Putnam
New Value
Fund
SEMIANNUAL REPORT
February 28, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Our investment process leads us to many value stocks outside the
market's mainstream. Investing in these unusual opportunities requires
conviction; we believe they offer great long-term potential with less
risk than better-known stocks."
-- David L. King, manager
Putnam New Value Fund
* "Indeed, [Fund Manager David] King's astute identification of
stocks poised for rebounds was a key driver behind the fund's fast
start in 1995 and 1996."
-- Morningstar Mutual Funds, January 9, 1998
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
15 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
If ever there is a time to counsel patience, it is in this review of the first
half of Putnam New Value Fund's fiscal 1998. The fund began its fourth year of
operation last September, just as U.S. stocks began to feel the aftershocks of
the currency and debt crisis in Asia. As a wave of volatility swept the
world's equity markets, Fund Manager David King found plenty of fertile ground
for his ongoing search for undervalued and out-of-favor stocks.
In a fund such as this, opportunities often take time to manifest themselves.
Therefore, the results for the semiannual period by no means reflect Dave's
view of the portfolio's potential. Indeed, while past performance can never be
taken as an assurance of future results, during the fund's short lifetime, it
has experienced an annualized growth rate of well above 20% at net asset
value. You can see detailed performance data in the tables starting on page 8.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
April 15, 1998
Report from the Fund Manager
David L. King
Over the long term, stocks have outperformed every other type of security. Yet
over any given short-term period, their risks may seem to outweigh their
potential rewards. That was the case for Putnam New Value Fund over the first
six months of its 1998 fiscal year. Several of the undervalued stocks we've
focused on have yet to perform as we had expected, and the weakness of value
stocks relative to growth-oriented companies also affected the fund's returns.
Complete performance information for the six months ended February 28, 1998,
begins on page 8.
* MARKET SHAKES OFF EARNINGS WORRIES, FAVORS GROWTH OVER VALUE
As your fund began its fiscal year on September 1, 1997, stocks in the United
States had just begun to react to the debt and currency crisis in Asia. U.S.
multinational companies with sales operations in Asia worried about falling
earnings, while U.S. companies that compete against Asian imports feared that
the currency devaluations would force them to cut prices. These concerns
persisted for months, causing occasional sharp selloffs in the U.S. market. In
October, the Dow Jones Industrial Average suffered its single greatest one-day
point loss in history. However, thus far the market has rebounded from every
low point. Few U.S. companies have yet to feel the anticipated Asian effects
and the U.S. economy has continued to expand. By the end of February, major
indexes such as the Dow and the S&P 500(registered trademark) were again
reaching record levels.
The resilience of the market has created a particular challenge for contrarian
investment approaches such as your fund's. Although we have a relatively
moderate approach to contrarian investing, we do look for opportunities off
the beaten path rather than following general market trends. When investors
are too nervous to buy underfollowed or misunderstood stocks and instead focus
only on the proven winners, it often takes longer for our choices to achieve
their targeted growth levels.
* MARKET PUNISHES STRUGGLING COMPANIES, CREATING NEW OPPORTUNITIES FOR FUND
The anxiety of investors in late 1997 prompted many to scramble for safety in
high-quality bonds or dividend-paying stocks of companies whose earnings met
or beat expectations. Your fund was able to benefit from this trend to some
extent, since one portion of its portfolio is devoted to stocks with high
dividend yields (known as anchor stocks in our strategy). One strong performer
in this area was the real estate investment trust (REIT) Beacon Properties,
which was acquired by a competitor based in Chicago. Although this security,
as well as other holdings discussed in this report, was viewed favorably at
the end of the reporting period, all portfolio holdings are subject to review
and adjustment in accordance with the fund's investment strategy and may vary
in the future.
