Putnam
Natural
Resources
Fund
[Artwork]
Annual Report
August 31, 1994
[Putnam Logo]
Boston * London * Tokyo
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PERFORMANCE HIGHLIGHTS
"Among securities, the common stocks of natural resource companies (gold, tim-
ber, oil, etc.) are often considered as inflation hedges since the value of the
companies. assets should rise during a period of inflation."
- -- David L. Scott, Wall Street Words
"The fund's diversification allows us to take advantage of the strengths of va-
rious natural resources sectors."
- -- Jeanne Mockard, Fund Manager
Performance should always be considered in light of a fund's investment strate-
gy. Putnam Natural Resources Fund is designed for investors seeking capital
appreciation through investments in energy and other natural resources indus-
tries.
FISCAL 1994 RESULTS AT A GLANCE
Class A Class B
Total return: NAV POP NAV CDSC
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12 months ended 8/31/94
(change in value during
period plus reinvested
distributions) -9.67% -14.86% -- --
Life of class B -- -- -0.88% -5.84%
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Share value: NAV POP NAV
8/31/93 $20.51 $21.76 --
2/1/94
(inception of class B shares) -- -- $14.78
8/31/94 14.73 15.63 14.65
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Capital gains
Long- Short-
Distributions No. Income term term Total
- -------------------------------------------------------------------------------
Class A 1 $0.07 $1.659 $1.867 $3.596
Class B 0 -- -- -- --
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Performance data represent past results. For performance over longer periods,
see pages 8 and 9. Effective 2/1/94, the fund began offering class B shares.
POP assumes 5.75% maximum sales charge. CDSC assumes 5% maximum contingent de-
ferred sales charge.
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FROM THE CHAIRMAN [Photograph of George Putnam]
* (C) Karsh, Ottawa
Dear Shareholder:
We have always believed that a mutual fund's name should reflect its investment
focus. Your fund's new name, Putnam Natural Resources Fund, which became offi-
cial on July 1, 1994, acknowledges the broader investment scope that has been
in place for some time. We consider this name a timely and appropriate designa-
tion for the former Putnam Energy-Resources Trust.
It would be pleasing to report as well that the change in name had somehow spa-
red your fund the stock market's unpredictable changes in recent months. Similar
to the behavior of other investments, stocks of companies in the natural resour-
ces industries have not escaped this year's declines. However, stocks in general
have recently shown signs of recovery that we believe bode well for the fund's
potential in 1995.
Continued volatility, rather than a new sustained rise, is the probable theme
for stocks over the months immediately ahead. The Fed will likely continue its
tight rein on credit until it is convinced that the economy's growth has achie-
ved a sustainable rate and inflation fears have been put to rest.
In the report that follows, Fund Manager Jeanne Mockard explains how she respon-
ded to the challenges of 1994 and what she sees in store for the period ahead.
Respectfully yours,
George Putnam
Chairman of the Trustees
October 19, 1994
* (C) Copyright
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REPORT FROM THE FUND MANAGER
JEANNE MOCKARD
While the second half of Putnam Natural Resources Fund's fiscal year continued
the challenges that marked the first half, we believe there are now definite
glimmers of light at the end of the tunnel. Thanks to a more positive environ-
ment for oil and gas stocks and the strategic portfolio shifts we have made to
take advantage of sectors we believe have the strongest potential, your fund's
performance during the period was ahead of most other broadly diversified natu-
ral resources funds tracked by Lipper Analytical Services.
Your fund's -9.67% total return for class A shares at net asset value over the
full fiscal year ended August 31, 1994, is certainly disappointing. However, a
comparison of its results for the calendar year through the end of August -- up
1.94% for class A shares at net asset value -- with those of several other fund
categories tracked by Lipper should provide some encouragement. Over the first
eight months of 1994, the average growth fund was up 0.96%, the average capital
appreciation fund was down 0.75%, and the average utility fund was down 6.03%.
AN UPTURN IN OIL STOCKS
In the fund's semiannual report, we anticipated -- and have since taken advanta-
ge of -- a more positive environment for oil stocks. This shift is attributable
to two key factors: strengthening economies around the world and cost-cutting/
consolidation trends among oil-related companies.
Over the past two years, a number of large oil companies, such as Chevron, have
made significant operational changes that are allowing them to increase their
efficiency, reduce operating costs, and deploy assets more profitably. We have
also seen consolidation and cooperation among oil services and exploration com-
panies, which have enabled individual companies to downscale while increasing
their profits.
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Oil, more than natural gas, tends to prosper in a rising economy. As consumer
confidence increases, people will drive more, buy new cars, or even acquire
additional vehicles. Industries are more dependent on oil than gas for manufac-
turing, as well as transportation. Therefore, the strengthening of economies
worldwide is an indication of increasing demand for oil, and can signal a posi-
tive long-term performance for oil stocks.
Although consumers, investors, and businesses may continue to feel some effects
of this year's increases in interest rates, the U.S. economy is still showing
signs of improvement. Most European economies appear to be on the upswing after
an apparent bottoming-out. Meanwhile, less-developed countries are industriali-
zing at an accelerated pace; China, for example, is creating an infrastructure
from the ground up. If even a fraction of the households in China were to acqui-
re automobiles, the impact on world oil consumption would be substantial.
