3/95) ranked 98 out of 540 funds for the one-year period and 26
out of 449 funds for two years. The fund's class B shares (inception 2/26/96)
ranked 142 out of 540 for one year. The fund's class M shares (2/26/96)
ranked 125 out of 540 funds. Past performance is not indicative of future
results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Investors who appreciate the attributes of value-style investing will find few
vehicles that adhere more strongly to the principles of this strategy than
Putnam New Value Fund. From the very start in January 1995, Fund Manager David
King has assiduously sought out stocks he believes are undervalued by the
market and then has selected those that, in his view, offered the best
combination for the fund's portfolio.
During the first half of fiscal 1997, some of the fund's earlier acquisitions
appreciated to the point where Dave considered they had fulfilled their
potential. He was able to sell the positions at an attractive profit and
reinvest the proceeds in a new generation of undervalued stocks, several of
which are described in the following report.
The fund's strategy may not always place it among the top performers in any
particular period. Over time, however, it should provide steady appreciation
of capital. In his report, Dave also discusses in detail how he has applied
the strategy thus far in fiscal 1997 and his expectations for the rest of the
year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 16, 1997
Report from the Fund Manager
David L. King
Swimming against the tide is always difficult -- especially when that tide is
a tsunami. Such was the situation for Putnam New Value Fund during the six
months ended February 28, 1997. The fund's focus on undervalued stocks often
ignored by Wall Street ran counter to a surging stock market led by a narrow
band of large-capitalization growth stocks. In such an environment, the fund's
class A shares delivered a total return of 18.23% at net asset value and
11.39% at public offering price during the period.
Although the fund's recent performance has lagged modestly relative to the
market, it has certainly outperformed its peers in its Lipper category, as
noted on page 2. For more performance information, please see the performance
section that follows this report on page 8.
* GROWTH STOCKS OUTSHINE VALUE STOCKS
As Wall Street's six-year bull market rolled on throughout the period, it was
increasingly led by large, highly liquid companies believed to have reliable
earnings growth. As we have stated in earlier reports, your fund will not
participate to any great extent in this type of market because, by virtue of
its objective, the fund typically will not own stocks in these kinds of
companies. Market-leading companies are generally too well known and their
valuation levels too high to make them candidates for your fund's portfolio.
Interestingly, near the end of the period, when Federal Reserve Board Chairman
Alan Greenspan made a second attempt to warn the public of what he considered
the perils of overvalued stocks, these market leaders -- which rose to favor,
in part, because of their perceived relative stability -- took heavy losses.
Meanwhile, many of the stocks owned by the fund held steady or rebounded.
Although we obviously cannot predict what the future holds, we were encouraged
by this brief development and believe that our emphasis on undervalued stocks
may help keep the portfolio's value more resilient in the event of a market
correction.
* LADDER STOCKS CLIMB IN VALUE
Of the three types of stocks that we include in your fund's portfolio, ladder
stocks -- out-of-favor stocks offering the greatest potential rewards along
with correspondingly greater risk -- made the strongest contribution to
performance over the period. Our position in the large pharmaceutical company,
Warner-Lambert, discussed in the annual report, appreciated substantially in
price and we were able to sell it at a handsome profit.
When we bought the stock, we thought either that it would be an attractive
takeover candidate or two of its new products would rejuvenate the company's
earnings. As it turned out, Food and Drug Administration approval for the new
products came more quickly than we expected and initial demand for the drugs
has been strong.
Looking to the future, we invested in some stocks that represented companies
spun off from larger parents. More importantly, these companies were
attractive businesses unrecognized by much of the Street. One such spinoff
that we believe holds excellent potential is NCR Corp., formally a unit of
AT&T. The company's lineage dates back to the trustbusting days of Theodore
Roosevelt's presidency when it was known as the National Cash Register
Company. More recently, it has become the leading producer of retail
point-of-sale inventory and pricing computers, in addition to other
businesses. While this stock, along with others discussed in this report, was
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.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Insurance and Finance 15.3%
Retail 9.2%
Oil and Gas 7.6%
Utilities 6.6%
Real Estate 6.5%
Footnote reads:
*Based on net assets as of 2/28/97. Holdings will vary over time.
