Putnam
Capital
Opportunities
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the appointment of Gerald I. Moore to your
fund's management team. Gerald joined Putnam in 1997 from The Boston
Company Asset Management. Most recently at Putnam, he was a senior
equity analyst in the Specialty Growth Equity Group. He has seven years
of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 20, 2000
REPORT FROM FUND MANAGEMENT
Joseph P. Joseph
Sandeep Mehta
Gerald I. Moore
Sticking with our discipline proved rewarding for the six months ended
October 31, 2000, as Putnam Capital Opportunities Fund delivered solid
returns. For the financial markets overall, the period was a turbulent
one. Although the stock market recovered after its sharp declines in
April, by the close of the semiannual period stocks in many industries
had once again turned downward. The stocks hurt most by the volatile
conditions were those in the fastest-growing industries, such as
technology and telecommunications. On the other hand, slower-growth
industries such as energy, utilities, industrials, and financials began
to achieve gains.
Total return for 6 months ended 10/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
31.24% 23.72% 30.71% 25.71% 30.73% 29.73% 30.79% 26.19%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 5.
* STOCK SELECTION ESSENTIAL IN TURBULENT TIMES
Our focus on individual stocks rather than overall industry trends was a
tremendous advantage in this market environment. All companies,
regardless of their size, products, services, or industry, have an
underlying long-term business worth. While a company's stock price may
fluctuate, this underlying worth is crucial in evaluating long-term
growth potential. Once we have determined a company's intrinsic worth,
we establish price targets for buying and selling the stock; these
valuations are constantly monitored and adjusted by our investment team.
We stay focused on individual stocks and stick with our decisions to
buy, sell, or hold them, even when there is strong market sentiment to
the contrary.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Electronics 13.7%
Banking 10.7%
Manufacturing 7.0%
Aerospace/defense 6.3%
Medical technology 5.7%
Footnote reads:
*Based on net assets as of 10/31/00. Holdings will vary over time.
This discipline was put to the test during the semiannual period,
beginning in the first few weeks when technology stock prices fell
sharply from their highs. Using our valuation method, we concluded that
many technology stocks were worth more than their current prices
indicated. The short-term market downturn had brought their prices down
considerably, but we believed they had plenty of room to grow. When most
investors were fleeing from technology stocks, we added more to the
portfolio. As a result, the fund benefited considerably when these
stocks experienced strong gains throughout the summer months.
"Our focus on individual stocks rather than overall industry trends has
been a tremendous advantage in the recent volatile market environment."
-- Joe Joseph, portfolio manager
At no point, however, did we lose sight of our discipline; we continued
to monitor each company's valuation and in September we determined that
the prices of many of the technology holdings had reached our sell
targets. We removed a number of them from the portfolio, just before the
technology market collapsed again. While we do not believe in trying to
time the market's moves, we have found that our company-by-company
approach keeps us from getting distracted by short-term fluctuations.
* CYCLICAL INDUSTRIES OUTPERFORMED OTHER SECTORS
The same practice held true for the fund's investments in slower-growth
cyclical stocks, those of companies in mature, established industries
such as paper and packaging. As with technology stocks, we scrutinized
their underlying long-term worth and decided that it was not reflected
in their low stock prices. Among the cyclical holdings that performed
well were Packaging Corporation of America, a producer of container
board and corrugated packaging products, and SCP Pool Corporation, a
distributor of swimming pool supplies. While these holdings, and others
discussed in this report, were viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* ELECTRONICS, CONTRACT MANUFACTURERS DELIVERED STRENGTH
In the electronics industry, we added a number of companies to the
portfolio that have since performed quite well, including DDi Corp., a
maker of electronic instruments and controls. The company capitalized on
the high demand for its circuit boards, which are used for
communications and networking and equipment. DDi's growth also has been
boosted by aggressive new product development in the industries it
targets. Another strong-performing stock in the electronics industry was
APW Ltd. Formed in July as a spinoff of Applied Power Inc., the company
specializes in electronic enclosure systems for computers and
telecommunications equipment. Enclosures are the cases, power supplies,
and cables that hold and protect the electronics in devices such as PCs.
Keithley Instruments, which develops measurement systems for electronics
companies, was another successful stock selection in the electronics
sector.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Precision Castparts Corp.
Aerospace/defense
PerkinElmer, Inc.
Electronics
APW Limited
Electronics
SBS Technologies, Inc.
Technology services
DDi Corp.
Electronics
Shaw Group, Inc.
Manufacturing
Sybron International Corp.
Medical technology
Bank United Corp.
Banking
Thermo Electron Corp.
Manufacturing
Avocent Corp.
Electrical equipment
Footnote reads:
These holdings represent 27.0% of the fund's net assets as of 10/31/00.
Portfolio holdings will vary over time.
During the period, the fund also profited from its investment in
contract manufacturers Merix Corp. and ACT Manufacturing, Inc. Contract
manufacturers are hired by other companies to handle specific
business-support functions. For example, large computer and wireless
equipment makers may hire a contract manufacturer to produce a specific
type of electronic component needed for their equipment. Known as
outsourcing, this practice has been recognized as an effective method
for large companies to cut costs and streamline operations. Contract
manufacturers have benefited particularly from the strong growth in the
technology sector in the past few years.
* FOCUS ON STOCK SELECTION CONTINUES
After the close of the semiannual period, volatility in the markets
intensified, particularly in the technology sector. Despite these
difficult conditions, we continue to scrutinize the portfolio on a
company-by-company basis, seeking the long-term growth potential that
often is overlooked when markets are turbulent. While no one can predict
the markets' behavior for the next six months, we enter the second half
of fiscal 2001 committed to our disciplined approach and our focus on
individual stocks of small and midsize companies.
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 10/31/00, there is no guarantee the fund
will continue to hold these securities in the future. The fund invests
all or a portion of its assets in small and midsize companies. Such
investments increase the risk of greater price fluctuations.
A NOTE ABOUT DUPLICATE MAILINGS
In response to investors' requests, the SEC has modified mailing regulations
for semiannual and annual reports and prospectuses. Putnam is now able to
send a single copy of these materials to customers who share the same
address. This change will automatically apply to all shareholders except
those who notify us. If you would prefer to receive your own copy, please
call Putnam at 1-800-225-1581.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Capital Opportunities Fund is designed for investors seeking long-term
growth of capital by investing primarily in stocks of U.S. companies
that Putnam believes offer above-average growth potential.
TOTAL RETURN FOR PERIODS ENDED 10/31/00
Class A Class B Class C Class M
(inception dates) (6/1/98) (6/29/98) (7/26/99) (6/29/98)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
6 months 31.24% 23.72% 30.71% 25.71% 30.73% 29.73% 30.79% 26.19%
------------------------------------------------------------------------------
1 year 48.49 39.89 47.57 42.57 47.64 46.64 47.94 42.74
------------------------------------------------------------------------------
Life of fund 46.70 38.33 44.27 41.27 44.31 44.31 45.06 39.91
Annual average 17.16 14.35 16.35 15.35 16.37 16.37 16.62 14.89
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/00
Russell 2000 Consumer
Index price index
------------------------------------------------------------------------------
6 months -1.11% 1.52%
------------------------------------------------------------------------------
1 year 17.41 3.45
------------------------------------------------------------------------------
Life of fund 12.32 6.82
Annual average 4.92 2.76
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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-, 5- and 10-year,
if available, 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. For class C
shares, returns for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the
first year and is eliminated thereafter, and the higher operating
expenses applicable to class C shares. All returns assume reinvestment
of distributions at NAV. 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. The fund's performance reflects an
expense limitation currently or previously in effect, without which
total return would have been lower.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 10/31/00
Class A Class B Class C Class M
------------------------------------------------------------------------------
Distributions (number)* -- -- -- --
------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
------------------------------------------------------------------------------
4/30/00 $9.38 $9.95 $9.28 $9.34 $9.32 $9.66
------------------------------------------------------------------------------
10/31/00 12.31 13.06 12.13 12.21 12.19 12.63
------------------------------------------------------------------------------
*The fund did not make any distributions during the period.
TOTAL RETURN FOR PERIODS ENDED 9/30/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (6/1/98) (6/29/98) (7/26/99) (6/29/98)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
6 months 17.95% 11.19% 17.58% 12.58% 17.56% 16.56% 17.61% 13.48%
------------------------------------------------------------------------------
1 year 57.42 48.39 56.12 51.12 56.35 55.35 56.36 50.80
------------------------------------------------------------------------------
Life of fund 48.02 39.56 45.58 42.58 45.61 45.61 46.25 41.06
Annual average 18.33 15.38 17.49 16.45 17.50 17.50 17.72 15.91
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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. 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 C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
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 5.75% maximum 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 or C shares and assumes redemption at the
end of the period. Your fund's class B 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. The CDSC for class C shares is 1% for one
year after purchase.
COMPARATIVE BENCHMARKS
Russell 2000 Index is an unmanaged list of common stocks that is
frequently used as a performance measure for small and midsize company
stocks. The index assumes reinvestment of all distributions and interest
payments and does not take into account brokerage fees or taxes.