(Bar Chart)
TOP INDUSTRY SECTORS*
Oil and gas 39.3 %
Chemicals 8.2 %
Paper 6.4 %
Oil Services 6.3 %
Railroads 5.9 %
* Based on net assets on 8/31/94.
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ACTIVE MANAGEMENT HELPS FUND PROFIT FROM
SHORT-TERM EVENTS
Short-term events such as this summer's oil strike in Nigeria -- which caused a
spike in oil prices -- are a good example of how we adjust the fund's holdings
to benefit from price swings. Before the strike, oil prices were on the rise,
moving up from $14 to $17 a barrel. We added to the fund's oil-related holdings
prior to this move. Then, when the Nigerian strike briefly forced oil prices up
to $20 a barrel, we took the opportunity to trim the fund's oil holdings in an-
ticipation of forthcoming price declines.
The opportunity to benefit from events like these is one reason why your fund
investment can be a valuable hedge against inflation. While unexpected inflation
can be detrimental to general securities prices -- as we have seen over the past
six months -- the value of oil companies. assets, like those of other natural
resource companies, tends to increase during periods of inflation. Your fund's
ability to diversify should enable us to take further advantage of appreciation
in different sectors of natural resources.
DIVERSIFICATION PROVIDES PROTECTION AGAINST
MARKET DECLINES
The fund's ability to diversify now allows us to shift assets into and out of
various sectors as opportunities arise. While oil and gas still make up the lar-
gest portion of the portfolio, we've participated in recent price advances in
all grades of paper, as well as the increased demand for certain chemical commo-
dities. This flexibility can be an important benefit for the fund's sharehol-
ders.
Prices of commodities such as oil, gas, paper, gold, and other metals don't all
move at the same time. Instead, they tend to follow a chain of events. Gold,
which does not tend to trade on supply and demand, often rises with anticipated,
rather than actual, inflation. This occurred during the first half of the fund's
fiscal year. Later, chemical stocks, then paper-related stocks, began to appre-
ciate, reflecting the economy's growing strength.
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TOP 10 HOLDINGS* (8/31/94)
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EXXON CORP.
Crude oil, natural gas, chemicals
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ATLANTIC RICHFIELD
Oil, gas, chemicals and coal
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CHEVRON INC.
Petroleum, crude oil, natural gas, refined products
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PHILLIPS PETROLEUM CO.
Crude oil, natural gas, plastics, petrochemicals
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UNION CARBIDE CORP.
Petrochemicals, plastics, specialty chemicals
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IMPERIAL OIL LIMITED
Crude oil, natural gas, petroleum, chemicals
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SCHLUMBERGER LTD.
Wellsite and drilling services for the oil and natural gas industries
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OLIN CORP.
Chemicals and metal products
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ILLINOIS CENTRAL CORP.
Operates midwestern rail system
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LOUISIANA LAND & EXPLORATION CO.
Crude oil, natural gas, and operates small refinery
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* These holdings represent 25.1% of the fund's net assets. Portfolio holdings
are subject to change.
OUTLOOK: SEEKING OPPORTUNITIES IN ALL NATURAL
RESOURCES SECTORS
We continue to look for the potential in every sector of the natural-resources
market to allow the fund to participate in the changing strengths of each, while
dampening the effects of the downside. Understanding that all stocks are cycli-
cal, we watch the end markets carefully. The demand for cars and appliances, for
example, has a profound impact on the potential for steel and aluminum stocks.
In light of our positive long-term outlook for oil, we expect to continue our
focus on energy holdings -- currently 50% of the portfolio's assets -- into fis-
cal 1995. However, we will remain watchful for opportunities that arise in other
natural resource sectors and will position the portfolio to take full advantage
of them.
The views expressed about the companies mentioned in this report are exclusively
those of Putnam Management, and are not meant as investment advice. Although the
described holdings were viewed favorably as of August 31, 1994, there is no gua-
rantee the fund will continue to hold these securities in the future.
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PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time, assum-
ing you held the shares through the entire period and reinvested all distribu-
tions back into the fund. We show total return in two ways: on a cumulative
long-term basis and on average how the fund might have grown each year over va-
rying periods. For comparative purposes, we show how the fund performed relative
to appropriate indices and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 8/31/94 Lipper
Natural
Standard Resources
Class A Class B & Poor's *(R) Category
NAV POP NAV CDSC 500 Index Average
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1 year -9.67% -14.86% -- -- 5.51% -3.45%
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5 years 35.30 27.52 -- -- 58.06 30.20
Annual average 6.23 4.98 -- -- 9.59 5.21
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10 years 133.17 119.82 -- -- 299.70 136.65
Annual average 8.83 8.19 -- -- 14.86 8.58
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Life of class
(since 2/1/94) -- -- -0.88% -5.84% 0.19 -1.95
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TOTAL RETURN FOR PERIODS ENDED 9/30/94
(Most recent calendar quarter)
Class A Class B
NAV POP NAV CDSC
- -------------------------------------------------------------------------------
1 year -8.89% -14.13% -- --
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5 years 33.64 25.92 --
Annual average 5.97 4.72 --
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10 years 128.51 115.38 --
Annual average 8.61 7.97 --
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Life of class
(since 2/1/94) -- -- -1.62% -6.54
- -------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan in 1990. Effective 2/1/94 the
fund began offering class B shares. Performance of share classes will differ.