Another spinoff holding is Unisource World Wide, Inc., which was once part of
a major paper and office product supply conglomerate. Unisource has long been
the largest paper distributor in North America. With the sagging paper prices
we've seen for some time and the lack of a following in the market, we believe
this company is greatly undervalued.
* ANCHOR AND RAMP STOCKS LIVE UP TO THEIR NAMES
Fund holdings in the other two parts of the portfolio, anchor and ramp stocks,
met or exceeded their potential over the period. Anchor stocks are those
chosen for their high sustainable current dividends which provide the fund
with a solid cushion of income, while ramp stocks are stocks of established
companies whose prices declined in response to what we see as short-term
reasons.
In anchor stocks, real estate investment trusts (REITs) were a major
contributor to the fund's return. REITs in general have performed well on the
back of a stable interest-rate environment and a strong real estate market in
many parts of the United States. Specifically, DeBartolo Realty (sold prior to
the end of the period) executed a favorable merger with Simon Property Group.
Additionally, Equity Residential Properties Trust enjoyed fairly strong price
appreciation. Both holdings contributed attractive income to the fund.
One ramp holding is a particular standout. Texas Instruments (also sold prior
to the end of the period) epitomized the 1990s wave of corporate restructuring
when the company announced sale of its defense unit. In addition, a rebound in
semiconductor prices following a worldwide supply glut also helped boost the
price of this electronics giant's stock.
* A POSITIVE VIEW GOING FORWARD
As the stock market continues its upward surge, investors should keep in mind
that for some time a very narrow band of stocks has been leading the climb.
Given the high level of expectations associated with these market-leading
stocks, it is possible they will fall the hardest in a market correction.
However, while there can be no guarantees, many of the stocks held by your
fund by their very nature would experience more limited adverse effects from a
correction. In that case, we believe the fund would be well positioned to take
advantage of a change in market sentiment.
TOP 10 HOLDINGS
K mart Corp.
Retailer
Freeport-McMoRan Copper & Gold Co., Inc.
Explorer minerals
Lowe's Cos., Inc.
Retail distributor of building and construction products
Hewlett-Packard Co.
Manufacturer of mini computers
Dayton Hudson Corp.
General merchandise retailer
Fleet Financial Group, Inc.
Banking
Ogden Corp.
Commercial services, Conglomerates
Minnesota Mining & Manufacturing Co.
Basic industrial products
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Occidental Petroleum Corp.
Oil and natural gas products
Footnote reads:
These holdings represent 22.7% of the fund's assets as of 2/28/97.
Portfolio holdings will vary over time.
Whether the market continues to rise or whether it falters, your fund's
commitment to seeking out undervalued businesses should provide you with a
continuing opportunity for long-term capital appreciation.
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.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam New Value Fund is designed for investors seeking long-term
capital appreciation through investments in undervalued common stocks.