Securities in the fund do not match those in the index and performance
of the fund will differ. It is not possible to invest directly in an
index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
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New features will be added to the site regularly. So be sure to bookmark us at
http://www.putnaminvestments.com
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000 (Unaudited)
COMMON STOCKS (93.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising and Marketing Services (2.2%)
-------------------------------------------------------------------------------------------------------------------
67,500 True North Communications, Inc. $ 2,543,906
169,300 Valassis Communications, Inc. (NON) 4,698,075
-------------
7,241,981
Aerospace/Defense (6.3%)
-------------------------------------------------------------------------------------------------------------------
60,300 Aeroflex, Inc. (NON) 3,587,850
453,400 Hexcel Corp. (NON) 4,959,063
322,800 Precision Castparts Corp. (SEG) 12,185,700
-------------
20,732,613
Airlines (0.5%)
-------------------------------------------------------------------------------------------------------------------
33,600 SkyWest, Inc. 1,696,800
Banking (10.7%)
-------------------------------------------------------------------------------------------------------------------
130,100 Bank United Corp. Class A 7,375,044
55,900 City National Corp. 1,921,563
56,100 Commerce Bancorp, Inc. 3,397,556
85,200 Greater Bay Bancorp 2,774,325
38,700 Investors Financial Services Corp. 2,774,306
134,300 M & T Bank Corp. 6,741,860
155,600 TCF Financial Corp. 6,292,075
184,700 UnionBanCal Corp. 3,878,700
-------------
35,155,429
Biotechnology (0.8%)
-------------------------------------------------------------------------------------------------------------------
104,200 Guilford Pharmaceuticals, Inc. (NON) 2,572,438
Business Services (1.0%)
-------------------------------------------------------------------------------------------------------------------
97,300 Korn/Ferry Intl. (NON) 3,405,500
Commercial and Consumer Services (2.6%)
-------------------------------------------------------------------------------------------------------------------
157,500 Moody's Corp. 4,144,219
158,400 TeleTech Holdings, Inc. (NON) 4,395,600
-------------
8,539,819
Communications Equipment (2.3%)
-------------------------------------------------------------------------------------------------------------------
124,700 Harmonic Lightwaves, Inc. (NON) 1,808,150
142,600 MCK Communications, Inc. (NON) 2,228,125
48,800 Proxim, Inc. (NON) 2,958,500
65,800 SpectraLink Corp. (NON) 489,388
-------------
7,484,163
Computers (2.3%)
-------------------------------------------------------------------------------------------------------------------
138,800 Cabletron Systems, Inc. (NON) 3,764,950
265,600 Quantum Corp. (NON) 3,984,000
-------------
7,748,950
Conglomerates (0.9%)
-------------------------------------------------------------------------------------------------------------------
108,600 Crane Co. 2,843,963
Consumer Services (1.6%)
-------------------------------------------------------------------------------------------------------------------
219,100 Multex.com, Inc. (NON) 2,834,606
142,500 Watson Wyatt & Co. Holdings (NON) 2,467,031
-------------
5,301,637
Electrical Equipment (2.9%)
-------------------------------------------------------------------------------------------------------------------
98,900 Avocent Corp. (NON) 7,015,719
151,700 Sensormatic Electronics Corp. (NON) 2,730,600
-------------
9,746,319
Electronics (13.7%)
-------------------------------------------------------------------------------------------------------------------
145,000 ACT Manufacturing, Inc. (NON) 4,766,875
82,400 Amphenol Corp. (NON) 5,294,200
210,500 APW Limited (NON) 9,722,459
218,900 DDi Corp. (NON) 8,742,319
101,600 Keithley Instruments, Inc. 5,435,600
94,600 PerkinElmer, Inc. 11,304,700
-------------
45,266,153
Energy (0.9%)
-------------------------------------------------------------------------------------------------------------------
102,500 Precision Drilling Corp. (Canada) (NON) 2,934,063
Engineering & Construction (1.5%)
-------------------------------------------------------------------------------------------------------------------
134,000 Insituform Technologies, Inc. (NON) 4,782,125
Health Care Services (2.2%)
-------------------------------------------------------------------------------------------------------------------
104,700 First Health Group Corp. (NON) 4,083,300
44,100 Trigon Healthcare, Inc. (NON) 3,161,419
-------------
7,244,719
Insurance (3.8%)
-------------------------------------------------------------------------------------------------------------------
117,100 Fidelity National Financial, Inc. 2,876,269
28,700 Gallagher, Arthur J. & Co. 1,811,688
102,100 Protective Life Corp. 2,361,063
133,800 Stancorp Financial Group 5,452,350
-------------
12,501,370
Investment Banking/Brokerage (1.6%)
-------------------------------------------------------------------------------------------------------------------
99,000 Legg Mason, Inc. 5,141,813
Leisure Time (0.7%)
-------------------------------------------------------------------------------------------------------------------
94,000 SCP Pool Corp. (NON) 2,432,250
Lodging/Tourism (1.0%)
-------------------------------------------------------------------------------------------------------------------
180,187 Orient Express Hotels, Ltd. (NON) 3,254,628
Machinery (0.7%)
-------------------------------------------------------------------------------------------------------------------
107,900 Esterline Technologies Corp. (NON) 2,407,519
Manufacturing (7.0%)
-------------------------------------------------------------------------------------------------------------------
158,200 Pentair, Inc. 4,716,338
106,000 Shaw Group, Inc. (NON) 8,639,000
103,400 Stewart & Stevenson Services, Inc. 2,481,600
253,500 Thermo Electron Corp. (NON) 7,351,500
-------------
23,188,438
Medical Technology (5.7%)
-------------------------------------------------------------------------------------------------------------------
109,600 ArthroCare Corp. (NON) 2,486,550
139,300 ATS Medical, Inc. (NON) 2,550,931
68,300 Avigen, Inc. (NON) 2,646,625
39,500 Coherent, Inc. (NON) 1,375,094
34,300 Cytyc Corp. (NON) 2,036,027
308,900 Sybron International Corp. (NON) 7,645,275
-------------
18,740,502
Metal Fabricators (1.1%)
-------------------------------------------------------------------------------------------------------------------
262,987 RTI International Metals, Inc. (NON) 3,813,312
Paper & Forest Products (3.4%)
-------------------------------------------------------------------------------------------------------------------
314,800 Packaging Corp. Of America (NON) 4,623,625
210,300 Smurfit-Stone Container Corp. (NON) 2,839,050
83,000 Temple Inland, Inc. 3,714,250
-------------
11,176,925
Pharmaceuticals (2.1%)
-------------------------------------------------------------------------------------------------------------------
59,400 Inhale Therapeutic Systems (NON) 2,955,150
54,500 NPS Pharmaceuticals, Inc. (NON) 2,336,688
29,300 United Therapeutics Corp. (NON) 1,567,550
-------------
6,859,388
Publishing (1.0%)
-------------------------------------------------------------------------------------------------------------------
91,200 Houghton Mifflin Co. 3,357,300
Restaurants (0.9%)
-------------------------------------------------------------------------------------------------------------------
67,000 Cheesecake Factory (The) (NON) 2,968,938
Retail (3.7%)
-------------------------------------------------------------------------------------------------------------------
119,400 Abercrombie & Fitch Co. Class A (NON) 2,813,363
74,300 American Eagle Outfitters, Inc. (NON) 2,558,706
86,400 Coach, Inc. (NON) 2,019,600
151,800 Duane Reade, Inc. (NON) 4,430,663
14,300 Michaels Stores, Inc. (NON) 347,669
-------------
12,170,001
Schools (1.7%)
-------------------------------------------------------------------------------------------------------------------
50,000 Learning Tree International, Inc. (NON) 2,262,500
73,300 Learning Tree International, Inc. 144A (NON) 3,316,825
-------------
5,579,325
Software (1.7%)
-------------------------------------------------------------------------------------------------------------------
32,100 Documentum, Inc. (NON) 2,728,500
95,800 Matrixone, Inc. (NON) 2,844,063
-------------
5,572,563
Technology Services (3.4%)
-------------------------------------------------------------------------------------------------------------------
54,400 FactSet Research Systems, Inc. 2,060,128
351,800 SBS Technologies Inc. (NON) 9,058,850
-------------
11,118,978
Toys (1.6%)
-------------------------------------------------------------------------------------------------------------------
482,900 Hasbro, Inc. 5,191,175
-------------
Total Common Stocks (cost $272,676,720) $ 308,171,097
<CAPTION>
SHORT-TERM INVESTMENTS (5.9%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 10,558,000 Interest in $949,877,000 joint repurchase agreement dated
October 31, 2000 with Merrill Lynch, Pierce, Fenner &
Smith, Inc. year due November 1, 2000 with respect to
various U.S. Government obligations -- maturity value of
$10,589,936 for an effective yield of 6.6% $ 10,558,000
9,000,000 Interest in $680,0000,000 joint repurchase agreement dated
October 31, 2000, year with Morgan (J.P.) due
November 1, 2000 year with respect to various U.S.
Government obligations -- maturity value of $9,001,650
for an effective yield of 6.6% 9,000,000
-------------
Total Short-Term Investments (cost $19,558,000) $ 19,558,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $292,234,720) (b) $ 327,729,097
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $329,425,596.
(b) The aggregate identified cost on a tax basis is $292,983,312,
resulting in gross unrealized appreciation and depreciation of
$51,276,056 and $16,530,271, respectively, or net unrealized
appreciation of $34,745,785.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at October
31, 2000.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
------------------------------------------------------------------------------
Futures Contracts Outstanding at October 31, 2000 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
------------------------------------------------------------------------------
S&P Index 500 (Long) $15,482,150 $14,937,635 Dec-00 $544,515
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $292,234,720) (Note 1) $327,729,097
-------------------------------------------------------------------------------------------
Cash 343,204
-------------------------------------------------------------------------------------------
Dividends and interest receivable 91,926
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,412,721
-------------------------------------------------------------------------------------------
Receivable for securities sold 6,425,359
-------------------------------------------------------------------------------------------
Receivable for variation margin 347,479
-------------------------------------------------------------------------------------------
Total assets 337,349,786
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 6,874,279
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 264,242
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 466,168
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 92,428
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 4,663
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,014
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 163,804
-------------------------------------------------------------------------------------------
Other accrued expenses 56,592
-------------------------------------------------------------------------------------------
Total liabilities 7,924,190
-------------------------------------------------------------------------------------------
Net assets $329,425,596
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $240,605,837
-------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (1,049,205)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 53,830,072
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 36,038,892
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $329,425,596
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($144,642,525 divided by 11,745,245 shares) $12.31
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.31)* $13.06
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($158,086,387 divided by 13,032,158 shares)** $12.13
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($7,401,397 divided by 606,046 shares)** $12.21
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($14,466,122 divided by 1,187,147 shares) $12.19
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.19)* $12.63
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($4,829,165 divided by 391,971 shares)** $12.32
-------------------------------------------------------------------------------------------
* 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 October 31, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends $ 525,835
-------------------------------------------------------------------------------------------
Interest 313,717
-------------------------------------------------------------------------------------------
Total investment income 839,552
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 824,203
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 232,337
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,212
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,013
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 147,577
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 605,673
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 20,067
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 38,775
-------------------------------------------------------------------------------------------
Other 54,730
-------------------------------------------------------------------------------------------
Total expenses 1,931,587
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (42,830)
-------------------------------------------------------------------------------------------
Net expenses 1,888,757
-------------------------------------------------------------------------------------------
Net investment loss (1,049,205)
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 45,226,718
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (1,076,945)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
futures contracts during the period 21,421,013
-------------------------------------------------------------------------------------------
Net gain on investments 65,570,786
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $64,521,581
-------------------------------------------------------------------------------------------
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
October 31 April 30
---------------------------------
2000* 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment loss $ (1,049,205) $ (1,815,485)
--------------------------------------------------------------------------------------------------
Net realized gain on investments 44,149,773 14,149,034
--------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 21,421,013 5,325,775
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 64,521,581 17,659,324
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 70,185,901 24,974,161
--------------------------------------------------------------------------------------------------
Total increase in net assets 134,707,482 42,633,485
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period 194,718,114 152,084,629
--------------------------------------------------------------------------------------------------
End of period (including accumulated
net investment loss of $1,049,205 and
$--, respectively) $ 329,425,596 $ 194,718,114
--------------------------------------------------------------------------------------------------
*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 Oct. 31 Year ended June 1, 1998+
operating performance (Unaudited) April 30 to April 30
---------------------------------------------------------------------------
2000 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $9.38 $8.07 $8.50
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment income (loss)(a) (.02) (.06) .03(d)
---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2.95 1.37 (.43)(e)
---------------------------------------------------------------------------
Total from
investment operations 2.93 1.31 (.40)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From return
of capital -- -- (.03)
---------------------------------------------------------------------------
Net asset value,
end of period $12.31 $9.38 $8.07
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 31.24* 16.23 (4.73)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $144,643 $90,219 $62,900
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .57* 1.20 1.15*(d)
---------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.22)* (.67) .30*(d)
---------------------------------------------------------------------------
Portfolio turnover (%) 119.92* 272.09 272.40*
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
less than $0.01 per share for class A, class B, and class M for the
period ended April 30, 1999.