Performance data represent past results. Investment returns and net asset value
will fluctuate so an investor's shares, when sold, may be worth more or less
than their original cost.
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks that is fre-
quently used as a general measure of stock market performance. The index assumes
reinvestment of all distributions and does not take into account brokerage co-
mmissions or other costs. The fund's portfolio contains securities that do not
match those in the index.
LIPPER NATURAL RESOURCES CATEGORY AVERAGE is composed of funds that invest more
than 65% of their equity holdings in common stocks issued by companies in the
energy and natural resources industries. For 1 year, the fund ranked 18th out
of 28 funds, for 5 years, 5th out of 17 funds, and for 10 years, 4th out of 7
funds.
* (R) Registered mark.
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(Line Chart)
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 8/31/84
Lipper
S & P Natural Resources Fund's Class A
500 Index Category Average Shares at POP
84 $ 10,000 $ 10,000 $ 9,425
85 11,823 10,796 10,132
86 16,450 11,428 9,645
87 22,149 17,576 13,973
88 18,165 14,385 12,342
89 25,289 18,624 16,248
90 23,993 19,948 17,826
91 30,469 20,123 19,007
92 32,886 19,762 19,980
93 37,883 24,375 24,334
94 39,970 23,665 21,982
Past performance is no assurance of future results. A $10,000 investment in the
fund's class B shares at inception on 2/1/94 would have been valued at $9,912 by
8/31/94 ($9,416 with a redemption at the end of the period).
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabili-
ties, divided by the number of outstanding shares, not including any initial or
contingent deferred sales charges.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume the maximum 5.75% sales charge.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of shares and assumes redemption at the end of the period. Your
fund's CDSC on class B shares declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer applies.
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LIFE CYCLE INVESTING
As we move through life, our investment needs change. As these needs change, so
does the way we allocate our assets. Here are some basic rules for setting up
and maintaining an investment program and some examples of how assets might be
allocated.
DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or retirement.
EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with longer timelines
and lower for older investors who may depend on their investment for current in-
come.
ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your investable do-
llars should be allocated to each investment category.
CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam's free exchange privilege, you can adjust your own Putnam portfolio
of funds as your financial needs change -- without a service fee.*
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Fund Selector **(TM) can help you make your choi-
ces.
* Putnam reserves the right to change or terminate the exchange privilege. In
some cases, a sales charge may apply. See prospectus for details.
** (TM) Trademark.
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(4 Pie Charts)
FOUR WAYS TO ALLOCATE ASSETS
SEEKING MAXIMUM GROWTH
Risk tolerance:
Generally investors with a higher risk tolerance (often in their 20s and early
30s.)
30% - 40% Growth and income
40% - 50% Growth
5% - 20% Income or tax-free income
SEEKING GROWTH AND SOME INCOME
Risk tolerance:
Generally investors with a high to moderate risk tolerance (often in their late
30s and early 40s)
40% - 50% Growth and income
30% - 40% Growth
10% - 30% Income or tax-free income
SEEKING INCOME AND SOME GROWTH
WITH PROTECTION AGAINST INFLATION
Risk tolerance:
Generally investors with a moderate risk tolerance (often in their late 40s and
50s.)
30% - 40% Growth and income
10% - 20% Growth
25% - 60% Income or tax-free income
SEEKING HIGH CURRENT INCOME AND
PROTECTION AGAINST INFLATION
Risk tolerance:
Generally investors with a moderate to low risk tolerance (often over 60 and
retired)
20% - 30% Growth and income
5% - 10% Growth
40% - 70% Income or tax-free income
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THE PUTNAM FUND SELECTOR *(TM)
The Putnam Fund Selector shows the many opportunities for investors within every
investment strategy. All investors should first accumulate a base of conservati-
ve, cash-equivalent investments. Then, with the help of your investment advisor,
diversify your portfolio by investing in the Putnam Family of Funds.
(Pyramid Graphic)
Risk/Reward
PUTNAM GROWTH FUNDS
PUTNAM GROWTH AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE FUNDS
MOST CONSERVATIVE INVESTMENTS
* (TM) Trademark.
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PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund Diversified Equity Trust
Europe Growth Fund Global Growth Fund
Health Sciences Trust Investors Fund
Natural Resources Fund * New Opportunities Fund
OTC Emerging Growth Fund Overseas Growth Fund
Vista Fund Voyager Fund
PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust Dividend Growth Fund
Equity Income Fund The George Putnam Fund of Boston
The Putnam Fund for Growth and Income Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund American Government Income Fund
Balanced Government Fund Corporate Asset Trust
Diversified Income Trust Federal Income Trust
Global Governmental Income Trust High Yield Advantage Fund
High Yield Trust Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund Municipal Income Fund
Tax Exempt Income Fund Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds +
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio, and Pennsylvania
LIFESTAGE (SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS ++
Putnam money market funds:
Money Market Fund +++
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts **
* Formerly Energy-Resources Trust.
+ Not available in all states.
++ Relative to above.
+++ Formerly Putnam Daily Dividend Trust.
** Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam to obtain a prospectus for any
Putnam fund. It contains more complete information, including charges and
expenses. Read it carefully before you invest or send money.