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) (1/3/95) (2/26/96) (2/26/96)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 18.23% 11.39% 17.82% 12.82% 17.97% 13.83%
- ------------------------------------------------------------------------------
1 year 27.48 20.20 24.98 19.98 25.36 21.02
- ------------------------------------------------------------------------------
Life of class 76.18 66.02 24.98 20.98 25.36 21.02
Annual average 29.98 26.45 24.71 20.76 25.08 20.79
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/97
Standard
Standard & Poor's/
& Poor's Barra
500 Index Value Index
- ------------------------------------------------------------------------------
6 months 22.52% 20.29%
- ------------------------------------------------------------------------------
1 year 26.15 23.65
- ------------------------------------------------------------------------------
Life of class A 81.06 76.10
Annual average 31.58 29.91
- ------------------------------------------------------------------------------
Life of class B and M 26.15 23.65
Annual average 26.15 23.65
- ------------------------------------------------------------------------------
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 $0.091 $0.058 $0.068
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.006 0.006 0.006
- ------------------------------------------------------------------------------
Short-term 0.137 0.137 0.137
- ------------------------------------------------------------------------------
Total $0.234 $0.201 $0.211
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
8/31/96 $11.57 $12.28 $11.52 $11.54 $11.96
- ------------------------------------------------------------------------------
2/28/97 13.43 14.25 13.36 13.39 13.88
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
Class A Class B Class M
(2/26/96) (2/26/96)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 8.90% 2.64% 8.50% 3.50% 8.56% 4.76%
- ------------------------------------------------------------------------------
1 year 18.90 12.05 18.09 13.09 18.35 14.23
- ------------------------------------------------------------------------------
Life of class 70.14 60.34 20.59 16.59 20.96 16.77
Annual average 26.78 23.46 18.55 14.97 18.89 15.13
- ------------------------------------------------------------------------------
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
Standard & Poor's 500 Index* is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
Standard & Poor's/Barra Value Index* is a capitalization-weighted index of all
the stocks in the S&P 500 that have low price-to-book ratios.
*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.
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New features will be added to the site on an ongoing basis. So, visit us
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Portfolio of investments owned
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (94.3%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (2.1%)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
163,700 Northrop Grumman Corp. $ 11,888,713
Automotive (4.2%)
- ---------------------------------------------------------------------------------------------------------
203,000 General Motors Corp. 11,748,625
220,800 Magna International, Inc. Class A (Canada) 11,592,000
--------------
23,340,625
Basic Industrial Products (4.4%)
- ---------------------------------------------------------------------------------------------------------
135,600 Minnesota Mining & Manufacturing Co. 12,475,200
525,000 New Holland N.V. (Netherland) + 12,140,625
--------------
24,615,825
Business Equipment and Services (6.4%)
- ---------------------------------------------------------------------------------------------------------
227,300 Hewlett-Packard Co. 12,728,800
83,150 IBM Corp. 11,952,813
331,600 NCR Corp. + 10,942,800
--------------
35,624,413
Chemicals (2.2%)
- ---------------------------------------------------------------------------------------------------------
260,000 Hercules, Inc. 12,090,000
Conglomerates (4.3%)
- ---------------------------------------------------------------------------------------------------------
197,600 General Motors Corp. Class H 11,658,400
613,400 Ogden Corp. 12,498,025
--------------
24,156,425
Consumer Durable Goods (2.1%)
- ---------------------------------------------------------------------------------------------------------
237,600 Whirlpool Corp. 11,998,800
Consumer Non Durables (4.1%)
- ---------------------------------------------------------------------------------------------------------
481,800 Dimon Inc. 11,322,300
325,000 RJR Nabisco Holdings Corp. 11,903,125
--------------
23,225,425
Food and Beverages (6.5%)
- ---------------------------------------------------------------------------------------------------------
652,425 Archer Daniels Midland Co. 12,069,863
315,775 Dole Food Co. 12,078,394
521,400 Whitman Corp. 12,252,900
--------------
36,401,157
Insurance and Finance (15.3%)
- ---------------------------------------------------------------------------------------------------------
293,100 Ahmanson (H.F.) & Co. 12,053,738
133,300 Bankers Trust New York Corp.[UPSIDE DOWN DELTA] 12,096,975
176,200 Beneficial Corp. 12,179,825
206,600 Fleet Financial Group, Inc. 12,602,600
28,050 Franklin Resources, Inc. 1,640,925
215,700 Salomon, Inc. 11,998,313
235,000 Summit Bancorp 11,221,250
526,300 USF&G Corp. 11,841,750
--------------
85,635,376
Metals and Mining (2.4%)
- ---------------------------------------------------------------------------------------------------------
388,144 Freeport-McMoRan Copper & Gold Co., Inc. Class B 13,196,896
Oil and Gas (7.6%)