A portion of the portfolio, of course, focuses on companies whose near-term
earnings prospects are somewhat uncertain. Jittery investors have lately
refused to forgive stumbles from stocks like these, and this has, in turn,
created new opportunities for the fund. The most prominent example was
MedPartners, a physician practice management company that ran into trouble
when its plan to grow by merging with another company fell apart. The market
punished the stock quickly, in part because of growing pessimism about the
potential of health services companies. Following the stock's sharp decline,
however, several of the company's officers decided to buy the stock. That was
the sort of commitment that we like to see on the part of management, and so
we decided to add to the fund's position. Since early January, the stock has
had a small but encouraging rebound. MedPartners was a singular case, though
several other holdings also suffered lesser declines for falling short of the
market's expectations.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART OF TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and
finance 15.1%
Electronics and
electrical equipment 8.3%
Retail 8.1%
Oil and gas 7.4%
Food and
beverages 6.8%
Footnote reads:
* Based on net assets as of 2/28/98. Holdings will vary over time.
* ASIAN CRISIS DEPRESSES STOCK PRICES, ADDING FURTHER OPPORTUNITY
The financial crisis in Asia generated buying opportunities for our strategy
by knocking some high-quality companies down to our price levels. Known as
ladder stocks in our terminology, these are prominent companies that investors
have temporarily spurned. Foremost among the ladder stocks in the past six
months was Texas Instruments. This company, a major producer of computer
chips, dropped sharply in late 1997, as analysts feared that a glut of memory
chips on world markets would force Texas Instruments to cut prices and,
thereby, shrink its profit margins. The stock fell from about $70 per share to
almost $40. However, it retained strong management and a dominant market
position in digital signal processing, a rapidly growing technology sector.
The fund's position reflects our belief in the company's potential and,
indeed, the stock has begun to recover in early 1998.
Caterpillar represented a similar opportunity. While we have purchased stocks
of other heavy industrial manufacturers for the fund, this company had been
above our price range because of its global success as a maker of construction
equipment. Last summer, the plunge in Asian construction activity that
followed on the heels of the financial crisis led many investors to sell
Caterpillar, which operates manufacturing units in Southeast Asia. We took a
different view of the company. We saw Caterpillar's strong business in other
regions of the world and noticed that its Asian sales were not tied
exclusively to new construction projects. When the stock fell by about 30% in
late 1997, we decided to establish a position. The stock has risen during the
market's rally in early 1998.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Wellpoint Health Networks, Inc.
Health care
Dole Food Co.
Food and beverages
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Aetna Inc.
Insurance and finance
Texas Instruments, Inc.
Electronics and electrical equipment
US West Communications, Inc.
Utilities
Kimberly-Clark Corp.
Consumer nondurables
The Quaker Oats Co.
Food and beverages
K mart Corp.
Retail
Ogden Corp.
Conglomerate
These holdings represent 23.9% of the fund's net assets as of 2/28/98.
Portfolio holdings will vary over time.
* FUND STAYS COMMITTED TO STRATEGY IN SPITE OF HARDSHIP
As the semiannual period amply illustrates, the fund's strategy has
consistently enabled it to find attractive investment opportunities even if
these investments do not produce quick rewards. Recent results also serve as a
reminder, however, that because this fund avoids general market trends, its
performance may lag during periods of market strength. Conversely, it could
produce resilience in periods of general market weakness because the fund's
holdings tend to respond more to company-specific information than to general
market sentiment.
In the months ahead, we expect continued volatility in the U.S. stock market
as the effects of the Asian crisis reach U.S. shores. We have already noticed
that prices of oil companies have slipped to attractive levels because Asian
economies are buying less oil. We will continue to monitor the market for this
sort of new value opportunity, confident that our stock selections will enable
the fund to benefit from recoveries and renewed potential.
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 2/28/98, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
New Value Fund is designed for investors seeking long-term capital
appreciation through investments in undervalued common stocks.