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REPORT OF INDEPENDENT ACCOUNTANTS
For the Fiscal Year Ended August 31, 1994
To the Trustees and Shareholders of
Putnam Natural Resources Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments owned, 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 Natural Resources Fund ("the
fund"), formerly Putnam Energy Resources Trust, at August 31, 1994, and the re-
sults of its operations, the changes in its net assets, and the financial high-
lights for the periods indicated, in conformity with generally accepted account-
ing principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's ma-
nagement; our responsibility is to express an opinion of these financial state-
ments based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the fi-
nancial statements are free of material misstatements. An audit includes examin-
ing, on a test basis evidence supporting the amounts and disclosures in the fi-
nancial statements, assessing the accounting principles used and significant es-
timates made by management, and evaluating the overall financial statement pre-
sentation. We believe that our audits, which included confirmation of invest-
ments owned at August 31, 1994 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
October 18, 1994
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PORTFOLIO OF INVESTMENTS OWNED
August 31, 1994
Common Stocks (93.6%)(a)
Number of Shares Value
OILS AND GAS (39.3%)(a)
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52,000 Amerada Hess Corp. $ 2,606,500
41,000 Amoco Corp. 2,372,875
45,000 Atlantic Richfield Co. 4,820,625
26,440 British Petroleum Co. PLC ADR(b) 2,009,440
25,000 Burlington Resources Inc. 940,625
108,000 Chevron Corp. 4,576,500
88,000 Diamond Shamrock Inc. 2,365,000
67,300 Elf Aquitane ADR(b) 2,574,225
82,000 Exxon Corp. 4,879,000
96,900 Imperial Oil Ltd. 3,016,013
39,000 Kerr-McGee Corp. 1,896,375
63,000 Louisiana Land & Exploration Co. 2,716,875
70,000 Occidental Petroleum Corp. 1,557,500
50,000 Pennzoil Co. 2,562,500
121,000 Phillips Petroleum Co. 4,008,125
14,000 Royal Dutch Petroleum Co. ADR(b) 1,576,750
75,000 Santa Fe Pacific Corp. 1,612,500
40,000 Sun, Co. Inc. 1,115,000
32,000 Texaco Inc. 1,976,000
300,000 Ulster Petroleum Ltd.(c) 943,740
100,000 Ultramar Corp. 2,612,500
125,000 USX-Marathon Group 2,156,250
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54,894,918
CHEMICALS (8.2%)
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19,000 Dow Chemical Co. 1,427,375
41,000 Grace (W.R.) & Co. 1,650,250
48,000 Olin Corp. 2,760,000
21,000 Rohm & Haas Co. 1,307,250
96,000 Union Carbide Corp. 3,300,000
32,000 Witco Chemical Corp. 984,000
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11,428,875
PAPER (6.4%)
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40,000 Champion International Corp. 1,440,000
13,000 International Paper Co. 1,002,625
10,000 Kimberly-Clark Corp. 593,750
16,000 Scott Paper Co. 1,048,000
13,000 Temple Inland, Inc. 732,875
33,000 Union Camp Corp. 1,662,375
38,000 Weyerhaeuser Co. 1,743,250
14,000 Willamette Industries, Inc. 721,000
--------------
8,943,875
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Common Stocks
Number of Shares Value
OIL SERVICES (6.3%)
- -------------------------------------------------------------------------------
36,600 BJ Services Co.(c) $ 704,550
70,000 Baker Hughes Inc. 1,312,500
75,000 Halliburton Co. 2,268,750
65,700 McDermott International, Inc. 1,716,411
50,000 Schlumberger Ltd. 2,850,000
--------------
8,852,211
RAILROADS (5.9%)
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39,000 Burlington Northern Inc. 2,047,500
87,000 Illinois Central Corp. 2,740,500
20,000 Norfolk Southern Corp. 1,285,000
55,000 Southern Pacific Rail Corp.(c) 1,113,750
18,000 Union Pacific Corp. 1,037,250
--------------
8,224,000
METALS AND MINING (5.9%)
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37,000 American Barrick Resources Corp. 841,750
40,000 Cyprus Amax Minerals Co. 1,300,000
50,000 Euro Nevada Mining Corp. 1,440,305
55,000 Freeport-McMoRan, Inc. 948,750
36,000 Freeport-McMoRan Copper & Gold, Inc. Class A 832,500
90,000 INDRESCO, Inc.(c) 1,192,500
73,000 Placer Dome Inc. 1,660,750
--------------
8,216,555
GAS PIPELINES (5.2%)
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33,000 El Paso Natural Gas Co. 1,084,875
55,400 Panhandle Eastern Corp. 1,211,875
82,000 Sonat, Inc. 2,501,000
115,000 Westcoast Energy, Inc. 1,940,625
16,100 Williams Cos., Inc. 501,113
--------------
7,239,488
STEEL (3.7%)
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200 Carpenter Technology Corp. 13,075
35,000 Inland Steel Industries, Inc.(c) 1,448,125
20,000 Nucor Corp. 1,380,000
31,000 USX-U.S. Steel Group 1,263,250
117,000 Weirton Steel Corp.(c) 1,126,125
--------------
5,230,575
FOREST PRODUCTS (2.7%)
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20,000 Georgia-Pacific Corp. 1,487,500