- ---------------------------------------------------------------------------------------------------------
145,000 Amoco Corp. 12,252,500
250,000 Elf Aquitane ADR S.A. (France) 12,000,000
484,700 Occidental Petroleum Corp. 12,359,850
225,000 YPF S.A. ADR (Argentina) 6,018,750
--------------
42,631,100
Paper and Forest Products (2.0%)
- ---------------------------------------------------------------------------------------------------------
529,700 Unisource Worldwide, Inc. 11,388,550
Pharmaceuticals (2.2%)
- ---------------------------------------------------------------------------------------------------------
337,050 Pharmacia & Upjohn, Inc. 12,428,719
Photography (2.1%)
- ---------------------------------------------------------------------------------------------------------
278,800 Polaroid Corp. 11,779,300
Publishing (2.0%)
- ---------------------------------------------------------------------------------------------------------
220,800 Times Mirror Co. Class A 11,371,200
Real Estate (6.5%)
- ---------------------------------------------------------------------------------------------------------
320,000 Beacon Properties Corp. (R) 11,400,000
51,166 Castle & Cooke, Inc. + 818,656
264,800 Equity Residential Properties Trust (R) 11,982,200
318,900 Meditrust Corp. (R) 12,277,650
--------------
36,478,506
Retail (9.2%)
- ---------------------------------------------------------------------------------------------------------
301,950 Dayton Hudson Corp. 12,681,900
1,072,300 K mart Corp. + 13,403,750
360,744 Lowe's Cos., Inc. 13,167,156
1,018,600 Officemax, Inc. + 12,223,200
--------------
51,476,006
Transportation (2.1%)
- ---------------------------------------------------------------------------------------------------------
152,000 Delta Air Lines, Inc. 12,236,000
Utilities (6.6%)
- ---------------------------------------------------------------------------------------------------------
527,000 Long Island Lighting Co. 12,121,000
153,400 Northeast Utilities Co. 1,591,522
256,600 Sprint Corp. 11,675,300
328,400 US West, Inc. 11,822,400
--------------
37,210,222
--------------
Total Common Stocks (cost $486,287,959) $ 529,173,258
SHORT-TERM INVESTMENTS (5.1) * (cost $28,383,225)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$28,379,000 Interest in $594,385,000 joint repurchase agreement
dated February 28,1997 with Morgan (J.P.) & Co., Inc.
due March 3, 1997 with with respect to various
U.S. Treasury obligations -- maturity value of
$28,391,676 for an effective yield of 5.36% $ 28,383,225
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $514,671,184) *** $ 557,556,483
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $560,885,779.
+ Non-income-producing security.
[UPSIDE DOWN DELTA] Bankers Trust New York Corp. provides
sub-custodian services to the fund
(R) Real Estate Investment Trust.
*** The aggregate identified cost on a tax basis is $514,800,828,
resulting in gross unrealized appreciation and depreciation of
$49,191,660 and $6,436,005, respectively, or net unrealized
appreciation of $42,755,655.
ADR after the name of a foreign holding stands for American Depository
receipts, representing ownership to foreign security on deposit with a
domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $514,671,184) (Note 1) $557,556,483
- ---------------------------------------------------------------------------------------------------
Cash 1,404,846
- ---------------------------------------------------------------------------------------------------
Dividends receivable 1,279,511
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 9,526,238
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 6,500,128
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 5,619
- ---------------------------------------------------------------------------------------------------
Total assets 576,272,825
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 12,962,905
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 649,124
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,240,564
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 81,547
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,843
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,312
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 309,724
- ---------------------------------------------------------------------------------------------------
Payable for organization expense (Note 1) 6,425
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 133,582
- ---------------------------------------------------------------------------------------------------
Total liabilities 15,387,026
- ---------------------------------------------------------------------------------------------------
Net assets $560,885,799
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $505,811,286
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,355,450
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 10,833,764
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 42,885,299
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $560,885,799
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($275,629,309 divided by 20,518,034 shares) $13.43
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.43)* $14.25
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($254,932,122 divided by 19,086,421 shares)** $13.36
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($30,324,368 divided by 2,264,760 shares) $13.39
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.39)* $13.88
- ---------------------------------------------------------------------------------------------------
* 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.