TOTAL RETURN FOR PERIODS ENDED 2/28/98
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 4.88% -1.14% 4.46% -0.49% 4.56% 0.89%
- ------------------------------------------------------------------------------
1 year 14.25 7.67 13.29 8.29 13.62 9.61
- ------------------------------------------------------------------------------
Life of fund 101.28 89.68 96.46 93.46 98.07 91.14
Annual average 24.87 22.54 23.91 23.31 24.23 22.83
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/98
Standard & Standard &
Poor's 500 Poor's/Barra Consumer
Index Value Index Price Index
- ------------------------------------------------------------------------------
6 months 17.62% 14.89% 0.68%
- ------------------------------------------------------------------------------
1 year 35.01 30.97 1.44
- ------------------------------------------------------------------------------
Life of fund 144.55 130.65 8.15
Annual average 32.68 30.25 2.51
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% and 3.50%, respectively. Class B share returns for
the 1-year and life-of-fund periods reflect the applicable contingent
deferred sales charge (CDSC), which is 5% in the first year, declines to
1% in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and, in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 2/28/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.123 $0.040 $0.066
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.169 0.169 0.169
- ------------------------------------------------------------------------------
Short-term 0.567 0.567 0.567
- ------------------------------------------------------------------------------
Total $0.859 $0.776 $0.802
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
8/31/97 $14.63 $15.52 $14.49 $14.55 $15.08
- ------------------------------------------------------------------------------
2/28/98 14.45 15.33 14.33 14.38 14.90
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/98
(most recent calendar quarter)
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 2.10% -3.76% 1.72% -3.09% 1.84% -1.71%
- --------------------------------------------------------------------------
1 year 22.80 15.75 21.85 16.85 22.18 17.89
- --------------------------------------------------------------------------
Life of fund 108.94 96.90 103.86 100.86 105.51 98.32
Annual average 25.54 23.26 24.59 24.02 24.90 23.53
- --------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. 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. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
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.
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.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
* 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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Portfolio of investments owned
February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (98.1%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (2.1%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
400,000 Boeing Co. $ 21,700,000
Automotive (2.2%)
- ------------------------------------------------------------------------------------------------------------
415,000 Lear Corp. + 21,943,125
Basic Industrial Products (4.2%)
- ------------------------------------------------------------------------------------------------------------
400,000 Caterpillar, Inc. 21,850,000
825,000 New Holland N.V. (Netherlands) 20,418,750
--------------
42,268,750
Business Equipment and Services (3.9%)
- ------------------------------------------------------------------------------------------------------------
200,000 IBM Corp. 20,887,500
592,700 NCR Corp. + 18,595,963
--------------
39,483,463
Computer Services and Software (1.9%)
- ------------------------------------------------------------------------------------------------------------
550,000 3Com Corp. + 19,662,500
Conglomerates (2.3%)
- ------------------------------------------------------------------------------------------------------------
831,800 Ogden Corp. 22,874,500
Consumer Non Durables (6.1%)
- ------------------------------------------------------------------------------------------------------------
1,003,100 Dimon Inc. 17,554,250
420,000 Kimberly-Clark Corp. 23,388,750
590,000 RJR Nabisco Holdings Corp. 20,391,875
--------------
61,334,875
Electronics and Electrical Equipment (8.3%)
- ------------------------------------------------------------------------------------------------------------
250,000 Intel Corp. 22,421,875
531,600 Micron Technology, Inc. 17,642,475
410,000 Texas Instruments, Inc. 23,728,750
998,840 Vishay Intertechnology, Inc. 20,351,365
--------------
84,144,465