52,000 Potlatch Corp. 2,288,000
--------------
3,775,500
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Common Stocks
Number of Shares Value
ALUMINUM (1.9%)
- -------------------------------------------------------------------------------
16,000 Aluminum Co. of America $ 1,344,000
24,000 Reynolds Metal Co. 1,317,000
--------------
2,661,000
CONGLOMERATES (1.6%)
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45,000 Tenneco Inc. 2,216,250
COMBINED UTILITIES (0.8%)
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55,000 Pacific Enterprises 1,175,625
PHARMACEUTICALS (0.8%)
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20,000 Bristol-Myers Squibb Co. 1,150,000
FINANCE (0.7%)
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15,000 Morgan (J.P.) & Co., Inc. 988,125
CONSTRUCTION (0.7%)
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14,000 Foster Wheeler Corp. 570,500
21,000 Morrison Knudsen Corp. 378,000
--------------
948,500
COMETICS (0.6%)
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14,000 Avon Products, Inc. 827,750
COMPUTERS (0.5%)
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11,000 IBM Corp. 754,875
FARM EQUIPMENT (0.5%)
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10,000 Deere (John) & Co. 742,500
PUBLISHING (0.5%)
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17,000 Houghton Mifflin Co. 735,250
COAL (0.5%)
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30,000 Pittston Minerals Group 690,000
INSURANCE (0.5%)
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13,000 Aetna Life & Casualty Co. 641,875
BASIC INDUSTRIAL PRODUCTS (0.4%)
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12,000 Parker-Hannifin Corp. 504,000
--------------
TOTAL COMMON STOCKS (cost $125,531,422) $130,841,747
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Convertible Preferred Stocks (1.2%)(a)
Number of Shares Value
OIL AND GAS (0.8%)
- -------------------------------------------------------------------------------
36,364 Arco/Lyondell Co. $2.33 cv. pfd. $ 1,118,193
OILS (0.4%)
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9,100 Ashland Oil $3.125 cv. pfd. 558,513
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,445,990) $ 1,676,706
SHORT-TERM INVESTMENTS (6.1%)(a) (cost $8,487,129)
Principal Amount Value
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$8,486,000 Interest in $300,000,000 joint
repurchase agreement dated August 31,
1994 with Bankers Trust New York Corp.
September 1, 1994 with respect to various
U.S. Treasury obligations.maturity value of
$8,487,129, for an effective yield of 4.79% $ 8,487,129
TOTAL INVESTMENTS
(cost $135,464,541)(d) $141,005,582
(a) Percentages indicated are based on net assets of $139,693,397, which corres-
pond to a net asset value per class A and class B share of $14.73 and
$14.65, respectively.
(b) ADR after the name of a foreign security stands for American Depository Re-
ceipt, representing ownership of foreign securities on deposit with a domes-
tic custodian bank.
(c) Non-income-producing security.
(d) The aggregate identified cost for federal income tax purposes is
$135,889,958 resulting in gross unrealized appreciation and depreciation of
$9,889,932 and $4,774,308 respectively, or net unrealized appreciation of
$5,115,624.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1994
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $135,464,541) (Note 1) $141,005,582
Cash 810
Dividends and other receivables 749,878
Receivable for shares of the fund sold 295,733
- -------------------------------------------------------------------------------
TOTAL ASSETS $142,052,003
LIABILITIES
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased $ 242,744
Payable for securities purchased 1,741,546
Payable for compensation of Manager (Note 2) 232,643
Payable for compensation of Trustees (Note 2) 310
Payable for administrative services (Note 2) 1,567
Payable for distribution fees (Note 2) 85,957
Other accrued expenses 53,839
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 2,358,606
- -------------------------------------------------------------------------------
NET ASSETS $139,693,397
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Notes 4 and 5) $138,173,794
Undistributed net investment income 1,530,057
Distributions in excess of net realized gain on investments (5,551,495)
Net unrealized appreciation of investments 5,541,041
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $139,693,397
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($129,449,311 divided by 8,788,166 shares) $14.73
Offering price per share (100/94.25 of $14.73)* $15.63
Net asset value and offering price per class B share
($10,244,086 divided by 699,173 shares)** $14.65
- -------------------------------------------------------------------------------
* 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.