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
---------------------------------------------------------------------------
Six months
ended For the period
Per-share Oct. 31 Year ended June 29, 1998+
operating performance (Unaudited) April 30 to April 30
---------------------------------------------------------------------------
2000 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $9.28 $8.03 $8.40
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment loss (a) (.06) (.13) (.02)(d)
---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2.91 1.38 (.34)(e)
---------------------------------------------------------------------------
Total from
investment operations 2.85 1.25 (.36)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From return
of capital -- -- (.01)
---------------------------------------------------------------------------
Net asset value,
end of period $12.13 $9.28 $8.03
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 30.71* 15.57 (4.27)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $158,086 $94,738 $84,777
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .94* 1.95 1.69*(d)
---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.59)* (1.42) (.34)*(d)
---------------------------------------------------------------------------
Portfolio turnover (%) 119.92* 272.09 272.40*
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
less than $0.01 per share for class A, class B, and class M for the
period ended April 30, 1999.
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
Six months
ended For the period
Per-share Oct. 31 July 26, 1999+
operating performance (Unaudited) to April 30
--------------------------------------------------------------
2000 2000
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $9.34 $8.22
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment loss (a) (.06) (.11)
--------------------------------------------------------------
Net realized and unrealized
gain on investments 2.93 1.23
--------------------------------------------------------------
Total from
investment operations 2.87 1.12
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From return
of capital -- --
--------------------------------------------------------------
Net asset value,
end of period $12.21 $9.34
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) 30.73* 13.63*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $7,401 $1,971
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .94* 1.50*
--------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.57)* (1.16)*
--------------------------------------------------------------
Portfolio turnover (%) 119.92* 272.09
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
less than $0.01 per share for class A, class B, and class M for the
period ended April 30, 1999.
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
---------------------------------------------------------------------------
Six months
ended For the period
Per-share Oct. 31 Year ended June 29, 1998+
operating performance (Unaudited) April 30 to April 30
---------------------------------------------------------------------------
2000 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $9.32 $8.05 $8.40
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment loss (a) (.05) (.11) (.01)(d)
---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2.92 1.38 (.32)(e)
---------------------------------------------------------------------------
Total from
investment operations 2.87 1.27 (.33)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From return
of capital -- -- (.02)
---------------------------------------------------------------------------
Net asset value,
end of period $12.19 $9.32 $8.05
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 30.79* 15.78 (3.98)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $14,466 $7,790 $4,408
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .82* 1.70 1.48*(d)
---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.46)* (1.18) (.13)*(d)
---------------------------------------------------------------------------
Portfolio turnover (%) 119.92* 272.09 272.40*
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
less than $0.01 per share for class A, class B, and class M for the
period ended April 30, 1999.
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS Y
-------------------------------------------------
For the period
Oct. 2, 2000+
Per-share to Oct. 31
operating performance (Unaudited)
-------------------------------------------------
2000
-------------------------------------------------
<S> <C>
Net asset value,
beginning of period $12.42
-------------------------------------------------
Investment operations
-------------------------------------------------
Net investment loss (a) --
-------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.10)
-------------------------------------------------
Total from
investment operations (.10)
-------------------------------------------------
Less distributions:
-------------------------------------------------
From return
of capital --
-------------------------------------------------
Net asset value,
end of period $12.32
-------------------------------------------------
Ratios and supplemental data
-------------------------------------------------
Total return at
net asset value (%)(b) (0.81)*
-------------------------------------------------
Net assets, end of period
(in thousands) $4,829
-------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .05*
-------------------------------------------------
Ratio of net investment loss
to average net assets (%) .03*
-------------------------------------------------
Portfolio turnover (%) 119.92*
-------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
less than $0.01 per share for class A, class B, and class M for the
period ended April 30, 1999.
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Capital Opportunities Fund ("the fund") is one of a series of
Putnam Investment Funds ("the trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund invests primarily in equity
securities of U.S. companies that Putnam Investment Management, Inc.,
("Putnam Management"), the fund's manager, a wholly-owned subsidiary of
Putnam Investments, Inc., believes offer above-average growth prospects
or are undervalued in relation to underlying asset values or earnings
potential and have the potential for long-term appreciation.
The fund offers class A, class B, class C, class M and class Y shares.
The fund began offering class Y shares on October 2, 2000. 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 C shares are subject to the same fees and expenses as
class B shares, except that class C shares have a one-year 1.00%
contingent deferred sales charge and do not convert to class A shares.
Class M shares are sold with a maximum front end sales charge of 3.50%
and pay an ongoing distribution fee that is higher than class A shares
but lower than class B and class C shares. Class Y shares, which are
sold at net asset value, are generally subject to the same expenses as
class A, class B, class C and class M shares, but do not bear a
distribution fee. Class Y shares are sold to defined contribution plans
that invest at least $150 million in a combination of Putnam funds and
other accounts managed by affiliates of Putnam Management.
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 that 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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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 sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at amortized
cost, which approximates market value. Other investments, including
restricted securities, are stated at fair 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 Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. 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). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Non-cash dividends, if any, are
recorded at the fair market value of the securities received.
E) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. 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. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
F) 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 October 31, 2000, the fund had no borrowings against the line of
credit.
G) 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.
H) 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.
I) 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.
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: 0.65% of the
first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion,
0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of
the next $5 billion, and 0.38% 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 subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended October 31, 2000, fund expenses were reduced by
$42,830 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $615
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a 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, class C 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 Retail Management, Inc., 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 Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 1.00%,
1.00% and 0.75% of the average net assets attributable to class A, class
B, class C and class M shares respectively.
For the six months ended October 31, 2000, Putnam Retail Management,
Inc., acting as underwriter received net commissions of $59,835 and
$2,909 from the sale of class A and class M shares, respectively, and
received $63,403 and $749 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the six months ended October 31, 2000, Putnam Retail
Management, Inc., acting as underwriter received $6,131 on class A
redemptions.
Note 3
Purchases and sales of securities
During the six months ended October 31, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $345,823,110 and $294,940,304, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended October 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 6,024,024 $68,301,094
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
6,024,024 $68,301,094
Shares
repurchased (3,892,048) (43,876,052)
---------------------------------------------------------------------------
Net increase 2,131,976 $24,425,042
---------------------------------------------------------------------------
Year ended April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 5,445,269 $51,932,918
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
5,445,269 51,932,918
Shares
repurchased (3,630,460) (32,355,355)
---------------------------------------------------------------------------
Net increase 1,814,809 $19,577,563
---------------------------------------------------------------------------
Six months ended October 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 5,197,434 $58,066,556
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
5,197,434 $58,066,556
Shares
repurchased (2,370,146) (25,957,516)
---------------------------------------------------------------------------
Net increase 2,827,288 $32,109,040
---------------------------------------------------------------------------
Year ended April 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 4,325,059 $40,568,489
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
4,325,059 40,568,489
Shares
repurchased (4,671,662) (39,821,976)
---------------------------------------------------------------------------
Net increase
(decrease) (346,603) $ 746,513
---------------------------------------------------------------------------
Six months ended October 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 550,740 $6,297,817
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
550,740 6,297,817
Shares
repurchased (155,591) (1,809,554)
---------------------------------------------------------------------------
Net increase 395,149 $4,488,263
---------------------------------------------------------------------------
For the period July 26,1999
(commencement of operations)
to April 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 223,465 $2,178,970
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
223,465 2,178,970
Shares
repurchased (12,568) (129,098)
---------------------------------------------------------------------------
Net increase 210,897 $2,049,872
---------------------------------------------------------------------------
Six months ended October 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 999,626 $11,232,608
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
999,626 $11,232,608
Shares
repurchased (648,760) (6,901,220)
---------------------------------------------------------------------------
Net increase 350,866 $ 4,331,388
---------------------------------------------------------------------------
Year ended April 30,2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 2,120,405 $18,616,945
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
2,120,405 18,616,945
Shares
repurchased (1,831,813) (16,016,732)
---------------------------------------------------------------------------
Net increase 288,592 $ 2,600,213
---------------------------------------------------------------------------
For the period October 2, 2000
(commencement of operations)
to October 31, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 431,183 $5,296,776
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
431,183 $5,296,776
Shares
repurchased (39,212) (464,608)
---------------------------------------------------------------------------
Net increase 391,971 $4,832,168
---------------------------------------------------------------------------
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
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.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Technology Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Fund
Balanced Retirement Fund
Classic Equity 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
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund
U.S. Government Income Trust
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
ASSET ALLOCATION 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 Growth and Income Fund II
[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 not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
John J. Morgan, Jr.