Food and Beverages (6.8%)
- ------------------------------------------------------------------------------------------------------------
470,775 Dole Food Co. 25,568,967
430,000 The Quaker Oats Co. 23,166,250
1,150,000 Whitman Corp. 20,484,375
--------------
69,219,592
Health Care (4.5%)
- ------------------------------------------------------------------------------------------------------------
1,610,000 MedPartners, Inc. + 19,320,000
442,000 Wellpoint Health Networks, Inc. + 25,829,375
--------------
45,149,375
Insurance and Finance (15.1%)
- ------------------------------------------------------------------------------------------------------------
288,000 Aetna Inc. 25,164,000
300,000 Ahmanson (H.F.) & Co. 18,731,250
171,200 Bankers Trust New York Corp.[UPSIDE DOWN DELTA] 20,244,400
368,700 Summit Bancorp 18,319,781
68,400 Transamerica Corp. 7,964,325
321,400 Union Planters Corp. 19,866,538
314,500 Washington Mutual, Inc. 21,110,813
64,000 Wells Fargo & Co. 20,608,000
--------------
152,009,107
Medical Supplies and Devices (0.1%)
- ------------------------------------------------------------------------------------------------------------
33,900 U. S. Surgical Corp. 1,038,188
Metals and Mining (1.9%)
- ------------------------------------------------------------------------------------------------------------
261,000 Aluminum Co. of America 19,150,875
Oil and Gas (7.4%)
- ------------------------------------------------------------------------------------------------------------
199,400 Amoco Corp. 16,949,000
327,500 Elf Aquitane ADR (France) 18,728,906
450,000 Halliburton Co. 20,925,000
587,300 YPF S.A. ADR (Argentina) 18,573,363
--------------
75,176,269
Paper and Forest Products (5.9%)
- ------------------------------------------------------------------------------------------------------------
642,200 Boise Cascade Corp. 21,393,288
1,359,000 Unisource Worldwide, Inc. 18,516,375
379,000 Weyerhaeuser Co. 18,926,313
--------------
58,835,976
Pharmaceuticals (2.5%)
- ------------------------------------------------------------------------------------------------------------
642,150 Pharmacia & Upjohn, Inc. 25,405,059
Publishing (2.1%)
- ------------------------------------------------------------------------------------------------------------
343,200 Times Mirror Co. Class A 21,128,250
Real Estate (3.9%)
- ------------------------------------------------------------------------------------------------------------
379,050 Equity Residential Properties Trust (R) 18,170,709
374,000 Starwood Lodging Trust (R) 21,154,375
--------------
39,325,084
Retail (8.1%)
- ------------------------------------------------------------------------------------------------------------
1,729,500 K mart Corp. + 23,132,063
348,544 Lowe's Cos., Inc. 20,368,040
1,278,900 Officemax, Inc. + 21,341,640
630,000 Toys R' Us 16,537,500
--------------
81,379,243
Transportation (4.6%)
- ------------------------------------------------------------------------------------------------------------
200,000 Burlington Northern Santa Fe Corp. 19,925,000
286,800 Canadian National Railway Co. (Canada) + 17,817,450
178,700 Union Pacific Corp. 9,113,700
--------------
46,856,150
Utilities (4.2%)
- ------------------------------------------------------------------------------------------------------------
750,000 Potomac Electric Power Co. 18,843,750
450,000 US West Communications, Inc. 23,428,125
--------------
42,271,875
--------------
Total Common Stocks (cost $892,494,541) $ 990,356,721
SHORT-TERM INVESTMENTS (1.7%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 1,700,000 Interest in $700,000,000 joint repurchase agreement
dated February 27, 1998 with Goldman, Sachs & Co.
due March 2, 1998 with respect to various U.S. Treasury
obligations -- maturity value of $1,700,799 for an
effective yield of 5.64% $ 1,700,533
15,716,000 Interest in $535,634,000 joint repurchase agreement
dated February 27, 1998 with UBS Securities due
March 2, 1998 with respect to various U.S. Treasury
obligations -- maturity value of $15,723,373 for an
effective yield of 5.63% 15,720,916
--------------
Total Short-Term Investments (cost $17,421,449) $ 17,421,449
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $909,915,990) *** $1,007,778,170
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,009,975,391.
*** The aggregate identified cost on a tax basis is $910,045,633, resulting in gross unrealized appreciation
and depreciation of $133,672,469 and $35,939,932, respectively, or net unrealized appreciation of
$97,732,537.
+ Non-income-producing security.
[UPSIDE DOWN DELTA] This entity provides subcustodian services to the fund.
(R) Real Estate Investment Trust.