** Redemption price per share is equal to net
asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 28, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $7,539) $ 4,951,698
- --------------------------------------------------------------------------------------------------
Interest 389,447
- --------------------------------------------------------------------------------------------------
Total investment income 5,341,145
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,258,836
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 385,862
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,402
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,925
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 218,336
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 816,930
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 76,013
- --------------------------------------------------------------------------------------------------
Reports to shareholders 22,469
- --------------------------------------------------------------------------------------------------
Registration fees 85,411
- --------------------------------------------------------------------------------------------------
Auditing 4,958
- --------------------------------------------------------------------------------------------------
Legal 4,791
- --------------------------------------------------------------------------------------------------
Postage 28,863
- --------------------------------------------------------------------------------------------------
Other 19,594
- --------------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (18,272)
- --------------------------------------------------------------------------------------------------
Total expenses 2,913,118
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (157,645)
- --------------------------------------------------------------------------------------------------
Net expenses 2,755,473
- --------------------------------------------------------------------------------------------------
Net investment income 2,585,672
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 14,695,406
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 1,094
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (777)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 40,320,552
- --------------------------------------------------------------------------------------------------
Net gain on investments 55,016,275
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $57,601,947
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
February 28 August 31
1997* 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,585,672 $ 1,055,624
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 14,696,500 566,617
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 40,319,775 2,257,919
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 57,601,947 3,880,160
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (1,337,077) (66,271)
- ----------------------------------------------------------------------------------------------------------------------
Class B (812,453) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (117,030) --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (2,101,574) (178,420)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,006,697) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (245,230) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 305,963,519 197,832,270
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 356,945,405 201,467,739
- ----------------------------------------------------------------------------------------------------------------------
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period $ 203,940,394 $ 2,472,655
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,355,450 and $1,036,338, respectively) $560,885,799 $203,940,394
- ----------------------------------------------------------------------------------------------------------------------
* 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 Year ended January 3,1995+
operating performance (Unaudited) August 31 to August 31
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.57 $10.53 $8.50
- --------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------
Net investment income (a) .06 .18 .15
- --------------------------------------------------------------------------------------------------------------
Net realized gain
on investments 2.03 1.82 1.88
- --------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.09 2.00 2.03
- --------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.26) --
- --------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.14) (.70) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.96) --
- --------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.43 $11.57 $10.53
- --------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 18.23* 20.29 23.88*
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $275,629 $97,718 $2,473
- --------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .62* 1.24 .51*
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .89* 2.45 1.67*
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.44* 33.57 51.07*
- --------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0449 $.0322 --
- --------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses
of the fund reflect a reduction of approximately $0.14 per share for the period ended August 31,1995.
Expenses for the period ended August 31,1996, reflect a reduction of $0.01 per class A shares and
$0.02 per class B and M shares respectively. Expenses for the period ended 2/28/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts (Note 2).
(e) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- --------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 February 26,1996+
operating performance (Unaudited) to August 31
- --------------------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.52 $10.86
- --------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------
Net investment income (a) .03 .10(c)
- --------------------------------------------------------------------------------------------------------------
Net realized gain
on investments 2.01 .56
- --------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.04 .66
- --------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------
From net
investment income (.06) --
- --------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.14) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.20) --
- --------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.36 $11.52
- --------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 17.82* 6.08*
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $254,932 $94,370
- --------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) 1.00* 1.04*
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .52* .88*
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.44* 33.57
- --------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0449 $.0322
- --------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses
of the fund reflect a reduction of approximately $0.14 per share for the period ended August 31,1995.
Expenses for the period ended August 31,1996, reflect a reduction of $0.01 per class A shares and
$0.02 per class B and M shares respectively. Expenses for the period ended 2/28/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts (Note 2).