Vice President
Justin Scott
Vice President
Joseph P. Joseph
Vice President and Fund Manager
Sandeep Mehta
Vice President and Fund Manager
Gerald I. Moore
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Capital
Opportunities 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
and Putnam's Quarterly Ranking Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
SA068-66578 21I 12/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
----------------------------------------------------------------------------
Putnam Capital Opportunities Fund
Supplement to semiannual Report dated 10/31/00
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, C, and M shares, which are discussed more extensively in the annual
report.
SEMIANNUAL RESULTS AT A GLANCE
----------------------------------------------------------------------------
Total return for periods ended 10/31/00
NAV
6 months 31.48%
1 year 48.97
Life of fund (since class A inception, 6/1/98) 47.70
Annual average 17.49
Share value: NAV
10/02/00 $12.42
10/31/00 $12.32
----------------------------------------------------------------------------
Distributions:
The fund had no distributions during this period.
----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for
class Y shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect the initial
sales charge currently applicable to class A shares. These returns have not
been adjusted to reflect differences in operating expenses which, for class
Y shares, typically are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Investment return and principal value will fluctuate so your
shares, when redeemed, may be worth more or less than their original cost.
See full report for information on comparative benchmarks. If you have
questions, please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
Putnam
Global Aggressive
Growth Fund*
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-00
*Formerly Putnam Worldwide Equity Fund.
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 20, 2000
REPORT FROM FUND MANAGEMENT
Stephen P. Dexter
Roland W. Gillis
Peter J. Hadden
After achieving robust gains in the first half of Putnam Global
Aggressive Growth Fund's* fiscal year, growth stocks succumbed to
mounting pressure in the second half. A correction in growth stock
valuations began in February, and though growth stocks rallied on
several occasions in subsequent months, each rally was undercut by
concerns that valuations were too high or that growth projections were
too optimistic. These concerns were fueled by a deceleration in the U.S.
economy, which slowed from a growth rate in excess of 7% in late 1999 to
approximately 3% as this report was being written. Internationally,
rising interest rates and rising energy prices combined to whittle down
growth expectations and send investors into more defensive sectors.
Although the small growth companies in your fund struggled in this
environment, their business results continued to meet our expectations.
Please note that as of the date of this report, Putnam Global Aggressive
Growth Fund was known as Putnam Worldwide Equity Fund. The fund's name
has changed but the objective remains the same.
Total return for 12 months ended 10/31/00
NAV POP
-----------------------------------------------------------------------
48.67% 40.10%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
*Formerly Putnam Worldwide Equity Fund.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Software 18.1%
Technology 13.8%
Electronics 12.5%
Communications
equipment 6.1%
Computers 5.8%
Footnote reads:
*Based on net assets as of 10/31/00. Holdings will vary over time.
* FUNDAMENTALS REMAIN STEADY AS PERCEPTIONS SHIFT
At any given time, stock prices reflect a variety of factors, such as
current business results, long-term opportunities, and the
attractiveness of one investment relative to others. We believe several
factors that make your fund's holdings attractive investments have
remained remarkably consistent during the fiscal year, even as the
performance of the stocks has changed directions. It is possible, after
all, for markets to be overly optimistic and overly pessimistic, and
this year we saw examples of both reactions. At the beginning of the
fiscal year, investors in most global markets showed extraordinary
enthusiasm for the small, growing companies in the portfolio, and bid up
their stock prices dramatically. Rallies of this scale are extremely
rare.
However, in the middle of the fiscal year, investors became more
skeptical about the valuations of growth stocks in many global markets.
This skepticism was fueled by rising interest rates in the U.S., Europe,
and even Japan, which slowed economic growth. For the balance of the
year, markets tried to discern whether the U.S. economy would achieve a
soft landing, in which economic growth continues at a moderate pace, or
a hard landing, in which a recession could bring a sudden halt to
spending. As the fiscal year closed, the soft-landing-scenario seemed
most likely, but some uncertainty remained. While these concerns
primarily affected the U.S. market, which represented a little more than
half of the fund's holdings, U.S. leadership tends to influence
performance in growth sectors around the world.
We still believe that the enthusiasm for growth stocks is justified. In
recent months, we intensively reviewed all of the fund's holdings using
our fundamental research process. In our view, earnings growth powers
the long-term performance of a stock but we also study economic trends
as part of our research to assess risk. Our analysis concludes that
growth companies can continue to thrive given the current macroeconomic
outlook. We believe there is no question that technological advances in
wireless telecommunications, networking devices, data storage, and
Internet software offer competitive advantages that businesses must
embrace to remain competitive. Outside technology, a host of young,
entrepreneurial companies in a variety of industries around the world is
executing innovative business plans to grow their market share and
profits. Our review reassured us that each of the fund's holdings has
the growth potential we seek.
* WORLDWIDE INTERNET CONSTRUCTION CONTINUES
The fund continues to invest in a number of technology companies in
several different industries that are building networking capabilities
around the world, primarily for business use. These companies make the
networking hardware equipment as well as the switches and routing
connections that enhance the speed and expand the bandwidth of the
networks, allowing more data to travel faster. Hardware manufacturers
include Juniper Networks and Redback Networks. In the semiconductor
industry, top holdings include Applied Micro Circuits, and Micrel.
Metromedia Fiber produces the fiber optic networks that carry the data
and voice traffic. While these holdings, as well as others mentioned in
this report, were viewed favorably at the end of the period, all are
subject to review and adjustment in accordance with the fund's
investment strategy and may vary in the future.
"Putnam's research capabilities and experience with growth investing in
the U.S. and international markets give us an edge. We are finding
smaller companies in Europe and Asia adapting U.S. business models and
managerial methods to achieve their growth goals."
-- Stephen Dexter, fund manager
Small companies in an age of global economic innovation
As the world enters the 21st century, it is on a path of economic a
dvancement that creates tremendous possibilities for investors. The
Future of the Global Economy: Towards a Long Boom?, a study published
by the Organization for Economic Cooperation and Development (OECD)
suggests that the world right now may be at the beginning of several
decades of above-average economic growth. This historic period is marked
by the transition to a knowledge-based society and economic system, with
tremendous gains in productivity. International institutions have already
begun the process of integrating global markets for goods, services,
capital, and technology. Small companies such as those represented in
Putnam Global Aggressive Growth Fund stand to benefit because the
knowledge-based boom will depend on the continuous innovation and growing
efficiency these companies generate. The fund invests in companies around
the world that are seizing new opportunities and introducing changes in
their industries.
In addition to technology hardware, your fund also owns several growing
software companies. With greater volumes of information flowing on
networks, there is of course greater demand for data storage. Brocade
Communications and VERITAS Software provide these capabilities. Two
other software holdings, Agile Software and I2 Technologies, are large
players in developing functions for business-to-business applications
that allow companies to manage purchases from their vendors more
efficiently. In a somewhat different branch of Internet activity, fund
holding Career Education is providing software with educational
content. Its software modules allow people to complete training
requirements on-line.
In addition to these U.S. technology stocks, your fund owns several
technology stocks outside the United States. A Canadian holding, Tundra
Semiconductor, makes bus-bridging semiconductors. ADVA Optical
Networking in Germany provides optical components for major fiber optics
companies. Orders for their components, which expand networking
bandwidth, have been exceptionally strong. Japan's Moritex Corporation
is an offshoot of the main fiber optics industry. It uses fiber optical
technology to automate manufacturing procedures in many types of
factories.
* MEDIA, RETAILING STOCKS THRIVE
As a diversified portfolio, your fund invests across a range of many
sectors. Many fund holdings have achieved rapid growth because their
leaders have skillfully tapped into new business opportunities. Several
of these are in the media sector. Havas Advertising, France's largest
advertising company, has successfully adapted to new technologies and
now provides a host of Web-based services to its clients. Capital Radio
has grown to become the United Kingdom's leading radio network and has a
dominant position in London. Also in the United Kingdom, your fund owns
Aegis Group, which is the world's largest independent media buyer -- it
buys advertising space from broadcasters and sells it to advertisers.
Although media stocks declined from their peaks toward the end of the
period, we believe ad spending will remain robust and the fund's
holdings are achieving strong cash flow.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
VERITAS Software Corp.
United States
Software
Brocade Communications Systems
United States
Communication equipment
Agile Software Corp.
United States
Software
Netegrity, Inc.
United States
Software
VeriSign, Inc.
United States
Computers
Province Healthcare Co.
United States
Healthcare
Jabil Circuit, Inc.
United States
Electronics
Juniper Networks, Inc.
United States
Communication equipment
Kontron Embedded Computers
Germany
Computers
E.piphany, Inc.
United States
Software
Footnote reads:
These holdings represent 13.4% of the fund's net assets as of 10/31/00.
Portfolio holdings will vary over time.
Stocks that we particularly like in other industries include retailers
Esprit Holdings in Hong Kong and Matalan in the United Kingdom. Esprit
remains one of the leading apparel retailers throughout Europe. Matalan
operates low-cost warehouse stores in remote rural areas of England, and
offers perhaps the lowest consumer prices in the country. The company's
earnings are growing in excess of 30%. Finally, in Norway, your fund
owns PAN Fish, a company that operates fish farms and is serving rapidly
growing demand for fish in Europe.
* ATTRACTIVE OPPORTUNITIES IN SMALL COMPANIES
While uncertainty has plagued stock markets in the past several months,
we believe that most markets are likely to become more stable in the
months ahead. This should be good news for the small growth companies
your fund holds that, as we have explained, continue to meet their
growth targets but are not in great demand during the current volatile
market environment. It appears that slower U.S. economic growth will
keep interest rates stable and international markets are expected to
follow the U.S. example. The building of technology and
telecommunications infrastructure will continue for many quarters and
years to come. We are also encouraged to see that, despite recent
uncertainty, a steady stream of high-quality growth companies continue
to go public in international markets. Even in slow-growing Japan, with
an underdeveloped venture capital pipeline, we have been able to find a
few solid small companies. Our strategy of identifying the most
attractive rapidly growing small companies throughout the world
continues to plow a fertile field.
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 10/31/00, there is no guarantee the fund
will continue to hold these securities in the future. This fund invests
all or a portion of its assets in small to midsize companies. Such
investments increase the risk of greater price fluctuations.
International investing involves certain risks, such as currency
fluctuations, economic instability, and political developments.
