PUTNAM
NATURAL
RESOURCES
FUND
ANNUAL REPORT
August 31, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
"[Fund Manager] Jeanne Mockard, who initiated the fund's
diversified natural-resources profile, managed to bring
returns back to par by the end of the year by favoring
paper and chemical stocks, which boomed with the growing
economy . . . Mockard has made other adroit moves that
have contributed to the fund's top-quartile returns this
year."
- -- Morningstar, Inc., August 25, 1995.*
FISCAL 1995 RESULTS AT A GLANCE
<TABLE><CAPTION>
<S> <C> <C> <C>
<C> <C>
CLASS A
CLASS B TOTAL RETURN: NAV POP
NAV CDSC
- ------------------------------------------------------------
- ---------(change in value during
period plus reinvested
distributions)
12 months ended 8/31/95 11.10% 4.70%
10.38% 5.38%
- ------------------------------------------------------------
---------CLASS ACLASS
B CLASS M
SHARE VALUE: NAV POP NAV
NAV POP
- ------------------------------------------------------------
- ---------8/31/94 $14.73 $15.63 $14.65 -
- - --
7/3/95 (Inception of
class M shares) -- -- --
$15.59 $16.16
8/31/95 16.09 17.07 15.94
16.07 16.65
- ------------------------------------------------------------
- ---------DISTRIBUTIONS: NO. INCOME CAPITAL GAINS
TOTAL
- ------------------------------------------------------------
- ---------Class A 1 $0.235 --
$0.235
Class B 1 0.198 --
0.198
- ------------------------------------------------------------
- ---------<FN>
Data above represent past results and are not indicative
of future performance. For performance over longer periods,
see pages 8 and 9.
Effective 7/3/95, the fund began offering class M shares;
performance for these shares is not shown because of the
brevity of the reporting period. POP assumes 5.75% maximum
sales charge for class A and 3.50% for class M shares.
CDSC assumes 5% maximum contingent deferred sales charge.
</TABLE>
* Morningstar is an independent research firm that rates
a fund in
relation to other funds with similar investment
objectives, based on the fund's 3-, 5-, and 10-
year average annual returns, adjusted for risk
factors and sales charges. Past performance is not
indicative of future results.
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF
GEORGE
PUTNAM]
(C)
KARSH,
OTTAWA
DEAR SHAREHOLDER:
PUTNAM MANAGEMENT'S FORECAST FOR THIS YEAR CALLED FOR
CONTINUED IMPROVEMENT IN THE STOCK MARKET, BUT IT CERTAINLY
DID NOT ANTICIPATE THE VIGOR OF THE ADVANCE WE HAVE
ACTUALLY EXPERIENCED. NOW, AS INVESTORS TAKE PROFITS
AND THE SLOWER ECONOMY BEGINS TO REIN IN CORPORATE
EARNINGS GROWTH, THE EXUBERANCE OF 1995'S FIRST HALF HAS
BECOME SOMEWHAT DIMINISHED.
SEVERAL DEVELOPMENTS COULD BRING WITH THEM NEAR-TERM
TURBULENCE. A WEAKENING DOLLAR, A RESURGENCE OF INFLATION
FEARS, OR A DRAMATIC FALL IN EARNINGS COULD CAUSE WAVES
IN THE FINANCIAL MARKETS, SPELLING DIFFICULTY FOR
STOCKS. FOR THE MOST PART, HOWEVER, FUNDAMENTAL
ECONOMIC AND FINANCIAL CONDITIONS APPEAR HEALTHY.
FURTHERMORE, AS THE ELECTION CAMPAIGN SPARKS TAX-CHANGE
PROPOSALS, ANTICIPATION OF MAJOR REFORMS THAT FAVOR SAVING
AND INVESTING MAY SPUR INVESTOR CONFIDENCE. SUCH A PROSPECT
COULD HELP SUSTAIN THE CURRENT MARKET ADVANCE EVEN THOUGH
NO MEANINGFUL LEGISLATION IS LIKELY BEFORE 1997.
IN THE FOLLOWING REPORT, FUND MANAGER JEANNE MOCKARD
REVIEWS YOUR FUND'S PERFORMANCE DURING THE FISCAL YEAR
ENDED AUGUST 31, 1995, AND PRESENTS HER OUTLOOK FOR THE
REMAINDER OF THE CALENDAR YEAR.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
OCTOBER 18, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
JEANNE MOCKARD
The past seven months have witnessed a remarkable rally
in U.S. financial markets, particularly with regard to
domestic stocks. Strong corporate earnings, rising exports,
and investor confidence all have helped drive the share
prices of many companies to new highs. Stocks of both
larger, well-established companies and smaller, innovative
companies have moved dramatically upward over the period.
