Putnam
New Value
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
2000. In the following report, the fund's manager discusses performance
for the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam New
Value Fund that I will be signing. After more than 30 years as Chairman of
the Trustees and President of the Putnam Funds, the time has come for me
to step aside. In June, John Hill will become Chairman. John is currently
an independent Trustee and has served on the board for the past 14 years.
In addition, my son, George Putnam, III, will take on the role of
President. I am confident that the leadership of the funds will be in
exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 19, 2000
Report from the Fund Manager
David L. King
The first six months of Putnam New Value Fund's 2000 fiscal year reflected
the push and pull of the "new economy." Rising interest rates undercut
stock prices for most companies, while technology stocks, appearing
impervious to the onslaught, continued to thrive. As investors chased
rapid growth, they tended to abandon traditional measures of stock
valuation and traditional companies as well.
Because your fund is committed to selecting stocks using a disciplined
investment strategy focused on value stocks, results for the period were
disappointing. We must point out, however, that this unusual environment
has also provided us with a rare opportunity to purchase top-quality
stocks at the lowest prices seen in years. Shortly after the end of your
fund's fiscal midpoint, the market showed signs of broadening, and many of
these holdings rebounded strongly. We continue to believe that over the
long term, a diversified portfolio of value-priced stocks with attractive
dividend yields and future earnings power can outperform over a market
cycle.
Total return for 6 months ended 2/29/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -------------------------------------------------------------------------
-15.04% -19.91% -15.36% -19.12% -15.39% -16.13% -15.26% -18.21%
- -------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* NEW ECONOMY CHARACTERIZED BY MARKET ANOMALIES
Market trends over the semiannual period challenged traditional market
logic. Share prices for many stocks became unhinged from their fundamental
values. Established companies with long histories of strong earnings
growth and healthy dividends fell out of favor, while their new-economy
counterparts, offering not a hint of current profits, have been wildly
pursued and their share prices have soared. While hefty stock prices are
nothing new, we considered it unusual to see such high valuations at a
time when the Federal Reserve Board was nudging up interest rates in an
effort to slow the economy.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banking 10.1%
Oil and gas 9.9%
Financial 6.5%
Computers 5.7%
Regional Bells 5.7%
Footnote reads:
*Based on net assets as of 2/29/00. Holdings will vary over time.
Generally interest-rate increases deliver a more potent blow to growth
companies than to dividend-paying value companies. Growing companies
funding vital new initiatives through the issuance of debt face higher
costs when interest rates rise. However, because many new technology
companies are funded by venture capital rather than by bond issues, they
have been less vulnerable to rising rates. In recent months, as rates
edged up, share prices for all but high-growth stocks declined. While the
broader economy began to slow, growth stocks, led by technology, continued
their dramatic rise. At the end of the period, despite a contradictory
boom in technology stocks, it appeared that the broader market had
succumbed to Fed Chairman Alan Greenspan's big bear hug; all but a few of
the stocks in the Dow Jones Industrial Average were down for the year and
down well below their 52-week highs.
In other words, the market has become more speculative and investors have
focused on a narrower band of industries. While growth stocks have been in
favor, investors' preference for only the fastest growing stocks among
that group has been notable. Excitement about the Internet and related
technologies made traditional companies and their products seem boring by
comparison. The short-term vision reflected in these market conditions
gave us reason to anticipate they cannot last indefinitely. Indeed,
shortly into the second half of the fund's fiscal year, a record one-day
jump in the Dow followed by smaller upticks signaled the market was
broadening again.
* LOW VALUATIONS DO NOT SIGNAL LOW QUALITY
As value investors, we buy companies that are currently out of favor when
we believe that they offer a promise of price appreciation over the long
term. Your fund's investment strategy is somewhat more aggressive than
other value funds. When we believe the potential rewards justify the added
risk, we may purchase stocks of companies whose path to recovery is less
certain. Indeed, some stocks may well turn out to have more profound
fundamental problems than we had expected, and that may hurt fund
performance.
"Our ability to buy extremely high-quality companies that meet the criteria of
this fund has never before been what it is today."