Additional risks, including illiquidity and volatility, may be
associated with emerging-markets securities.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Global Aggressive Growth Fund (formerly Putnam Worldwide Equity Fund) is
designed for investors seeking capital appreciation through a globally
diversified equity portfolio.
TOTAL RETURN FOR PERIODS ENDED 10/31/00
Salomon Bros. Salomon Bros. Consumer
Extended Extended Market price
NAV POP Market Index* Growth Index* index
-------------------------------------------------------------------------------
1 year 48.67% 40.10% 13.66% 17.86% 3.45%
-------------------------------------------------------------------------------
Life of fund
(since 5/6/98) 297.38 274.47 13.75 26.89 7.02
Annual average 74.04 69.94 5.28 9.97 2.74
-------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns at POP reflect the current
maximum initial sales charges of 5.75%. All returns assume reinvestment
of distributions at NAV. 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. Recent returns were achieved during
favorable market conditions and may not be sustained. For all of these
periods, the fund was offered on a limited basis and had limited assets.
Performance data reflect an expense limitation currently in effect.
Without it, total returns would have been lower.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/00
-------------------------------------------------------------------------------
Distributions (number) 1
-------------------------------------------------------------------------------
Income --
-------------------------------------------------------------------------------
Capital gains
Long-term $0.365
-------------------------------------------------------------------------------
Short-term 4.043
-------------------------------------------------------------------------------
Total $4.408
-------------------------------------------------------------------------------
Share value: NAV POP
-------------------------------------------------------------------------------
10/31/99 $22.72 $24.11
-------------------------------------------------------------------------------
10/31/00 29.31 31.10
-------------------------------------------------------------------------------
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 5/6/98
Salomon Bros. Salomon Bros.
Fund's shares Extended Extended Market Consumer price
Date at POP Market Index Growth Index index
5/6/98 9,425 10,000 10,000 10,000
10/31/98 8,725 8,520 8,364 10,086
10/31/99 25,189 10,008 10,766 10,345
10/31/00 $37,447 $11,375 $12,689 $10,702
Footnote reads:
Past performance is no assurance of future results. See first page of
performance section for performance calculation method.
TOTAL RETURN FOR PERIODS ENDED 9/30/00(most recent calendar quarter)
(inception dates) (5/6/98)
NAV POP
-------------------------------------------------------------------------------
1 year 97.71% 86.38%
-------------------------------------------------------------------------------
Annual average 351.48 325.45
(life of fund) 87.40 82.82
-------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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. 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.
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 5.75% maximum sales charge.
COMPARATIVE BENCHMARKS
Salomon Brothers Extended Market Growth Index is an unmanaged list of
global equity securities, with all values expressed in U.S. dollars.*
Salomon Brothers Extended Market Index is an unmanaged list of global
equity securities, with all values expressed in U.S. dollars.*
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 into account brokerage fees or taxes.
Securities in the fund do not match those in the index and performance
of the fund will differ. It is not possible to invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Putnam Investment Funds
and Shareholders of Putnam Global Aggressive Growth Fund
(a series of Putnam Investment Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Putnam Global Aggressive Growth Fund (the "fund") (formerly Putnam
Worldwide Equity Fund) at October 31, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of investments owned at
October 31, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000
COMMON STOCKS (97.1%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Australia (2.2%)
-------------------------------------------------------------------------------------------------------------------
10,000 Cochlear, Ltd. $ 140,351
32,600 Computershare, Ltd. 140,978
120,000 ERG, Ltd. 195,766
45,600 Securenet Ltd. (NON) 197,196
-------------
674,291
Canada (3.6%)
-------------------------------------------------------------------------------------------------------------------
5,425 BCE Emergis, Inc. (NON) 252,276
7,300 Certicom Corp. (NON) 241,453
3,200 Cognos, Inc. (NON) 132,800
2,000 Mosaid Technologies, Inc. (NON) 62,811
2,650 Sierra Wireless, Inc. (NON) 174,607
800 SMTC Corp. (NON) 15,100
3,330 Tundra Semiconductor Corp., Ltd. (NON) 119,957
11,100 Westaim Corp. (NON) 114,868
-------------
1,113,872
Denmark (2.0%)
-------------------------------------------------------------------------------------------------------------------
800 Danske Traelast AS 82,466
4,500 GN Store Nord AS 87,136
750 NEG Micon AS 38,869
3,000 RTX Telecom AS (NON) 126,432
5,300 Vestas Wind Systems AS 286,751
-------------
621,654
Finland (3.2%)
-------------------------------------------------------------------------------------------------------------------
23,400 Aldata Solutions Oyj (NON) 164,601
8,800 Comptel Oyj 121,565
9,000 Elcoteq Network Corp. Class A 306,626
5,300 Perlos Oyj 112,743
8,800 Teleste Oyj 261,030
-------------
966,565
France (3.4%)
-------------------------------------------------------------------------------------------------------------------
3,000 Business Objects S.A. (NON) 236,391
485 Egide S.A. (NON) 263,064
4,300 GFI Informatique 109,036
7,900 Havas Advertising S.A. 127,143
800 Radiall S.A. 135,803
7,300 Riber S.A. (NON) 155,782
-------------
1,027,219
Germany (8.8%)
-------------------------------------------------------------------------------------------------------------------
1,800 ACG AG fuer Chipkarten und informationsteme (NON) 93,513
3,125 ADVA AG Optical Networking (NON) 229,090
1,500 Aixtron (NON) 200,858
1,240 Consors Discount Broker AG (NON) 98,574
1,950 D. Logistics AG (NON) 137,168
8,600 Gauss Interprise AG (NON) 114,429
1,500 GPC Biotech AG (NON) 67,376
2,500 GPC Biotech AG,144A (NON) 112,294
2,800 Intershop Communications AG (NON) 121,023
3,200 Kontron Embedded Computers (NON) 344,966
2,000 Lion Bioscience AG (NON) 155,940
3,000 LPKF Laser & Electronics 108,819
1,340 Pandatel AG (NON) 101,073
9,200 ProSieben SAT.1 Media AG 288,489
2,370 Singulus Technologies AG 95,407
1,300 Software AG 94,200
3,200 Tecis Holdings 231,062
1,525 Telesens AG (NON) 80,131
900 Wedeco Water Technology AG (NON) 33,408
-------------
2,707,820
Hong Kong (0.6%)
-------------------------------------------------------------------------------------------------------------------
40,000 Esprit Holdings, Ltd. 34,363
130,000 Global Tech Holdings, Ltd. 150,853
-------------
185,216
Ireland (1.0%)
-------------------------------------------------------------------------------------------------------------------
26,500 Parthus Technologies PLC 90,411
4,200 SmartForce PLC ADR (NON) 211,378
-------------
301,789
Israel (1.0%)
-------------------------------------------------------------------------------------------------------------------
25,800 BATM Advanced Communications, Ltd. 192,152
300 Ceragon Networks, Ltd. (NON) 3,750
7,300 GEO Interactive Media Group (NON) 104,922
-------------
300,824
Italy (1.4%)
-------------------------------------------------------------------------------------------------------------------
400 I.NET SpA (NON) 103,717
26,000 Saipem SpA 135,295
9,750 Snai SpA 194,762
-------------
433,774
Japan (2.7%)
-------------------------------------------------------------------------------------------------------------------
5,000 ANRITSU CORP. 109,910
16,000 Fujikura, Ltd. 140,978
2,600 MORITEX Corp. 126,214
6 NET One Systems Co., Ltd. 178,055
300 Seikoh Giken Co., Ltd. 95,897
2,000 SURUGA SEIKI Co., Ltd. 86,096
2 Yozan, Inc. (NON) 95,256
-------------
832,406
Netherlands (0.9%)
-------------------------------------------------------------------------------------------------------------------
2,700 Unit 4 110,980
2,700 Draka Holding N.V. 157,775
-------------
268,755
New Zealand (0.5%)
-------------------------------------------------------------------------------------------------------------------
32,000 Baycorp Holdings, Ltd. 149,718
Norway (2.1%)
-------------------------------------------------------------------------------------------------------------------
3,600 Eltek ASA 135,165
10,900 Frontline, Ltd. (NON) 179,409
500 Opticom ASA (NON) 84,880
22,000 PAN Fish ASA (NON) 151,471
3,500 Tandberg ASA (NON) 92,625
-------------
643,550
Spain (0.4%)
-------------------------------------------------------------------------------------------------------------------
6,500 Zeltia SA 117,391
Sweden (1.5%)
-------------------------------------------------------------------------------------------------------------------
2,300 Audiodev AB Class B (NON) 15,961
3,000 Audiodev AB 144A (NON) 20,819
2,700 LGP Telecom Holding AB 67,399
5,400 Micronic Laser Systems AB (NON) 160,679
1,700 POOLIA AB 71,293
20,000 Telelogic AB (NON) 131,802
-------------
467,953
Switzerland (1.6%)
-------------------------------------------------------------------------------------------------------------------
400 Micronas Semiconductor Holding AG (NON) 173,565
80 Straumann Holding AG 172,897
55 Vontobel Holding AG 154,359
-------------
500,821
United Kingdom (6.5%)
-------------------------------------------------------------------------------------------------------------------
57,000 Aegis Group PLC 129,922
4,450 Autonomy Corporation PLC (NON) 227,072
35,700 Baltimore Technologies PLC (NON) 274,954
11,850 Celltech Group PLC (NON) 235,692
8,450 Capital Radio PLC 182,789
10,600 Cedar Group PLC 83,101
22,300 First Technology PLC 199,431
4,700 Innovation Group PLC (NON) 70,964
15,000 Matalan PLC 141,551
13,800 Orchestream Holdings PLC (NON) 110,692
5,600 Orchestream Holdings PLC 144A (NON) 44,919
2,400 Shire Pharmaceuticals Group PLC ADR (NON) 150,900
4,500 Staffware PLC 130,205
-------------
1,982,192
United States (53.7%)
-------------------------------------------------------------------------------------------------------------------
2,700 99 Cents Only Stores (NON) 60,581
1,400 Act Manufacturing, Inc. (NON) 46,025
6,000 Agile Software Corp. (NON) 452,250
3,900 Alpha Industries, Inc. (NON) 155,513
1,650 Avanex Corp. (NON) 167,578
1,400 Anaren Microwave, Inc. (NON) 145,600
2,260 Applied Micro Circuits Corp. (NON) 172,749
1,100 Applied Molecular Evolution, Inc. (NON) 23,925
2,100 Ariba, Inc. (NON) 265,388
1,800 Art Technology Group, Inc. (NON) 112,950
10,700 Asia Global Crossing, Ltd. (NON) 74,900
2,170 Brocade Communications Systems (NON) 493,404
5,800 Career Education Corp. (NON) 224,388
3,250 Cephalon, Inc. (NON) 174,281
5,500 Citadel Communications Corp. (NON) 66,688
3,400 Click Commerce, Inc. (NON) 97,325