<PAGE>
<PAGE>
STATEMENT OF OPERATIONS
Year ended August 31 1994
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $127,281) $ 3,116,478
- -------------------------------------------------------------------------------
Interest 27,873
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,144,351
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) $ 876,815
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 169,441
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,875
- -------------------------------------------------------------------------------
Reports to shareholders 39,776
- -------------------------------------------------------------------------------
Auditing 25,592
- -------------------------------------------------------------------------------
Legal 15,257
- -------------------------------------------------------------------------------
Postage 36,545
- -------------------------------------------------------------------------------
Administrative services (Note 2) 8,500
- -------------------------------------------------------------------------------
Distribution fees . class A (Note 2) 329,353
- -------------------------------------------------------------------------------
Distribution fees . class B (Note 2) 30,269
- -------------------------------------------------------------------------------
Registration fees 13,176
- -------------------------------------------------------------------------------
Other 19,016
- -------------------------------------------------------------------------------
TOTAL EXPENSES 1,577,615
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,566,736
- -------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (2,295,993)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments
during the year (11,413,778)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (13,709,771)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(12,143,035)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended August 31
1994 1993
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $ 1,566,736 $ 1,451,512
- -------------------------------------------------------------------------------
Net realized loss on investments (2,295,993) 20,064,518
- -------------------------------------------------------------------------------
Net realized loss on options -- (560,708)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments (11,413,778) 2,837,599
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (12,143,035) 23,792,921
- -------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income -- Class A (1,197,888) (1,156,589)
- -------------------------------------------------------------------------------
From net realized gain on investments --
Class A (18,784,262) (3,199,407)
- -------------------------------------------------------------------------------
In excess of net realized gain
on investments -- Class A (3,255,502) --
- -------------------------------------------------------------------------------
Increase from capital share transactions
(Note 4) 41,489,102 4,443,448
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS 6,108,415 23,880,373
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of year 133,584,982 109,704,609
- -------------------------------------------------------------------------------
END OF YEAR (including undistributed
net investment income of $1,530,057 and
$83,877, respectively) $139,693,397 $133,584,982
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
February 1, 1994
(commencement
of operations) to
August 31 Year ended August 31
1994* 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
Class B Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.78 $20.51 $17.57 $17.74 $17.94 $17.06
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income .13 .19 .23 .35 .46 .49
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.26) (2.37) 3.41 .44 .59 1.13
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.13) (2.18) 3.64 .79 1.05 1.62
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income -- (.19) (.18) (.39) (.52) (.54)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (2.91) (.52) (.57) (.73) (.20)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (.50) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (3.60) (.70) (.96) (1.25) (.74)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.65 $14.73 $20.51 $17.57 $17.74 $17.94
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (b) (0.88)(c) (9.67) 21.79 5.12 6.62 9.72
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,244 $129,449 $133,585 $109,705 $125,607 $137,669
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 1.11(c) 1.24 1.18 1.61 1.53 1.50
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .90(c) 1.24 1.25 2.13 2.65 2.82
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 189.83 189.83 170.54 28.33 38.03 48.19
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
* Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(a) Reflects expense limitations applicable during these periods. As a result of such limitations, expenses of the Fund for the
years ended August 31, 1988 and 1987 and the period ended August 31, 1985, reflect per share reductions of $.01, $.03 and $.03
respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Not annualized.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (Continued)
(For a share outstanding throughout the period)
Nine months
ended
Year ended August 31 August 31
1989 1988 1987 1986 1985
- --------------------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.25 $15.55 $11.14 $11.98 $10.61
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income .45 .37(a) .44(a) .18 .17(a)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.70 (2.22) 4.44 (.75) 1.55
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.15 (1.85) 4.88 (.57) 1.72
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.34) (.41) (.42) (.27) (.35)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.04) (.05) -- --
- --------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.34) (.45) (.47) (.27) (.35)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.06 $13.25 $15.55 $11.14 $11.98
- --------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (b) 31.64 (11.67) 44.87 (4.81) 16.70(c)
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $116,042 $107,932 $146,755 $34,860 $33,995
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 1.40 1.47(a) 1.42(a) 1.77 1.25(a)(c)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.93 2.73(a) 3.46(a) 1.57 1.28(a)(c)
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.29 86.04 179.58 216.22 129.59(c)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
July 31, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. On July 1, 1994, the
fund was renamed Putnam Natural Resources Fund. Prior to July 1, 1994, the fund
was known as Putnam Energy-Resources Trust. The fund continues to seek capital
appreciation by investing primarily in the common stocks of companies in the
energy and natural resources industries, but may also invest a portion of its
assets in other industries and in fixed-income securities.
The fund offers both class A and class B shares. The fund commenced its public
offering of class B shares on February 1, 1994. Class A shares are sold with a
maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares, and
may be subject to a contingent deferred sales charge, if those shares are re-
deemed within six years of purchase. In addition, the Trustees declare separate
dividends on each class of shares. Expenses of the fund are borne pro-rata by
the shareholders of both classes of shares, except that each class bears expen-
ses unique to that class (including the distribution fees applicable to such
class). Each class votes as a class only with respect to its own distribution
plan or other matters on which a class vote is required by law or determined by
the Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated.
The following is a summary of significant accounting policies consistently fo-
llowed by the fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
A SECURITY VALUATION Investments for which market quotations are readily avail-
able are stated at market value, which is determined using the last reported sa-
le price, or, if no sales are reported -- as in the case of some securities tra-
ded over-the-counter -- the last reported bid price, except that certain U.S.
government obligations are stated at the mean between the last reported bid and
asked prices. Market quotations are not considered to be readily available for
some convertible securities; such investments are stated at fair value on the
basis of valuations furnished by a pricing service approved by the Trustees,
which determines valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market value, and
other investments are stated at fair value following procedures approved by the
Trustees. Foreign securities quoted in foreign currencies are translated into
U.S. dollars at the current exchange rate.
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,
<PAGE>
<PAGE>
along with the cash of other registered investment companies managed by Putnam
Investment Management, Inc. (Putnam Management), the fund's Manager, a wholly-
owned subsidiary of Putnam Investments, Inc. and certain other accounts. 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 cus-
todian, receives delivery of the underlying securities, the market value of whi-
ch at the time of purchase is required to be in an amount at least equal to the
resale price, including accrued interest. The fund's Manager 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). In-
terest income is recorded on the accrual basis and 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 OPTION ACCOUNTING PRINCIPLES When the fund writes a call option or put option,
an amount equal to the premium received by the fund is included in the fund's
"Statement of assets and liabilities" as an asset and an equivalent liability.