- -- David L. King, portfolio manager
We believe it is important to note, however, that recent underperformance
in most of the fund's holdings cannot be linked to any particular problems
at these companies. Most of our selections have met or exceeded their
earnings targets and have had attractive valuations. The fund's
disappointing performance over the period has been largely the result of
the market's assignment of lower values to traditional, old economy
companies and the impact of rising interest rates.
* BARGAINS ABOUND IN MARKETPLACE
Perhaps the cloud over value investing is beginning to show a silver
lining. Recent low valuations across the board made it possible to buy the
best companies in a wide range of industries at significant discounts.
Many extraordinarily strong companies with depressed prices declined to
the point at which they met the fund's buying criteria. We have not
experienced such positive buying opportunities in more than 20 years.
Avery Dennison Corp., best known for its extensive line of adhesive
labels, exemplifies the kind of company we are now adding to the
portfolio. This traditional old economy company is benefiting from the
explosion in Internet retail sales and home computing.
As consumers have embraced online shopping, the demand for package labels
has grown significantly, securing Avery's dominance in that market. Sales
of the company's office supplies continue to expand as more people conduct
work from their homes. The company has also made great strides with the
introduction of a special, printable adhesive film that transforms many of
our subway cars and city buses into rolling billboards. Avery is doing all
the things that a growing company should do -- stepping up earnings,
boosting dividends, and buying back shares. We consider it one of the
strongest companies in the portfolio.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Exxon Mobil Corp.
Oil and gas
Citigroup, Inc.
Financial
SBC Communications, Inc.
Regional Bells
GTE Corp.
Regional Bells
Hewlett-Packard Co.
Computers
Boeing Co.
Aerospace/defense
Bank of America Corp.
Banking
Royal Dutch Petroleum Co. Plc ADR
Oil and gas
DPL, Inc.
Electric utilities
Union Pacific Corp.
Railroads
Footnote reads:
These holdings represent 24.9% of the fund's net assets as of 2/29/00.
Portfolio holdings will vary over time.
Another fund holding, NCR Corporation, is an inexpensive technology stock
positioned to benefit from its strength in data warehousing. This
flourishing branch of technology involves collecting and implementing
information that enables businesses to offer customers more personalized
services, based on individual spending habits. NCR currently provides data
warehousing services to large, traditional retail chains. As the ranks of
Internet retailers swell, the competitiveness of such companies may depend
on their ability to offer customized services made possible by NCR's data
warehousing capabilities.
A third recent addition, Emerson Electric, was once a television
manufacturer. The company has changed its product mix over the years and
currently manufactures power supply components for use by computer and
telecommunications companies. The power supply carries electricity from
the wall receptacle to the computer (or another device). These products
are not high tech, but they are essential, and we believe Emerson will
profit from steadily increasing demand. This exceptional company can boast
42 years of continuous earnings growth. While these holdings, along with
others discussed 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.
* TRADITIONAL MEASURES DRIVE OUR STRATEGY
We continue to believe in the validity of traditional stock valuations.
Our investment decisions are based on tried and true standards that have
proved their worth over the long term. For example, we look for current
yields greater than the current rate of inflation. We buy stocks that
offer attractive prices relative to their earnings power and private
market values. We believe the prospects for your fund's holdings are
positive and expect that they will benefit from strengthening momentum in
global markets.
Further actions by the Fed to slow the economy will most likely have some
initial impact on the stocks the fund owns but eventually will begin to
slow capital spending earmarked for technology and telecommunications. We
believe this will prompt a reality check for investors which could lead to
a profound reevaluation downward of these stocks. If the market should
experience an overall drop, we believe the stocks your fund holds will
retain more of their value than more speculative issues.