6,050 CNET Networks, Inc. (NON) 190,575
2,300 Critical Path, Inc. 144A (NON) 111,694
2,750 Cytyc Corp. (NON) 163,238
2,100 DDi Corp. (NON) 83,869
1,800 Docent, Inc. (NON) 46,350
900 Dollar Tree Stores, Inc. (NON) 35,213
3,720 E.piphany, Inc. (NON) 335,265
4,200 Eclipsys Corp. (NON) 103,688
2,900 Efficient Networks, Inc. (NON) 121,664
1,250 Emulex Corp. (NON) 183,594
3,700 Entercom Communications Corp. (NON) 144,994
6,600 Entravision Communications Corp. (NON) 116,738
6,200 Exar Corp. (NON) 277,063
1,650 Extreme Networks, Inc. (NON) 136,847
2,500 Factory 2-U Stores, Inc. (NON) 79,844
7,700 Finisar Corp. (NON) 221,856
3,600 Focal Communications Corp. (NON) 52,200
1,800 Freemarkets, Inc. (NON) 88,988
400 Genaissance Pharmaceuticals (NON) 9,550
2,340 GlobeSpan, Inc. (NON) 180,034
2,300 Hispanic Broadcasting Corp. (NON) 71,875
2,700 I-many, Inc. (NON) 55,688
1,500 I2 Technologies, Inc. (NON) 255,000
3,500 Informatica Corp. (NON) 330,750
6,000 Information Holdings, Inc. (NON) 156,375
1,570 Inrange Technologies Corp. (NON) 57,501
3,600 Insituform Technologies, Inc. (NON) 128,475
1,200 Intermune Pharmaceuticals, Inc. (NON) 60,000
1,450 Internet Security Systems, Inc. (NON) 127,963
700 Intersil Holding Corp. (NON) 33,556
2,000 Interwoven, Inc. (NON) 201,500
6,400 Jabil Circuit, Inc. (NON) 365,200
900 JNI Corp. (NON) 80,156
1,840 Juniper Networks, Inc. (NON) 358,800
4,500 Kana Communications, Inc. (NON) 105,750
5,600 LAM Research Corp. (NON) 108,500
5,100 Lamar Advertising Co. (NON) 244,800
1,800 Learning Tree International, Inc. (NON) 81,450
3,100 LTX Corp. (NON) 43,400
1,900 Macromedia, Inc. (NON) 146,419
2,200 Marvell Technology Group, Ltd. (NON) 122,650
4,300 MCK Communications, Inc. (NON) 67,188
800 Medicines Co. (NON) 24,100
10,000 Metromedia Fiber Network, Inc. Class A (NON) 190,000
3,200 Michaels Stores, Inc. (NON) 77,800
6,200 Micrel, Inc. (NON) 280,550
1,400 Microchip Technology, Inc. (NON) 44,275
1,800 Micromuse, Inc. (NON) 305,438
1,200 Molecular Devices Corp. (NON) 82,050
2,400 NEON Communications, Inc. (NON) 28,950
4,975 Netegrity, Inc. (NON) 388,050
150 Netro Corp. (NON) 3,272
1,350 Network Appliance, Inc. (NON) 160,650
200 New Focus, Inc. (NON) 12,700
3,600 Orient Express Hotels, Ltd. (NON) 65,025
5,500 Pemstar, Inc. (NON) 80,438
4,900 Peregrine Systems, Inc. (NON) 117,600
2,350 Phone.com, Inc. (NON) 217,522
2,500 Pinnacle Holdings, Inc. (NON) 39,375
3,450 Plexus Corp. (NON) 217,566
4,100 Portal Software, Inc. (NON) 144,269
200 Power-One, Inc. (NON) 14,188
8,900 Province Healthcare Co. (NON) 374,913
2,800 QLogic Corp. (NON) 270,900
1,320 Quest Software, Inc. (NON) 57,668
6,000 Radio One, Inc. Class A (NON) 47,625
12,000 Radio One, Inc. Class D (NON) 96,188
2,360 Redback Networks, Inc. (NON) 251,193
8,500 Regent Communications, Inc. (NON) 51,000
959 Retek, Inc. (NON) 37,821
2,400 Sanmina Corp. (NON) 274,350
3,200 SBA Communications Corp. (NON) 160,400
700 Scient Corp. (NON) 12,600
3,160 Semtech Corp. (NON) 101,910
1,970 Sepracor, Inc. (NON) 134,206
2,400 Sipex Corp. (NON) 94,500
2,250 Software.com, Inc. (NON) 335,250
3,110 Sonus Networks, Inc. (NON) 107,295
500 StorageNetworks, Inc. (NON) 31,719
3,400 TCF Financial Corp. 137,488
2,800 TMP Worldwide, Inc. (NON) 194,906
2,300 TranSwitch Corp. (NON) 132,825
900 TTM Technologies, Inc. (NON) 18,000
3,000 Univision Communications, Inc. Class A (NON) 114,750
2,935 VeriSign, Inc. (NON) 387,420
4,267 VERITAS Software Corp. (NON) 601,714
6,730 Vignette Corp. (NON) 200,639
950 Virata Corp. (NON) 18,406
3,700 Vitria Technology, Inc. (NON) 99,438
2,450 webMethods, Inc. (NON) 217,744
9,400 Westwood One, Inc. (NON) 178,013
1,800 Xilinx, Inc. (NON) 130,388
7,100 XO Communications, Inc. (NON) 239,514
2,200 Zoran Corp. (NON) 110,275
2,000 Zygo Corp. (NON) 99,000
-------------
16,433,681
-------------
Total Common Stocks (cost $26,840,913) $ 29,729,491
<CAPTION>
SHORT-TERM INVESTMENTS (3.8%) (a) (cost $1,148,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 1,148,000 Interest in 680,000,000 joint repurchase agreement
dated October 31, 2000 with Morgan (J.P.) & Co., Inc.
due November 1, 2000 with respect to various
U.S. Government obligations -- maturity value
of 1,148,210 for an effective yield of 6.60% $ 1,148,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $27,988,913) (b) $ 30,877,491
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $30,603,486.
(b) The aggregate identified cost on a tax basis is $28,728,644,
resulting in gross unrealized appreciation and depreciation of
$6,374,842 and $4,225,995, respectively, or net unrealized appreciation
of $2,148,847.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
Depositary Receipts representing ownership of foreign securities on
deposit with a domestic custodian bank.
The fund had the following industry group concentration greater
than 10% at October 31, 2000 (as a percentage of net assets):
Software 18.1%
Technology 13.8
Electronics 12.5
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $27,988,913) (Note 1) $30,877,491
-------------------------------------------------------------------------------------------
Cash 9,736
-------------------------------------------------------------------------------------------
Foreign currency (cost $135,770) 129,689
-------------------------------------------------------------------------------------------
Dividends and interest receivable 1,768
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,690
-------------------------------------------------------------------------------------------
Receivable for securities sold 208,136
-------------------------------------------------------------------------------------------
Total assets 31,228,510
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 466,242
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 314
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 45,607
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 59,480
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 991
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,467
-------------------------------------------------------------------------------------------
Other accrued expenses 50,923
-------------------------------------------------------------------------------------------
Total liabilities 625,024
-------------------------------------------------------------------------------------------
Net assets $30,603,486
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $31,875,003
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
and foreign currency transactions (Note 1) (4,152,284)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 2,880,767
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $30,603,486
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($30,603,486 divided by 1,044,092 shares) $29.31
-------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $29.31)* $31.10
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest $ 62,273
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $3,804) 29,501
-------------------------------------------------------------------------------------------
Total investment income 91,774
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 229,392
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 246,583
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,894
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,338
-------------------------------------------------------------------------------------------
Auditing 37,343
-------------------------------------------------------------------------------------------
Other 17,214
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by manager (Note 2) (122,812)
-------------------------------------------------------------------------------------------
Total expenses 415,952
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (25,969)
-------------------------------------------------------------------------------------------
Net expenses 389,983
-------------------------------------------------------------------------------------------
Net investment loss (298,209)
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (4,094,892)
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (18,242)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and
liabilities in foreign currencies during the year 7,096
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 463,392
-------------------------------------------------------------------------------------------
Net loss on investments (3,642,646)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(3,940,855)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended October 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment loss $ (298,209) $ (33,316)
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions (4,113,134) 2,068,146
--------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 470,488 2,306,429
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (3,940,855) 4,341,259
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net realized gain on investments (1,793,199) --
--------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (25,597) --
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 28,589,123 1,471,049
--------------------------------------------------------------------------------------------------
Total increase in net assets 22,829,472 5,812,308
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 7,774,014 1,961,706
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $-- and $16,177, respectively) $30,603,486 $7,774,014
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
---------------------------------------------------------------------------
For the period
Per-share May 6, 1998+
operating performance Year ended October 31 to October 31
---------------------------------------------------------------------------
2000 1999 1998
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $22.72 $7.87 $8.50
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment loss (a)(d) (.36) (.12) (.02)
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 11.36(e) 14.97 (.61)
---------------------------------------------------------------------------
Total from
investment operations 11.00 14.85 (.63)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From net realized gain on investments (4.35) -- --
---------------------------------------------------------------------------
In excess of net realized gain
on investments (.06) -- --
---------------------------------------------------------------------------
Total distributions (4.41) -- --
---------------------------------------------------------------------------
Net asset value,
end of period $29.31 $22.72 $7.87
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 48.67 188.69 (7.41)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $30,603 $7,774 $1,962
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.45 1.45 .71*
---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(d) (1.04) (.80) (.29)*
---------------------------------------------------------------------------
Portfolio turnover (%) 206.00 312.75 150.43*
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
$.15, $.13 and $.10 per share for the periods ended October 31, 2000,
October 31, 1999 and October 31, 1998, respectively (Note 2).