ADR after the name of a foreign holding stands for American Depository Receipts
representing ownership of foreign securities on deposit with a domestic custodian bank.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at February 28, 1998 (Unaudited)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
French Francs $ 13,559,983 $ 13,561,008 Aug 98 $ 1,025
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $909,915,990) (Note 1) $ 1,007,778,170
- ---------------------------------------------------------------------------------------------------
Cash 369
- ---------------------------------------------------------------------------------------------------
Dividends receivable 826,304
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,465,133
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 31,566,160
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,025
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,158
- ---------------------------------------------------------------------------------------------------
Total assets 1,042,640,319
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 26,934,795
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,190,363
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,574,563
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 181,956
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,844
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,911
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 611,995
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 156,076
- ---------------------------------------------------------------------------------------------------
Total liabilities 32,664,928
- ---------------------------------------------------------------------------------------------------
Net assets $ 1,009,975,391
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 901,277,299
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 933,805
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 9,901,082
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 97,863,205
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 1,009,975,391
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($489,186,828 divided by 33,863,040 shares) $14.45
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $14.45)* $15.33
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($469,313,140 divided by 32,747,511 shares)** $14.33
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($51,475,423 divided by 3,580,143 shares) $14.38
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.38)* $14.90
- ---------------------------------------------------------------------------------------------------
* 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 28,1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends $ 8,477,675
- --------------------------------------------------------------------------------------------------
Interest 602,260
- --------------------------------------------------------------------------------------------------
Total investment income 9,079,935
Expenses:
Compensation of Manager (Note 2) 3,130,735
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 864,517
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 11,655
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,771
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 581,161
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,226,937
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 189,675
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,558
- --------------------------------------------------------------------------------------------------
Reports to shareholders 53,711
- --------------------------------------------------------------------------------------------------
Registration fees 44,423
- --------------------------------------------------------------------------------------------------
Auditing 26,154
- --------------------------------------------------------------------------------------------------
Legal 4,857
- --------------------------------------------------------------------------------------------------
Postage 67,031
- --------------------------------------------------------------------------------------------------
Other 103,313
- --------------------------------------------------------------------------------------------------
Total expenses 7,311,498
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (142,209)
- --------------------------------------------------------------------------------------------------
Net expenses 7,169,289
- --------------------------------------------------------------------------------------------------
Net investment income 1,910,646
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 24,145,238
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (1,340,153)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 883,917
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 16,316,535
- --------------------------------------------------------------------------------------------------
Net gain on investments 40,005,537
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $41,916,183
- --------------------------------------------------------------------------------------------------
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
1998* 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,910,646 $ 5,702,195
- ------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 22,805,085 39,752,647
- ------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 17,200,452 78,097,229
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 41,916,183 123,552,071
- ------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (3,916,327) (1,337,077)
- ------------------------------------------------------------------------------------------------------------------
Class B (1,238,499) (812,454)
- ------------------------------------------------------------------------------------------------------------------
Class M (230,636) (117,030)
- ------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (23,434,277) (2,101,574)
- ------------------------------------------------------------------------------------------------------------------
Class B (22,788,386) (2,006,697)
- ------------------------------------------------------------------------------------------------------------------
Class M (2,571,946) (245,230)
- ------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 139,449,253 561,917,623
- ------------------------------------------------------------------------------------------------------------------
Total increase in net assets 127,185,365 678,849,632
Net assets
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 882,790,026 203,940,394
- ------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $933,805 and $4,408,621, respectively) $1,009,975,391 $882,790,026
- ------------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $14.63 $11.57 $10.53 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .05 .19(d)(e) .18(e) .15(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments .63 3.10 1.82 1.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .68 3.29 2.00 2.03
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.09) (.26) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.74) (.14) (.70) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.86) (.23) (.96) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.45 $14.63 $11.57 $10.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%) (a) 4.88* 28.79 20.29 23.88*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $489,187 $429,246 $97,718 $2,473
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .57* 1.22(e) 1.24(e) .51*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .38* 1.40(e) 2.45(e) 1.67*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.77* 65.38 33.57 51.07*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0471 $.0322
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets 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).
(c) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) Reflects an expense limitation during the period. 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 year ended 8/31/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 Year ended Feb. 26, 1996+
operating performance (Unaudited) August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.49 $11.52 $10.86
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income -- .09(d)(e) .10(d)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments .62 3.08 .56
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .62 3.17 .66
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.74) (.14) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.78) (.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.33 $14.49 $11.52
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%) (a) 4.46* 27.79 6.08*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $469,313 $406,783 $94,370
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .95* 1.97(e) 1.04*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .01* .65(e) .88*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.77* 65.38 33.57
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0471 $.0322
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets 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).