(e) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 February 26,1996+
operating performance (Unaudited) to August 31
- --------------------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.54 $10.86
- --------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------
Net investment income (a) .05 .11(C)
- --------------------------------------------------------------------------------------------------------------
Net realized gain
on investments 2.01 .57
- --------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.06 .68
- --------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------
From net
investment income (.07) --
- --------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.14) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.21) --
- --------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.39 $11.54
- --------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 17.97* 6.26*
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $30,324 $11,852
- --------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .87* .91*
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .65* 1.05*
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.44* 33.57
- --------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0449 $.0322
- --------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses
of the fund reflect a reduction of approximately $0.14 per share for the period ended August 31,1995.
Expenses for the period ended August 31,1996, reflect a reduction of $0.01 per class A shares and
$0.02 per class B and M shares respectively. Expenses for the period ended 2/28/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts (Note 2).
(e) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
Notes to financial statements
February 28, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam New Value Fund (the "fund") is one in 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 primarily in common stocks which are undervalued at the time of
purchase.
The fund offers class A, class B and class M shares. 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 the case of some
securities traded over-the-counter -- the last bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates 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 $6,425. These expenses are being amortized based on projected
net asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
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, 0.43% of any excess
thereafter.
Putnam Management agreed to limit its compensation (and, to the extent
necessary, bear other expenses) 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. This agreement expired October 31, 1996.
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
$157,645 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 an annual Trustees fee of $850 and an additional
fee for each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees payable on
or after July 1, 1995. The deferred fees remain in the fund and are invested
in 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.
For the six months ended February 28, 1997, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $557,809 and $32,564 from the sale
of class A and class M shares, respectively and $127,730 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 $2,320 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended February 28, 1997, purchases and sales of
investment securities other than short-term investments aggregated
$401,799,999 and $120,984,878, 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 13,696,174 $173,549,964
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 98,584 1,245,122
- ------------------------------------------------------------
13,794,758 174,795,086
Shares
repurchased (1,724,352) (21,931,482)
- ------------------------------------------------------------
Net increase 12,070,406 $152,863,604
- ------------------------------------------------------------
Year ended
August 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 8,571,175 $97,356,430
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 24,155 244,691
- ------------------------------------------------------------
8,595,330 97,601,121
Shares
repurchased (382,562) (4,366,497)
- ------------------------------------------------------------
Net increase 8,212,768 $93,234,624
- ------------------------------------------------------------
Six months
ended
February 28, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 11,732,696 $148,149,037
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 56,847 714,847
- ------------------------------------------------------------
11,789,543 148,863,884
Shares
repurchased (897,781) (11,343,269)
- ------------------------------------------------------------
Net increase 10,891,762 $137,520,615
- ------------------------------------------------------------
For the period
February 26, 1996
(commencement of
operations) to
August 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 8,521,256 $96,626,977
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
8,521,256 96,626,977
Shares
repurchased (326,597) (3,707,666)
- ------------------------------------------------------------
Net increase 8,194,659 $92,919,311
- ------------------------------------------------------------
Six months
ended
February 28, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,331,635 $16,753,077
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,993 113,311
- ------------------------------------------------------------
1,340,628 16,866,388
Shares
repurchased (103,020) (1,287,088)
- ------------------------------------------------------------
Net increase 1,237,608 $15,579,300
- ------------------------------------------------------------
For the period
February 26, 1996
(commencement of
operations) to
August 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,094,106 $12,434,719
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
1,094,106 12,434,719
Shares
repurchased (66,954) (756,384)
- ------------------------------------------------------------
Net increase 1,027,152 $11,678,335
- ------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS **
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured up to certain
limits by federal/state agencies. Savings accounts may also be insured
up to certain limits. Please call your financial advisor or Putnam at
1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and expenses. Please read
it carefully before you invest or send money.
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
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
David L. King
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 New Value 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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
32136-274/2BF/2BG 4/97