(e) The amount shown for net realized and unrealized gain (loss) on
investments may not agree with the amounts shown on the Statement of
changes in net assets because of the timing of sales and repurchases of
the fund's shares in relation to the fluctuating market values for the
portfolio.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
Note 1
Significant accounting policies
Putnam Global Aggressive Growth Fund (the "fund") (formerly Putnam
Worldwide Equity Fund) is a series of Putnam Investment Funds ("the
trust") which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks long-term capital appreciation by investing primarily in
common stocks traded in securities markets located in a number of
foreign countries and in the United States.
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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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 sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair 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.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. 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). Gains or losses on securities sold are determined
on the identified cost basis.
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. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and 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 realized
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. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
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 year ended
October 31, 2000, 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. At October 31, 2000, the fund had a capital loss
carryover of approximately $3,413,000 available to offset future net
capital gain, if any, which will expire on October 31, 2008.
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. These differences
include temporary and permanent differences of losses on wash sale
transactions, and realized gains and losses on passive foreign
investment companies. 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. For the
year ended October 31, 2000, the fund reclassified $282,032 to decrease
accumulated net investment loss and $300,916 to decrease
paid-in-capital, with an decrease to accumulated net realized losses of
$18,884. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
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.
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: 0.80% of the
first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million, 0.60% of the next $5 billion,
0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of
the next $5 billion, and 0.53% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through December 31, 2000, to the
extent that expenses of the fund (exclusive of brokerage commissions,
interest, taxes, deferred organizational and extraordinary expense or
credits from Putnam Fiduciary Trust Company (PFTC), a subsidiary of
Putnam Investments, Inc. and payments under the Trust's distribution
plan) would exceed an annual rate of 1.45% of the fund's average net
assets.
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 PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended October 31, 2000, fund expenses were reduced by
$25,969 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $537
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement
of operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan
is to compensate Putnam Retail Management, Inc., a wholly-owned
subsidiary of Putnam Investments, Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The Plan
provides for payment by the fund to Putnam Retail Management, Inc. at an
annual rate of up to 0.35% of the fund's average net assets. The fund is
currently not making any payments pursuant to the Plan.
For the year ended October 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received no net commissions from the sale of
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of shares. For the year ended October 31, 2000, Putnam
Retail Management, Inc., acting as underwriter received no monies on
redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $82,085,209 and $56,181,106, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 2000, there were an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended October 31, 2000
---------------------------------------------------------------------------
Shares Amount
---------------------------------------------------------------------------
Shares sold 981,612 $ 38,171,305
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 62,891 1,818,796
---------------------------------------------------------------------------
1,044,503 39,990,101
Shares
repurchased (342,612) (11,400,978)
---------------------------------------------------------------------------
Net increase 701,891 $ 28,589,123
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Shares Amount
---------------------------------------------------------------------------
Shares sold 121,826 $1,939,193
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
121,826 1,939,193
Shares
repurchased (28,842) (468,144)
---------------------------------------------------------------------------
Net increase 92,984 $1,471,049
---------------------------------------------------------------------------
At October 31, 2000, Putnam Investments, Inc. owned 271,158 shares of
the fund (26.0% of shares outstanding), valued at $7,947,641.
FEDERAL TAX INFORMATION
(Unaudited)
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar year 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
Stephen Oristaglio
Vice President
Robert J. Swift
Vice President
Stephen P. Dexter
Vice President and Fund Manager
Roland W. Gillis
Vice President and Fund Manager
Peter J. Hadden
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Global
Aggressive Growth Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance Summary
and Putnam's Quarterly Ranking Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
66565 21H 12/00
Putnam
Midcap
Value
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND PORTFOLIO
10-31-00
[SCALE LOGO OMITTED]
The following report contains a list of your fund's portfolio holdings
and complete financial statements for the six months ended 10/31/00.
Additional details, including fund strategy, performance, and managers'
outlook, will be provided in the annual report, which will cover the 12
months ended 4/30/01.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000 (Unaudited)
COMMON STOCKS (98.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (1.5%)
-------------------------------------------------------------------------------------------------------------------
500 General Dynamics Corp. $ 35,781
400 Northrop Grumman Corp. 33,600
-------------
69,381
Airlines (0.9%)
-------------------------------------------------------------------------------------------------------------------
900 Delta Air Lines, Inc. 42,525
Automotive (2.5%)
-------------------------------------------------------------------------------------------------------------------
1,300 Dana Corp. 28,844
1,500 Genuine Parts Co. 31,969
1,900 Lear Corp. (NON) 51,775
-------------
112,588
Banking (4.3%)
-------------------------------------------------------------------------------------------------------------------
1,300 Charter One Financial, Inc. 29,819
900 City National Corp. 30,938
550 Comerica, Inc. 33,172
1,000 Cullen/Frost Bankers, Inc. 33,313
450 PNC Financial Services Group 30,094
750 Wilmington Trust Corp. 39,469
-------------
196,805
Beverage (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,200 Fortune Brands, Inc. 35,325
Building Materials (1.8%)
-------------------------------------------------------------------------------------------------------------------
2,200 Masco Corp. 41,113
1,800 Sherwin Williams Co. 39,038
-------------
80,151
Chemicals (4.6%)
-------------------------------------------------------------------------------------------------------------------
900 Avery Dennison Corp. 45,450
1,300 Great Lakes Chemical Corp. 43,388
850 PPG Industries, Inc. 37,931
1,200 Praxair, Inc. 44,700
1,300 Rohm & Haas Co. 39,081
-------------
210,550
Combined Utilities (0.7%)
-------------------------------------------------------------------------------------------------------------------
750 Constellation Energy Group 31,266
Commercial and Consumer Services (2.4%)
-------------------------------------------------------------------------------------------------------------------
1,000 Manpower, Inc. 34,813
1,400 Moody's Corp. 36,838
1,650 R. R. Donnelley & Sons Co. 35,475
-------------
107,126
Communications Equipment (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,000 ADTRAN, Inc. (NON) 38,000
Computers (2.4%)
-------------------------------------------------------------------------------------------------------------------
3,600 Quantum Corp. (NON) 54,000
1,500 Synopsys, Inc. (NON) 52,313
-------------
106,313
Conglomerates (2.1%)
-------------------------------------------------------------------------------------------------------------------
1,300 Cooper Industries, Inc. 49,725
900 Textron, Inc. 45,394
-------------
95,119
Consumer Finance (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,150 Countrywide Credit Industries, Inc. 43,053
Consumer Goods (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,100 Clorox Co. 49,088
Electric Utilities (5.0%)
-------------------------------------------------------------------------------------------------------------------
1,300 CiNergy Corp. 39,813
1,300 Consolidated Edison, Inc. 45,744
1,100 CP&L, Inc. 44,344
2,100 Edison International 50,138
1,200 TXU Corp. 44,475
-------------
224,514
Electrical Equipment (1.7%)
-------------------------------------------------------------------------------------------------------------------
1,300 Hubbell, Inc. Class B 31,119
1,200 Rockwell International Corp. 47,175
-------------
78,294
Electronics (4.4%)
-------------------------------------------------------------------------------------------------------------------
2,100 American Power Conversion Corp. (NON) 27,169
1,500 Arrow Electronics, Inc. (NON) 48,000
1,800 Avnet, Inc. 48,375
800 Dallas Semiconductor Corp. 31,700
1,400 W. W. Grainger 44,713
-------------
199,957
Energy (2.5%)
-------------------------------------------------------------------------------------------------------------------
1,000 Diamond Offshore Drilling, Inc. 34,563
1,000 Tidewater, Inc. 46,188
600 Transocean Sedco Forex, Inc. 31,800
-------------
112,551
Engineering & Construction (1.9%)
-------------------------------------------------------------------------------------------------------------------
1,100 Fluor Corp. 38,500
1,200 Martin Marietta Materials, Inc. 46,080
-------------
84,580
Food (5.1%)
-------------------------------------------------------------------------------------------------------------------
1,700 Campbell Soup Co. 49,725
900 Hershey Foods Corp. 48,881
1,900 Kellogg Co. 48,213
1,700 Ralston-Ralston Purina Group 41,225
550 Wrigley (WM) Jr., Co. 43,553
-------------
231,597
Health Care Services (2.5%)
-------------------------------------------------------------------------------------------------------------------
4,200 Humana, Inc. (NON) 50,925
2,600 IMS Health, Inc. 61,425
-------------
112,350
Homebuilding (1.4%)
-------------------------------------------------------------------------------------------------------------------
1,650 Centex Corp. 61,050
Insurance (3.8%)
-------------------------------------------------------------------------------------------------------------------
800 AON Corp. 33,150
550 Lincoln National Corp. 26,606
450 MBIA, Inc. 32,709
1,600 Protective Life Corp. 37,000
1,300 Torchmark Corp. 43,306
-------------
172,771
Investment Banking/Brokerage (0.6%)
-------------------------------------------------------------------------------------------------------------------
450 Bear Stearns Companies, Inc. (The) 27,281
Lodging/Tourism (0.7%)
-------------------------------------------------------------------------------------------------------------------
800 Marriott International, Inc. Class A 32,400
Machinery (2.6%)
-------------------------------------------------------------------------------------------------------------------
1,200 Caterpillar, Inc. 42,075
950 Ingersoll-Rand Co. 35,863
1,000 Parker-Hannifin Corp. 41,375
-------------
119,313
Manufacturing (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,400 Pentair, Inc. 41,738
Medical Technology (1.9%)
-------------------------------------------------------------------------------------------------------------------
1,000 Bausch & Lomb, Inc. 38,563
1,400 Becton, Dickson and Co. 46,900
-------------
85,463
Metals (2.7%)
-------------------------------------------------------------------------------------------------------------------
2,500 Newmont Mining Corp. 33,906
1,100 Nucor Corp. 38,156
1,100 Phelps Dodge Corp. 51,425
-------------
123,487
Natural Gas Utilities (1.9%)
-------------------------------------------------------------------------------------------------------------------
1,100 NICOR, Inc. 38,844
2,300 Sempra Energy 47,581
-------------
86,425
Office Equipment & Supplies (1.5%)
-------------------------------------------------------------------------------------------------------------------
1,200 Herman Miller, Inc. 31,350
1,200 Pitney Bowes, Inc. 35,625
-------------
66,975
Oil & Gas (3.6%)
-------------------------------------------------------------------------------------------------------------------
850 Burlington Resources, Inc. 30,600
1,700 Tosco Corp. 48,663
1,300 Unocal Corp. 44,363
1,400 USX-Marathon Group, Inc. 38,063
-------------
161,689
Paper & Forest Products (1.7%)
-------------------------------------------------------------------------------------------------------------------
1,300 Mead Corp. 37,619
800 Weyerhaeuser Co. 37,550
-------------
75,169
Photography/Imaging (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,100 Eastman Kodak Co. 49,363
Publishing (5.2%)
-------------------------------------------------------------------------------------------------------------------
800 Gannett Co., Inc. 46,400
900 Knight-Ridder, Inc. 45,225
1,200 McClatchy Co. (The) 45,600
500 McGraw-Hill, Inc. 32,094
800 Media General, Inc. Class A 30,400
1,000 Tribune Co. 37,063
-------------
236,782
Railroads (2.8%)
-------------------------------------------------------------------------------------------------------------------
1,800 Burlington Northern Santa Fe Corp. 47,813