Many of Putnam Natural Resource Fund's portfolio holdings
were caught up in this momentum, resulting in a
respectable performance for the fiscal year ended August
31, 1995.
Your fund's class A shares rose 11.10%, with class B shares
increasing 10.38%, both at net asset value (NAV). While
these performance numbers fall below the Standard &
Poor's 500(Registered Trademark) Index's
robust rise of 21.42% over the same period, your fund
easily bested the average return of 6.28% of the 33
funds in Lipper Analytical Services' natural resources
category. We anticipate that investors' enthusiasm for
equities should continue in the months ahead, and thus we
are moderately optimistic as the fund's fiscal 1996 begins.
OIL AND GAS COMPANIES: STRONG PERFORMANCE NOW, MORE
OPPORTUNITIES AHEAD
Oil and gas companies currently represent the fund's largest
holdings, as they did throughout the past fiscal year. We
believe this industry is a vital one, with substantial near-
and long-term growth potential. The industrialization and
economic growth of China -- one of the most significant
geopolitical developments in recent years -- is creating a
massive new market thirsty for oil. Similar developments
in India, Indonesia, and Latin America represent still
more demand for fossil fuels over time. In short, as net
exporters of oil become importers, large multinational
energy companies could prove the main
beneficiaries. In recent months, oil and gas stocks have
been steady performers. During the fund's
<PAGE>
fiscal year, a sturdy domestic economy kept fuel demand
up, as did strong economic growth elsewhere in the
developed world.
Careful management and analysis allowed the fund to benefit
from oil equities over the fund's annual period. For
example, we bought and sold Exxon at strategic times over
the fiscal year as it diverged from its traditional
earnings multiples and then moved back into line with
historical valuations. Today, Exxon represents the
fund's largest holding, constituting approximately 6% of
the portfolio.
The near-term outlook for oil and gas companies appears
positive. One demand statistic is particularly telling: the
United States consumes some 3 trillion cubic feet (TCF) of
gas annually. Right now, supply is at 2.4 TCF. Clearly,
there is an immediate need for growth in production of
natural gas. Accordingly, the fund is overweighted in oil
and gas; the sector makes up approximately 40% of the
fund's portfolio with large positions in the stocks of
Atlantic Richfield, Occidental Petroleum, and Texaco.
ALUMINUM DEMAND RISES; PAPER STOCKS BOOM
Over your fund's annual period, a number of holdings in
the metals industry enjoyed solid performance. Aluminum
companies proved robust as global inventories of the
[BAR CHART]
TOP INDUSTRY SECTORS* --------------------------------------
- -------------------------------Energy and energy services
51.3%
Metals and mining 13.8%
Chemicals 7.7%
Basic industrial 5.2%
Forest products 4.8% --------------------------
- -------------------------------------------* Based on net
assets on 8/31/95. Holdings will vary over time.
<PAGE>
ubiquitous metal were low throughout the period. The stock
of Aluminum Company of America, one of the fund's largest
holdings, benefited from this trend.
While steel companies generally had a difficult several
months, we
concentrated on the more robust specialty-steel industry,
a narrow group that contributed favorably to the fund's
performance. The stock of Carpenter Technology, which
manufactures precision stainless steel instruments, rose
nicely over the fund's fiscal year. Your fund was
underweighted in gold during 1994, a situation that
ultimately helped performance; gold had a sometimes
difficult year, despite periodic fears of inflation.
Elsewhere in the portfolio, paper stocks gained as
paper prices climbed to record levels. Many paper producers
in the fund's portfolio were particularly strong during
fiscal 1995. One such holding, Weyerhauser, benefited
from moves toward corporate efficiency. Along with the
installation of a new president and an ambitious cost-
cutting program, the major manufacturer of paper products
has implemented a management system known as "economic
value added" (EVA). The system requires managers to
justify all expenditures on their potential for generating
earnings in excess of their cost. EVA is causing
Weyerhaeuser to evaluate carefully each capital
expenditure's impact on the corporation's profitability.
While the long-term outlook for paper producers appears
strong, we have trimmed some of the fund's holdings
because we believe newsprint (paper supplied to newspapers)
has neared its cyclical price peak. We now have a weighting
in paper stocks (and forest products) similar to that of
other funds in this category, some 5.0% of the fund's
portfolio.