The amount of the liability is subsequently "marked-to-market" to reflect the
current market value of the option written. The current market value of an op-
tion is the last sale price or, in the absence of a sale, the last offering pri-
ce, except that certain options on U.S. government obligations are stated at
fair value on the basis of valuations furnished by a pricing service approved by
the Trustees. If an option expires on its stipulated expiration date, or if the
fund enters into a closing purchase transaction, the fund realizes a gain (or
loss if the cost of a closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is extingui-
shed. If a written call option is exercised, the fund realizes a gain or loss
from the sale of the underlying security and the proceeds of the sale are in-
creased by the premium originally received. If a written put option is exerci-
sed, the amount of the premium originally received reduces the cost of the secu-
rity that the fund purchases upon exercise of the option. Accordingly, the risk
in writing a call option is that the fund relinquishes the opportunity to profit
if the market price of the underlying security increases and the option is exer-
cised. In writing a put option, the fund assumes the risk of incurring a loss
if the market price of the underlying security decreases and the option is exer-
cised.
The premium paid by the fund for the purchase of a call option or put option is
included in the fund's "Statement of assets and liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option the fund has purchased expires on the stipulated expira-
tion date the fund realizes a loss in the amount of the cost of the option. If
<PAGE>
<PAGE>
the fund enters into a closing sale transaction, it realizes a gain or loss, de-
pending on whether the proceeds from the closing sale are greater or less than
the cost of the option. If the fund exercises a put option, it realizes a gain
or loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If the fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium originally paid.
F FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the In-
ternal 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. There-
fore, no provision has been made for federal taxes on income, capital gains or
unrealized appreciation of securities held and excise tax on income and capital
gains.
G DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date.
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. The differences include treatment of losses on wash sales
transactions and post-October losses. 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 August 31, 1994, the Fund reclassified $191,635 to increase undistributed
net investment income and $191,635 to decrease paid-in capital.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management, for management and investment advisory servi-
ces is paid quarterly based on the average net assets of the fund for the quar-
ter. 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 and 0.50% of any amount over $1.5 billion, subject, under current
law, to reduction in any year to the extent that expenses (exclusive of distri-
bution fees, brokerage, interest, and taxes and credits allowed by PFTC) of the
fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the
next $70 million and 1.5% of any amount over $100 million, and by the amount of
certain brokerage commissions and fees (less expenses) received by affiliates of
the Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative ser-
vices to the fund. The aggregate amount of all such reimbursements is determined
annually by the Trustees. For the year ended August 31, 1994, the fund paid
$8,500 for these services.
Trustees of the fund receive an annual Trustee.s fee of $880 and an additional
fee for each Trustees'
<PAGE>
<PAGE>
meeting attended. Trustees who are not interested persons of the Manager and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
Custodial functions for the fund's assets are being provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servi-
cing agent functions are provided by Putnam Investor Services, a division of
PFTC. Fees paid for these investor servicing and custodial functions for the
year ended August 31, 1994, amounted to $169,441.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended August 31, 1994, have been reduced by credits allowed by
PFTC.
The fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds
Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services pro-
vided and expenses incurred by it in distributing class A shares. The Trustees
have approved payment by the fund to Putnam Mutual Funds Corp. at an annual rate
of 0.25% of the fund's average net assets attributable to class A shares. For
the year ended August 31, 1994, the fund paid $329,353 in distribution fees for
class A shares.
During the year ended August 31, 1994, Putnam Mutual Funds Corp., acting as the
underwriter, received net commissions of $114,585 from the sale of class A sha-
res of the fund.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more. For the
year ended August 31, 1994, Putnam Mutual Funds Corp., acting as the underwri-
ter, received commissions of $852 on such redemptions.
The fund has adopted a separate distribution plan with respect to its class B
shares (the .Class B Plan.) pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Class B Plan is to compensate Putnam Mutual
Funds Corp. for services provided and expenses incurred by it in distributing
class B shares. The Class B Plan provides for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate of up to 1.00% of the fund's average net
assets attributable to class B shares. For the year ended August 31, 1994, the
fund paid Putnam Mutual Funds Corp. distribution fees of $30,269 for class B
shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent deferred
sales charges on its class B shares redemptions within six years of purchase.
The charge is based on declining rates, which begin at 5.00% of the net asset
value of the redeemed shares. For the year ended August 31, 1994. Putnam Mutual
Funds Corp., acting as the underwriter, received contingent deferred sales char-
ges of $5,315 from such redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended August 31, 1994, purchases and sales of investment secu-
rities other than U.S.
<PAGE>
<PAGE>
government obligations and short-term investments aggregated $242,601,792 and
231,546,703, respectively. There were no purchases or sales of U.S. government
obligations during the year. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
NOTE 4
CAPITAL SHARES
At August 31, 1994, there was an unlimited number of shares of beneficial inte-
rest authorized, divided into two classes, class A and class B capital stock.