Although the going has been rough, we firmly believe in a balanced
investment approach that includes value stocks. We continue to stress
time, not timing. As the market once again embraces value stocks, your
fund should be uniquely positioned to return positive performance over the
long term.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 2/29/00, 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 midsize companies. Such investments increase the
risk of greater price fluctuations.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam New Value
Fund is designed for investors seeking long-term capital appreciation through
investments in undervalued common stocks.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 2/29/00
Class A Class B Class C Class M
(inception dates) (1/3/95) (2/26/96) (7/26/99) (2/26/96)
NAV POP NAV CDSC NAV CDSC NAV POP
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months -15.04% -19.91% -15.36% -19.12% -15.39% -16.13% -15.26% -18.21%
- -------------------------------------------------------------------------------------------
1 year -12.67 -17.69 -13.28 -17.14 -13.34 -14.11 -13.13 -16.17
- -------------------------------------------------------------------------------------------
Life of fund 83.67 73.08 76.51 75.51 76.55 76.55 78.87 72.61
Annual average 12.50 11.22 11.64 11.52 11.65 11.65 11.93 11.16
- -------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/00
Standard & Poor's Consumer
500 Index price index
- -----------------------------------------------------------------------
6 months 4.11% 1.67%
- -----------------------------------------------------------------------
1 year 11.73 3.16
- -----------------------------------------------------------------------
Life of fund 227.16 13.18
Annual average 25.80 2.43
- -----------------------------------------------------------------------
Past performance is no indication 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
(where 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. For a portion of these periods the fund was offered
on a limited basis and had limited assets.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 2/29/00
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1 1
- ------------------------------------------------------------------------------
Income $0.164 $0.049 $0.149 $0.084
- ------------------------------------------------------------------------------
Capital gains
Long-term 0.577 0.577 0.577 0.577
- ------------------------------------------------------------------------------
Short-term 0.815 0.815 0.815 0.815
- ------------------------------------------------------------------------------
Total $1.556 $1.441 $1.541 $1.476
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
8/31/99 $13.98 $14.83 $13.80 $13.97 $13.88 $14.38
- ------------------------------------------------------------------------------
2/29/00 10.47 11.11 10.38 10.43 10.43 10.81
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (1/3/95) (2/26/96) (7/26/99) (2/26/96)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 0.94% -4.88% 0.57% -3.90% 0.49% -0.40% 0.69% -2.86%
- ------------------------------------------------------------------------------------------
1 year -5.55 -10.96 -6.24 -10.40 -6.24 -7.06 -6.03 -9.31
- ------------------------------------------------------------------------------------------
Life of fund 106.83 94.90 98.78 97.78 98.72 98.72 101.51 94.46
Annual average 14.88 13.58 14.01 13.90 14.00 14.00 14.31 13.53
- ------------------------------------------------------------------------------------------
</TABLE>
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
Standard & Poor's 500 Index is an index of common stocks frequently used
as a general measure of stock market performance.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Welcome to www.putnaminv.com
Now you can use your PC to get up-to-date information about your funds, learn
more about investing and retirement planning, and access market news and
economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
Putnam's Capital Markets outlook, search for a particular fund by name or
objective, use our glossary to decode investment terms . . . and much more.
The site can be accessed through any of the major online services (America
Online, CompuServe, Prodigy) that offer web access. Of course, you can also
access it via Netscape or Microsoft Internet Explorer, using an independent
Internet service provider.