Railroad stocks were also positive performers for
the fund. Consolidation among U.S. railroad operators
contributed to a strong first quarter of 1995. One
railroad company among the fund's top 10 holdings is Union
Pacific, which operates the
<PAGE>
TOP 10 HOLDINGS (8/31/95) ----------------------------------
- ------------------------------------
EXXON CORP.
Major petroleum developer, refiner, and marketer -----------
- -----------------------------------------------------------
ROYAL DUTCH PETROLEUM, ADR
Major petroleum developer, refiner, and marketer -----------
- -----------------------------------------------------------
UNION PACIFIC
Second largest railroad operator with oil and gas trucking -
- ------------------------------------------------------------
- ---------
ALUMINUM CO. OF AMERICA
Leading U.S. aluminum producer -----------------------------
- -----------------------------------------
TEXACO, INC.
Oil company ------------------------------------------------
- ----------------------
UNION CARBIDE
Chemicals and plastics -------------------------------------
- ---------------------------------
FREEPORT-MCMORAN CLASS A
Mineral and diversified mining -----------------------------
- -----------------------------------------
ANADARKO PETROLEUM CORP.
Oil and gas exploration
- ------------------------------------------------------------
- ----------
OCCIDENTAL PETROLEUM
Diversified international energy company -------------------
- ---------------------------------------------------
WEYERHAUSER CO.
Major producer of timber, paper, and paper products --------
- ------------------------------------------------------------
- --
These holdings represent 24.6% of the fund's net assets.
Holdings will vary over time.
second-largest rail system in the United States.
Additionally, the company has holdings that span the
natural resources sector, from petroleum production to
mining to hazardous- waste management.
OUTLOOK: CAUTIOUS OPTIMISM FOR MONTHS AHEAD
We believe that over the long term, natural resources
companies could prove strong investment choices. Supply
and demand characteristics appear to favor many of the
companies in this industry, from energy producers to
metals and mining companies to transportation firms. We
also believe chemical companies are well positioned to
gain from increasing global demand. In short, we consider
this fund an excellent vehicle for accessing long-term
growth in this broad industry sector.
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 8/31/95, there is no
guarantee the fund will continue to hold these securities
in the future.
<PAGE>
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, assuming you
held the shares through the entire period and reinvested
all distributions 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
varying periods.
Performance should always be considered in light of
a fund's
investment strategy. Putnam Natural Resources Fund is
designed for investors seeking capital appreciation
through investments in energy and other natural resources
industries.
TOTAL RETURN FOR PERIODS ENDED 8/31/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LIPPER STANDARD
NATURAL
CLASS A CLASS B & POOR'S
RESOURCES NAV POP NAV CDSC
500 INDEX AVERAGE
- ------------------------------------------------------------
- ---------1 year 11.10% 4.70% 10.38% 5.38%
21.42% 6.28%
- ------------------------------------------------------------
- ---------5 years 36.99 29.15 -- -- 102.28 29.17
Annual average 6.50 5.25 -- -- 15.13 4.98
- ------------------------------------------------------------
- ---------10 years 141.02 127.18 -- -- 310.50 133.06
Annual average 9.20 8.55 -- -- 15.17 8.50
- ------------------------------------------------------------
- ---------Life of class B -- -- 9.41 5.41 21.65 4.85
Annual average -- -- 5.85 3.39 13.21 2.95
- ------------------------------------------------------------
- ----------
TOTAL RETURN FOR PERIODS ENDED 9/30/95
(most recent calendar quarter)
</TABLE>
<TABLE><CAPTION>
<S> <C> <C>
<C> <C>
CLASS A CLASS B
NAV POP
NAV CDSC
- ------------------------------------------------------------
- ---------1 year 12.56% 6.10%
11.70% 6.70%
- ------------------------------------------------------------
- ---------5 years 43.43 35.19 -
- - --
Annual average 7.48 6.22 -
- - --
- ------------------------------------------------------------
- ---------10 years 158.85 144.04 -
- - --
Annual average 9.98 9.33 -
- - --
- ------------------------------------------------------------
- ---------Life of class B -- -- 9.89
5.89
Annual average -- --
5.84 3.51
- ------------------------------------------------------------
- ---------<FN>
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 and
on 7/3/95, class M shares. Performance for class M shares is
not shown because of the brevity of the reporting period.