(c) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) Reflects an expense limitation during the period. 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 year ended 8/31/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 Year ended Feb. 26,1996+
operating performance (Unaudited) August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.55 $11.54 $10.86
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .01 .12(d)(e) .11(d)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments .63 3.10 .57
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .64 3.22 .68
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.07) (.07) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.74) (.14) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.81) (.21) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.38 $14.55 $11.54
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.56* 28.19 6.26*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $51,475 $46,761 $11,852
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .82* 1.72(e) .91*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .13* .91(e) 1.05*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.77* 65.38 33.57
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0471 $.0322
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets 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).
(c) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) Reflects an expense limitation during the period. 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 year ended 8/31/97 reflect a reduction
of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
Notes to financial statements
February 28, 1998 (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.
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 gains and losses 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) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using current forward currency
exchange rates supplied by a quotation service. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The fund could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet the
terms of their contracts or if the fund is unable to enter into a closing
position.
G) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended February 28, 1998, the
fund had no borrowings against the line of credit.
H) 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, as amended. 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.
I) 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.
J) 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.
K) 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 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.
The fund reimburses Putnam Management an allocated amount 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, 1998, fund expenses were reduced by
$142,209 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.
Each Trustee of the fund receives an annual Trustee fee, of which $1,170 has
been allocated to the fund, 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 "Deferral 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
Deferral 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 currently limit payment by the fund to 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, 1998, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $308,512 and $15,772 from the sale
of class A and class M shares, respectively and $318,052 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, 1998, Putnam Mutual Funds Corp., acting as
underwriter received $7,997 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 28, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$501,202,108 and $421,250,229, 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, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
February 28, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 7,219,965 $ 106,224,770
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,885,227 26,185,799
- ------------------------------------------------------------
9,105,192 132,410,569
Shares
repurchased (4,580,037) (66,421,435)
- ------------------------------------------------------------
Net increase 4,525,155 $ 65,989,134
- ------------------------------------------------------------
Year ended
August 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 26,781,456 $ 353,636,956
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 254,484 3,214,135
- ------------------------------------------------------------
27,035,940 356,851,091
Shares
repurchased (6,145,683) (83,030,249)
- ------------------------------------------------------------
Net increase 20,890,257 $ 273,820,842
- ------------------------------------------------------------
Six months ended
February 28, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 5,969,925 $ 87,320,873
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,588,154 21,916,528
- ------------------------------------------------------------
7,558,079 109,237,401
Shares
repurchased (2,880,519) (41,154,073)
- ------------------------------------------------------------
Net increase 4,677,560 $ 68,083,328
- ------------------------------------------------------------
Year ended
August 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 22,345,379 $ 292,796,597
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 197,604 2,484,902
- ------------------------------------------------------------
22,542,983 295,281,499
Shares
repurchased (2,667,691) (35,691,818)
- ------------------------------------------------------------
Net increase 19,875,292 $ 259,589,681
- ------------------------------------------------------------
Six months ended
February 28, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 690,647 $ 10,169,641
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 196,662 2,719,832
- ------------------------------------------------------------
887,309 12,889,473
Shares
repurchased (521,929) (7,512,682)
- ------------------------------------------------------------
Net increase 365,380 $ 5,376,791
- ------------------------------------------------------------
Year ended
August 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 2,566,516 $ 33,630,185
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 28,012 352,955
- ------------------------------------------------------------
2,594,528 33,983,140
Shares
repurchased (406,917) (5,476,040)
- ------------------------------------------------------------
Net increase 2,187,611 $ 28,507,100
- ------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
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
Global Growth and Income Fund
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
Strategic Income Fund *
High Quality Bond Fund +
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Money Market 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 Exempt Money Market 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
State tax-free money market funds [SECTION MARK]
California, New York
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
*Formerly Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
**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.
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
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President
David L. King
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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 the 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
- --------------------
SA025-41227 274/2BF/2BG 4/98