New features will be added to the site regularly. So be sure
to bookmark us at http://www.putnaminv.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
February 29, 2000 (Unaudited)
COMMON STOCKS (97.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
356,300 Boeing Co. $ 13,138,563
Automotive (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
82,100 General Motors Corp. 6,244,731
227,600 Lear Corp. (NON) 4,808,050
--------------
11,052,781
Banking (10.1%)
- --------------------------------------------------------------------------------------------------------------------------
255,100 Bank of America Corp. 11,750,544
237,300 BB&T Corp. 5,576,550
450,700 Charter One Financial, Inc. 7,098,525
332,500 Firstar Corp. 5,922,656
210,000 FleetBoston Financial Corp. 5,722,500
16,800 M & T Bank Corp. 6,199,200
284,900 National City Corp. 5,484,325
156,100 PNC Bank Corp. 6,039,119
213,500 Washington Mutual, Inc. 4,723,688
--------------
58,517,107
Beverage (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
601,500 Pepsi Bottling Group, Inc. (The) 10,075,125
Chemicals (5.1%)
- --------------------------------------------------------------------------------------------------------------------------
118,200 Avery Dennison Corp. 7,173,263
75,900 Dow Chemical Co. 8,235,150
426,900 Engelhard Corp. 5,816,513
215,200 Monsanto Co. 8,352,450
--------------
29,577,376
Commercial and Consumer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
380,200 Service Corp. International 1,401,988
Computers (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
103,200 Hewlett-Packard Co. 13,880,400
59,100 IBM Corp. 6,028,200
213,500 NCR Corp. 8,099,656
474,500 Quantum Corp. (NON) 4,922,938
--------------
32,931,194
Consumer Goods (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
142,000 Kimberly-Clark Corp. 7,339,625
Electric Utilities (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
529,200 DPL, Inc. 11,377,800
332,500 Entergy Corp. 6,733,125
--------------
18,110,925
Electrical Equipment (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
129,400 Emerson Electric Co. 5,895,788
195,100 Rockwell International Corp. 8,828,275
--------------
14,724,063
Energy (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
124,400 Schlumberger Ltd. (NON) 9,190,050
152,100 Transocean Sedco Forex Inc. 5,998,444
--------------
15,188,494
Financial (6.5%)
- --------------------------------------------------------------------------------------------------------------------------
279,600 Associates First Capital Corp. 5,557,050
333,400 Citigroup, Inc. 17,232,613
176,400 Fannie Mae 9,349,200
170,000 Household International, Inc. 5,429,375
--------------
37,568,238
Food (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
237,300 Nabisco Holdings Corp. Class A 6,941,025
Health Care Services (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
118,200 CIGNA Corp. 8,724,638
295,500 Tenet Healthcare Corp. (NON) 5,171,250
--------------
13,895,888
Insurance (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
146,400 American General Corp. 7,640,250
339,600 Travelers Property Casualty Corp. 10,739,850
--------------
18,380,100
Investment Banking/Brokerage (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
94,400 Lehman Brothers Holding, Inc. 6,844,000
Lodging/Tourism (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
332,500 Starwood Hotels & Resorts Worldwide, Inc. 7,460,469
Manufacturing (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
213,500 Cooper Industries, Inc. 6,458,375
Media (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
102,400 Seagram Co., Ltd. (Canada) (NON) 6,016,000
Medical Technology (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
79,400 Baxter International, Inc. 4,327,300
44,800 Becton, Dickson and Co. 1,391,600
--------------
5,718,900
Metals (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
80,300 Alcoa Inc. 5,500,550
Natural Gas Utilities (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
498,300 Sempra Energy 8,969,400
200,000 Williams Cos., Inc. 8,362,500
--------------
17,331,900
Oil & Gas (9.9%)
- --------------------------------------------------------------------------------------------------------------------------
35,000 Atlantic Richfield Co. 2,485,000
80,000 BP Amoco Plc ADR (United Kingdom) 3,760,000
357,200 Conoco, Inc. 6,853,775
284,900 Exxon Mobil Corp. 21,456,523
218,800 Royal Dutch Petroleum Co. Plc ADR (Netherlands) 11,487,000
118,200 Texaco, Inc. 5,607,113
619,800 Union Pacific Resources Group Inc. 5,539,463
--------------
57,188,874
Paper & Forest Products (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
285,800 Boise Cascade Corp. 8,520,413
198,500 Owens-Illinois, Inc. (NON) 2,741,781
356,300 Smurfit-Stone Container Corp. (NON) 4,854,588
--------------
16,116,782
Pharmaceuticals (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
189,700 Abbott Laboratories 6,212,675
213,500 American Home Products Corp. 9,287,250
62,900 Pharmacia & Upjohn, Inc. 2,995,613
--------------
18,495,538
Photography/Imaging (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
118,200 Eastman Kodak Co. 6,774,338
Publishing (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
203,800 Times Mirror Co. Class A 10,393,800
Railroads (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
284,900 Union Pacific Corp. 10,826,200
REIT (Real Estate Investment Trust) (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
190,500 Equity Residential Properties Trust 7,608,094
Regional Bells (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
275,200 GTE Corp. 16,236,800
445,100 SBC Communications, Inc. 16,913,800
--------------
33,150,600
Retail (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
151,700 Federated Department Stores, Inc. (NON) 5,565,494
760,300 K mart Corp. (NON) 6,700,144
142,000 Penney (J.C.) Co., Inc. (NON) 2,236,500
--------------
14,502,138
Software (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
85,600 Computer Associates International, Inc. 5,505,150
Technology Services (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
156,100 Electronic Data Systems Corp. 10,107,475
Telecommunications (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
152,600 ALLTEL Corp. 8,850,800
189,700 AT & T Corp. 9,378,294
--------------
18,229,094
Waste Management (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
878,400 Republic Services, Inc. (NON) 9,552,600
332,500 Waste Management, Inc. 4,987,500
--------------
14,540,100
--------------
Total Common Stocks (cost $649,457,957) $ 567,610,869
CONVERTIBLE BONDS AND NOTES (1.6%) (a) (cost $14,948,171)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 18,600,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 $ 9,207,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $664,406,128) (b) $ 576,817,869
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $579,662,756.