1,800 CSX Corp. 45,563
800 GATX Corp. 33,650
-------------
127,026
Real Estate (1.4%)
-------------------------------------------------------------------------------------------------------------------
700 Equity Residential Properties Trust (R) 32,944
800 Kimco Realty Corp. (R) 32,200
-------------
65,144
Retail (5.0%)
-------------------------------------------------------------------------------------------------------------------
2,100 May Department Stores Co. 55,125
600 Payless Shoesource, Inc. (NON) 34,763
1,400 Sears, Roebuck & Co. 41,622
1,900 Supervalu, Inc. 29,213
2,350 TJX Cos., Inc. 64,038
-------------
224,761
Semiconductor (1.7%)
-------------------------------------------------------------------------------------------------------------------
1,000 Novellus Systems, Inc. (NON) 40,938
1,100 Teradyne, Inc. (NON) 34,375
-------------
75,313
Shipping (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,300 CNF Transportation, Inc. 34,694
Technology Services (3.9%)
-------------------------------------------------------------------------------------------------------------------
600 Affiliated Computer Services, Inc. Class A (NON) 33,413
900 Computer Sciences Corp. (NON) 56,700
2,400 Keane, Inc. (NON) 31,200
1,200 Symbol Technologies, Inc. 54,525
-------------
175,838
Textiles (0.8%)
-------------------------------------------------------------------------------------------------------------------
900 Liz Claiborne, Inc. 38,250
Tobacco (1.2%)
-------------------------------------------------------------------------------------------------------------------
2,200 UST, Inc. 55,550
Toys (0.9%)
-------------------------------------------------------------------------------------------------------------------
3,300 Mattel, Inc. 42,694
Trucks & Parts (0.9%)
-------------------------------------------------------------------------------------------------------------------
700 Johnson Controls, Inc. 41,724
-------------
Total Common Stocks (cost $4,180,224) $ 4,482,033
<CAPTION>
SHORT-TERM INVESTMENTS (1.6%) (a) (cost 73,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 73,000 Interest in $680,000,000 joint repurchase agreement
dated October 31, 2000 with Morgan Stanley & Co.,
Inc. due November 1, 2000 with respect to various
U.S. Government obligations -- maturity value of
$73,013 for an effective yield of 6.60% $ 73,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $4,253,224) (b) $ 4,555,033
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,533,216.
(b) The aggregate identified cost on a tax basis is $4,253,163,
resulting in gross unrealized appreciation and depreciation of $338,609
and $36,739, respectively, or net unrealized appreciation of $301,870.
(NON) Non-income-producing security.
(R) Real Estate Investment Trust.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $4,253,224) (Note 1) $4,555,033
-------------------------------------------------------------------------------------------
Cash 912
-------------------------------------------------------------------------------------------
Dividends and interest receivable 4,381
-------------------------------------------------------------------------------------------
Receivable for securities sold 59,162
-------------------------------------------------------------------------------------------
Total assets 4,619,488
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 71,775
-------------------------------------------------------------------------------------------
Payable for compensation of manager (Note 2) 2,419
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 955
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 395
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 13
-------------------------------------------------------------------------------------------
Other accrued expenses 10,715
-------------------------------------------------------------------------------------------
Total liabilities 86,272
-------------------------------------------------------------------------------------------
Net assets $4,533,216
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4, and 5) $3,730,478
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 9,796
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 491,133
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 301,809
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $4,533,216
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($4,533,216 divided by 434,992 shares) $10.42
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.42)* $11.06
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended October 31, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends $ 45,169
-------------------------------------------------------------------------------------------
Interest 2,225
-------------------------------------------------------------------------------------------
Total investment income 47,394
Expenses:
-------------------------------------------------------------------------------------------
Compensation of manager (Note 2) 14,088
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,892
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,124
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 20
-------------------------------------------------------------------------------------------
Reports to shareholders 2,403
-------------------------------------------------------------------------------------------
Auditing 12,701
-------------------------------------------------------------------------------------------
Legal 2,076
-------------------------------------------------------------------------------------------
Other 863
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by manager (Note 2) (16,041)
-------------------------------------------------------------------------------------------
Total expenses 20,126
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,135)
-------------------------------------------------------------------------------------------
Net expenses 17,991
-------------------------------------------------------------------------------------------
Net investment income 29,403
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 297,661
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 199,657
-------------------------------------------------------------------------------------------
Net gain on investments 497,318
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $526,721
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period
November 1, 1999
Six months ended (commencement of
October 31 operations)
2000* to April 30, 2000
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
------------------------------------------------------------------------------------------------------
Operations:
------------------------------------------------------------------------------------------------------
Net investment income $ 29,403 $ 19,578
------------------------------------------------------------------------------------------------------
Net realized gain on investments 297,661 193,472
------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 199,657 102,152
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 526,721 315,202
------------------------------------------------------------------------------------------------------
Distributions to shareholders:
------------------------------------------------------------------------------------------------------
From net investment income (19,850) (19,335)
------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 180,573 549,905
------------------------------------------------------------------------------------------------------
Total increase in net assets 687,444 845,772
Net assets
------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 3,845,772 3,000,000
------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $9,796 and $243, respectively) $4,533,216 $3,845,772
------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
--------------------------------------------------------------
Six months
ended For the period
Per-share October 31 Nov. 1, 1999+
operating performance (Unaudited) to April 30
--------------------------------------------------------------
2000 2000
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $9.24 $8.50
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (a)(d) .07 .05
--------------------------------------------------------------
Net realized and unrealized
gain on investments 1.16 .74
--------------------------------------------------------------
Total from
investment operations 1.23 .79
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.05) (.05)
--------------------------------------------------------------
Net asset value,
end of period $10.42 $9.24
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) 13.36* 9.38*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $4,533 $3,846
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .50* .50*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) .73* .62*
--------------------------------------------------------------
Portfolio turnover (%) 61.77* 48.32*
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses for the fund for the period
ended October 31, 2000 and April 30, 2000 reflect a reduction of $.04
and $ .03 per share, respectively.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Mid Cap Value Fund (the "fund") is one of a series of Putnam
Investment Funds (the "Trust"), which is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund seeks capital appreciation by investing
primarily in common stocks of small companies which Putnam Investments
Management, Inc. ("Putnam Management"), the fund's manager, a
wholly-owned subsidiary of Putnam Investments, Inc. believes are
currently undervalued. The fund seeks current income as a secondary
objective.
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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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 sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at amortized
cost, which approximates market value. Other investments, including
restricted securities, are stated at fair 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 Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. 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). Gains or losses on securities sold are determined
on the identified cost basis. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Non-cash
dividends, if any, are recorded at the fair market value of the
securities received.
E) 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 October 31, 2000, the fund had no borrowings against the line of
credit.
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, 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.
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 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.
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.
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: 070% of the
first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion, and 0.43% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through April 30, 2001, to the
extent that expenses of the fund (exclusive of brokerage commissions,
interest, taxes, deferred organizational and extraordinary expense,
credits from Putnam Fiduciary Trust Company (PFTC), a subsidiary of
Putnam Investments, Inc. and payments under the Trust's distribution
plan) would exceed an annual rate of 1.00% of he fund's average net
assets.
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 subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended October 31, 2000, fund expenses were reduced by
$2,135 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 $100
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan
is to compensate Putnam Retail Management, Inc., a wholly-owned
subsidiary of Putnam Investments, Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The Plan
provides for payment by the fund to Putnam Retail Management, Inc., at
an annual rate of up to 0.35% of the fund's average net assets.
Currently, no payments are being made on the plan.
For the six months ended October 31, 2000, Putnam Retail Management,
Inc., acting as underwriter received no net commissions from the sale of
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of shares. For the six months ended October 31, 2000, Putnam
Retail Management, Inc., acting as underwriter received no monies on
redemptions.
Note 3
Purchases and sales of securities
During the six months ended October 31, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $3,028,525 and $2,821,547, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
October 31,2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 80,976 $785,970
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,078 19,850
---------------------------------------------------------------------------
83,054 805,820
Shares
repurchased (64,338) (625,247)
---------------------------------------------------------------------------
Net increase 18,716 $180,573
---------------------------------------------------------------------------
For the period
November 1, 1999
(commencement of operations) to
April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 63,199 $548,188
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,269 19,335
---------------------------------------------------------------------------
65,468 567,523
Shares
repurchased (2,133) (17,618)
---------------------------------------------------------------------------
Net increase 63,335 $549,905
---------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The Trust was established as a Massachusetts business trust on October
31, 1994. During the period October 31, 1994 to November 1, 1999, the
fund had no operations other than those related to organizational
matters, including the initial capital contribution of $3,000,000 and
the issuance if 352,941 shares to Putnam Retail Management, Inc., a
wholly-owned subsidiary of Putnam Investments, Inc. on October 29, 1999.
At October 31, 2000, Putnam Investments, Inc. owned 356,977 shares of
the fund (82.1% of shares outstanding), valued at $3,719,700.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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 J. Hoey
Vice President and Fund Manager
Edward T. Shadek, Jr.
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Midcap
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' Web site:
www.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
66583 2OV 12/00