Transactions in capital shares were as follows:
Year ended August 31
1994
Class A Shares Amount
- -------------------------------------------------------------------------------
Shares sold 5,945,322 $90,135,849
- -------------------------------------------------------------------------------
Shares issued in connection with reinvestment
of distributions 1,449,982 20,229,142
- -------------------------------------------------------------------------------
7,395,304 110,364,991
- -------------------------------------------------------------------------------
Shares repurchased (5,118,928) (78,718,058)
- -------------------------------------------------------------------------------
Net increase 2,276,376 $31,646,933
- -------------------------------------------------------------------------------
Year ended August 31
1993
Class A Shares Amount
- -------------------------------------------------------------------------------
Shares sold 4,060,443 $73,323,992
- -------------------------------------------------------------------------------
Shares issued in connection with reinvestment
of distributions 231,880 3,776,894
- -------------------------------------------------------------------------------
4,292,323 77,100,886
- -------------------------------------------------------------------------------
Shares repurchased (4,025,052) (72,657,438)
- -------------------------------------------------------------------------------
Net increase 267,271 $4,443,448
- -------------------------------------------------------------------------------
February 1, 1994
(commencement of operations)
to August 31, 1994
Class B Shares Amount
- -------------------------------------------------------------------------------
Shares sold 787,844 $11,091,198
- -------------------------------------------------------------------------------
Shares repurchased (88,671) (1,249,029)
- -------------------------------------------------------------------------------
Net increase 699,173 $9,842,169
- -------------------------------------------------------------------------------
NOTE 5
Effective September 1, 1993, Putnam Natural Resources Fund adopted the provi-
sions of the Statement of Position 93-2 "Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain and Return of Capital Distribu-
tions, by Investment Companies (SOP)." The purpose of this SOP is to report the
accumulated net investment income (loss) and accumulated net realized gain
(loss) accounts in such a manner as to approximate amounts available for future
tax distributions (or to offset future realized capital gains ) and to achieve
uniformity in the presentation of distributions by investment companies.
As a result of the SOP, the fund has reclassified $885,697 to increase undistri-
buted net investment income, $487,027 to increase accumulated distributions in
excess of net realized gain on investments, and $398,670 to decrease additional
paid-in capital.
These reclassifications which have no impact on the total net asset value of the
fund are primarily attributable to market discounts and disposition of stock
acquired through a corporate reorganization, which are treated differently in
the computation of distributable income and capital gains under federal income
tax rules and regulations versus generally accepted accounting principles.
<PAGE>
<PAGE>
FEDERAL TAX INFORMATION
The fund paid a net investment income distribution of $0.07 per share, and
$1.867 and $1.659 for short-term and long-term capital gain, respectively, for
class A shares. The fund has designated 67.73% of the "net investment income"
as qualifying for the dividends-received deduction for corporations. The dis-
tribution from long-term capital gains of $1.746 is taxable as "capital gains"
for federal income tax purposes.
The tax status of the distribution paid during calendar 1993 was previously re-
ported to you on Form 1099.
The Form 1099 you will receive in January 1995 will show you, for income tax
purposes, the tax status of all distributions paid to your account in calendar
1994.
If you're a shareholder in an IRA or other tax-sheltered retirement plan, this
statement is for information only and will serve as a record of distributions
reinvested in your account during the fiscal year. Money invested in these plans
generally is not subject to federal income tax until you withdraw it.
As required by law, your fund reports to the Internal Revenue Service on a ca-
lendar year basis the amount of distributions paid to each shareholder.
<PAGE>
<PAGE>
OUR COMMITMENT TO QUALITY SERVICE
CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal every
year since the award's 1990 inception. DALBAR, an independent research firm, ran
more than 10,000 tests of 38 shareholder service components. In every category,
Putnam outperformed the industry standard.
HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month from a
Putnam fund or from your checking or savings account.*
SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of shares
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 their original cost.
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 repre-
sentative.
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.
* Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market. Investors should consider their ability to con-
tinue purchasing shares during periods of low price levels.
<PAGE>
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman William F. Pounds, Vice Chairman
Jameson Adkins Baxter Hans H. Estin
John A. Hill Elizabeth T. Kennan
Lawrence J. Lasser Robert E. Patterson
Donald S. Perkins George Putnam, III
A.J.C. Smith W. Nicholas Thorndike
OFFICERS
George Putnam Charles E. Porter
President Executive Vice President
Patricia C. Flaherty John R. Verani
Senior Vice President Vice President
Lawrence J. Lasser Gordon H. Silver
Vice President Vice President
Peter Carman Brett C. Browchuk
Vice President Vice President
Thomas V. Reilly Jeanne L. Mockard
Vice President Vice President and Fund Manager
William N. Shiebler Paul M. O.Neil
Vice President Vice President
John D. Hughes Beverly Marcus
Vice President and Treasurer Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Natural Resources
Fund. It may also be used as sales literature when preceded or accompanied by
the current prospectus, which gives details of sales charges, investment objec-
tives 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.
<PAGE>
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Bulk Rate
U.S. Postage
Paid
Putnam
Investments
018/14151
<PAGE>
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.
(4) Page numbering has been omitted.
(5) The trademark symbol has been replaced by (TM).
(6) The copyright symbol has been replaced by (C).
(7) The dagger symbol has been replaced by (+).
(8) The registered mark symbol has been replaced by (R).