(b) The aggregate identified cost on a tax basis is $667,828,186 resulting in gross unrealized appreciation and
depreciation of $34,603,676 and $125,613,993 respectively, or net unrealized depreciation of $91,010,317.
(NON) Non-income-producing security.
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 accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 2000 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $664,406,128) (Note 1) $576,817,869
- -----------------------------------------------------------------------------------------------
Cash 1,365,727
- -----------------------------------------------------------------------------------------------
Dividends and other receivables 1,802,702
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,720,926
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 8,824,306
- -----------------------------------------------------------------------------------------------
Total assets 590,531,530
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 6,704,243
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,412,101
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,153,900
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 107,203
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 29,632
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,661
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 400,236
- -----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 2,294
- -----------------------------------------------------------------------------------------------
Other accrued expenses 57,504
- -----------------------------------------------------------------------------------------------
Total liabilities 10,868,774
- -----------------------------------------------------------------------------------------------
Net assets $579,662,756
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $704,820,381
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,558,754
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (39,128,120)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (87,588,259)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $579,662,756
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($278,423,700 divided by 26,594,012 shares) $10.47
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.47)* $11.11
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($274,200,681 divided by 26,412,637 shares)** $10.38
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($2,287,267 divided by 219,344 shares)** $10.43
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($24,751,108 divided by 2,372,510 shares) $10.43
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.43)* $10.81
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 29, 2000 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $5,198) $ 7,903,413
- -----------------------------------------------------------------------------------------------
Interest 1,102,904
- -----------------------------------------------------------------------------------------------
Total investment income 9,006,317
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,487,474
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 594,536
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 11,401
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,136
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 441,970
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,798,238
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 6,502
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 122,329
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 735
- -----------------------------------------------------------------------------------------------
Reports to shareholders 22,580
- -----------------------------------------------------------------------------------------------
Registration fees 229
- -----------------------------------------------------------------------------------------------
Auditing 16,696
- -----------------------------------------------------------------------------------------------
Legal 4,663
- -----------------------------------------------------------------------------------------------
Postage 71,333
- -----------------------------------------------------------------------------------------------
Other 81,894
- -----------------------------------------------------------------------------------------------
Total expenses 5,665,716
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (88,560)
- -----------------------------------------------------------------------------------------------
Net expenses 5,577,156
- -----------------------------------------------------------------------------------------------
Net investment income 3,429,161
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (35,575,635)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (82,233,588)
- -----------------------------------------------------------------------------------------------
Net loss on investments (117,809,223)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(114,380,062)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
February 29 August 31
2000* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 3,429,161 $ 5,638,237
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (35,575,635) 77,023,049
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (82,233,588) 113,799,505
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (114,380,062) 196,460,791
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (4,409,539) (3,503,936)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,333,412) (478,437)
- ---------------------------------------------------------------------------------------------------------------
Class C (15,352) --
- ---------------------------------------------------------------------------------------------------------------
Class M (207,356) (129,575)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (37,427,304) (35,199,845)
- ---------------------------------------------------------------------------------------------------------------
Class B (37,879,799) (37,036,615)
- ---------------------------------------------------------------------------------------------------------------
Class C (143,421) --
- ---------------------------------------------------------------------------------------------------------------
Class M (3,436,189) (3,628,113)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (83,535,416) 3,694,459
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (282,767,850) 120,178,729
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 862,430,606 742,251,877
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,558,754 and $4,095,252, respectively) $579,662,756 $862,430,606
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
. ended For the period
Per-share February 29 January 3, 1995+
operating performance (Unaudited) Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.98 $12.01 $14.63 $11.57 $10.53 $8.50
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .08(c) .15(c) .13(c) .19 (c)(d) .18(d) .15(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments (2.04) 3.27 (1.89) 3.10 1.82 1.88
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (1.96) 3.42 (1.76) 3.29 2.00 2.03
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.16) (.13) (.12) (.09) (.26) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.39) (1.32) (.74) (.14) (.70) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.55) (1.45) (.86) (.23) (.96) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.47 $13.98 $12.01 $14.63 $11.57 $10.53
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (15.04)* 29.23 (12.83) 28.79 20.29 23.88*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $278,424 $400,555 $350,430 $429,246 $97,718 $2,473
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .56* 1.09 1.16 1.22(d) 1.24(d) .51*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .65* 1.04 .89 1.40(d) 2.45(d) 1.67*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.31* 87.23 135.56 65.38 33.57 51.07*
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation during the period. As a result of such limitation, expenses of the fund reflect a reduction of
approximately $0.14 per share for the period ended August 31, 1995. Expenses for the period ended August 31, 1996, reflect a
reduction of $0.01 per class A shares and $0.02 per class B and M shares, respectively. Expenses for the year ended
August 31, 1997 reflect a reduction of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Feb. 26, 1996+
operating performance (Unaudited) Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.80 $11.87 $14.49 $11.52 $10.86
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .03 .04 .02 .09(d) .10(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments (2.01) 3.23 (1.86) 3.08 .56
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (1.98) 3.27 (1.84) 3.17 .66
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.05) (.02) (.04) (.06) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.39) (1.32) (.74) (.14) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.44) (1.34) (.78) (.20) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.38 $13.80 $11.87 $14.49 $11.52
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (15.36)* 28.14 (13.48) 27.79 6.08*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $274,201 $423,948 $355,743 $406,783 $94,370
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .94* 1.84 1.91 1.97(d) 1.04*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .27* .29 .14 .65(d) .88*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.31* 87.23 135.56 65.38 33.57
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation during the period. As a result of such limitation, expenses of the fund reflect a reduction of
approximately $0.14 per share for the period ended August 31, 1995. Expenses for the period ended August 31, 1996, reflect a
reduction of $0.01 per class A shares and $0.02 per class B and M shares, respectively. Expenses for the year ended
August 31, 1997 reflect a reduction of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 July 26,1999+
operating performance (Unaudited) to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $13.97 $15.04
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .04 (.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments (2.04) (1.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (2.00) (1.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.15) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.39) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.54) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.43 $13.97
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (15.39)* (7.12)*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,287 $561
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .94* .19*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .31* (.18)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.31* 87.23
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation during the period. As a result of such limitation, expenses of the fund reflect a reduction of
approximately $0.14 per share for the period ended August 31, 1995. Expenses for the period ended August 31, 1996, reflect a
reduction of $0.01 per class A shares and $0.02 per class B and M shares, respectively. Expenses for the year ended
August 31, 1997 reflect a reduction of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Feb. 26,1996+
operating performance (Unaudited) Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.88 $11.93 $14.55 $11.54 $10.86
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .05 .08 .06 .12(d) .11(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments (2.03) 3.24 (1.87) 3.10 .57
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (1.98) 3.32 (1.81) 3.22 .68
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.08) (.05) (.07) (.07) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.39) (1.32) (.74) (.14) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.47) (1.37) (.81) (.21) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.43 $13.88 $11.93 $14.55 $11.54
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (15.26)* 28.46 (13.25) 28.19 6.26*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $24,751 $37,367 $36,079 $46,761 $11,852
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81* 1.59 1.66 1.72(d) .91*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .40* .54 .39 .91(d) 1.05*(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.31* 87.23 135.56 65.38 33.57
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996, and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation during the period. As a result of such limitation, expenses of the fund reflect a reduction of
approximately $0.14 per share for the period ended August 31, 1995. Expenses for the period ended August 31, 1996, reflect a
reduction of $0.01 per class A shares and $0.02 per class B and M shares, respectively. Expenses for the year ended
August 31, 1997 reflect a reduction of less than a $0.01 per class A, B, and M shares, respectively.
</TABLE>
Notes to financial statements
February 29, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam New Value Fund (the "fund") is one in a series of Putnam Investment
Funds (the "Trust") which is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. The objective of the fund is to seek long term capital
appreciation. This fund pursues its objective by investing primarily in
common stocks that we consider to be undervalued at the time of purchase.
The fund offers class A, class B, class C and class M shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing distribution
fee than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class 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.
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 as 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 sale price on its principal exchange, or if no sales are reported
- -- as in the case of some securities traded over-the-counter -- the last
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.
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 February 29, 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.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $6,425. These expenses have been fully
amortized as of February 29, 2000.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.70% of the first $500
million of average net assets, 0.60% of the next $500 million, 0.55% of
the next $500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion,
0.43% 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 February 29, 2000, fund expenses were reduced by
$88,560 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,068
has been allocated to the fund, and an additional fee for each Trustee's
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 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 Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%,
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 February 29, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $83,232 and $2,641 from
the sale of class A and class M shares, respectively and received $491,128
and $739 in contingent deferred sales charges from redemptions of class B
and 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 February 29, 2000, Putnam Mutual
Funds Corp., acting as underwriter received $7,346 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended February 29, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $306,512,317 and $472,558,694, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At February 29, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,124,142 $ 38,743,879
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,457,345 40,036,081
- -----------------------------------------------------------------------------
6,581,487 78,779,960
Shares
repurchased (8,648,035) (105,517,032)
- -----------------------------------------------------------------------------
Net decrease (2,066,548) $(26,737,072)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,419,351 $107,854,586
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,816,997 36,987,205
- -----------------------------------------------------------------------------
10,236,348 144,841,791
Shares
repurchased (10,746,101) (151,031,295)
- -----------------------------------------------------------------------------
Net decrease (509,753) $ (6,189,504)
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,922,697 $ 35,694,589
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,142,823 36,142,487
- -----------------------------------------------------------------------------
6,065,520 71,837,076
Shares
repurchased (10,370,882) (126,833,922)
- -----------------------------------------------------------------------------
Net decrease (4,305,362) $(54,996,846)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 9,858,611 $143,410,626
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,653,084 34,596,187
- -----------------------------------------------------------------------------
12,511,695 178,006,813
Shares
repurchased (11,767,183) (164,047,031)
- -----------------------------------------------------------------------------
Net increase 744,512 $ 13,959,782
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 191,446 $2,299,560
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 13,434 155,300
- -----------------------------------------------------------------------------
204,880 2,454,860
Shares
repurchased (25,688) (301,278)
- -----------------------------------------------------------------------------
Net increase 179,192 $2,153,582
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to August 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 40,219 $579,630
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
40,219 579,630
Shares
repurchased (67) (973)
- -----------------------------------------------------------------------------
Net increase 40,152 $578,657
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 329,646 $ 4,029,732
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 306,684 3,545,273
- -----------------------------------------------------------------------------
636,330 7,575,005
Shares
repurchased (955,249) (11,530,085)
- -----------------------------------------------------------------------------
Net decrease (318,919) $(3,955,080)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 529,850 $ 7,657,083
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 278,381 3,644,006
- -----------------------------------------------------------------------------
808,231 11,301,089
Shares
repurchased (1,141,744) (15,955,565)
- -----------------------------------------------------------------------------
Net decrease (333,513) $(4,654,476)
- -----------------------------------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
*DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
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 [DBL. DAGGER]
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 [DBL. DAGGER]
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
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 Diversified Income Trust 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.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice 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
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Deborah F. Kuenstner
Vice President
David L. King
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 New Value
Fund. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most
recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA025-59716 274/2BF/2BG 4/00