Performance data differ for each share class and
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. </TABLE>
<PAGE>
<MOUNTAIN CHART>
GROWTH OF A $10,000 INVESTMENT -----------------------------
- ----------------------------------------Date
Fund at POP S&P 500 CPI
8/31/85 $9,425 $10,000 $10,000
8/31/86 $8,972 $13,914 $10,157
8/31/87 $12,998 $18,734 $10,593
8/31/88 $11,481 $15,365 $11,019
8/31/89 $15,114 $21,390 $11,537
8/31/90 $16,583 $20,294 $12,185
8/31/91 $17,681 $25,771 $12,648
8/31/92 $18,586 $27,816 $13,046
8/31/93 $22,637 $32,043 $13,407
8/31/94 $20,448 $33,808 $13,796
8/31/95 $22,717 $41,051 $14,157
- ------------------------------------------------------------
- ---------Past performance is no assurance of future
results. A $10,000 investment in the fundOs class B
shares at inception on 2/1/94 would have been valued at
$10,941 on 8/31/95 ($10,541 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.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1
fee than class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus
any liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus
the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales charge
for class A shares and 3.50% for class M shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of 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.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
The index assumes reinvestment of all distributions and does not take
into account brokerage commissions or other costs. The fund's
portfolio contains securities that do not match those in the index.
LIPPER NATURAL RESOURCES AVERAGE is composed of funds that invest more
than 65% of their equity holdings in the natural resources industries.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
For the Fiscal Year Ended August 31, 1995
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"), at
August 31, 1995, and the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at August 31, 1995 by correspondence
with the custodian provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
October 17, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
August 31, 1995
<TABLE><CAPTION>
<S> <C>
COMMON STOCKS (93.0%)*
NUMBER OF SHARES VALUE
ALUMINUM (3.1%) --------------------------------------------------------
- -------------
64,000 Aluminum Co. of America $3,656,000
24,000 Reynolds Metal Co. 1,434,000
----------
5,090,000
BANKS (1.5%) -----------------------------------------------------------
- ----------
35,000 PNC Bank Corp. 918,750
39,000 Wachovia Corp. 1,550,250
2,469,000 ---
--------
CHEMICALS (7.7%) -------------------------------------------------------
- --------------
19,000 Dow Chemical Co. 1,406,000 19,000
du Pont (E.I.) de Nemours & Co., Ltd. 1,242,125 30,000
Georgia Gulf Corp. 993,750 41,000 Grace
(W.R.) & Co. 2,731,625 21,000 Rohm & Haas
Co. 1,254,750 96,000 Union Carbide Corp.
3,408,000 52,000 Witco Chemical Corp.
1,729,000
----------
12,765,250
COAL (0.5%) -----------------------------------------------------------------
- -----
30,000 Pittston Minerals Group 356,250
33,000 Zeigler Coal Holding Co. 416,625
----------
772,875
CONGLOMERATES (1.3%) --------------------------------------------------------
- --------------
45,000 Tenneco, Inc.
2,182,500
CONSTRUCTION (0.3%) ---------------------------------------------------------
- -------------
14,000 Foster Wheeler Corp. 516,250
CONTAINERS (0.4%) -----------------------------------------------------------
- -----------
13,000 Temple Inland, Inc. 672,750
ENVIRONMENTAL CONTROL (1.0%) ------------------------------------------------
- ----------------------
55,000 WMX Technologies, Inc.
1,615,625
FARM EQUIPMENT (1.4%) -------------------------------------------------------
- ---------------
28,000 Deere (John) & Co.
2,394,000
FINANCE (0.7%) --------------------------------------------------------------
- --------
15,000 Morgan (J.P.) & Co., Inc.
1,093,125
FOOD AND BEVERAGES (2.3%) ---------------------------------------------------
- ------------------
157,500 Archer Daniels Midland Co.
2,618,438 28,000 Pioneer Hi-Bred International,
Inc. 1,204,000
----------
3,822,438
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
FOREST PRODUCTS (2.3%) -------------------------------------------------------
- ---------------
70,000 Fort Howard Corp.+
$1,102,500 10,000 Kimberly-Clark
Corp. 638,750 52,000 Potlatch
Corp. 2,060,500
----------
3,801,750
GAS PIPELINES (4.0%) ---------------------------------------------------------
- -------------
33,000 El Paso Natural Gas Co. 928,125
30,000 Enron Corp.
1,008,750
85,400 Panhandle Eastern Corp.
2,135,000 82,000 Sonat, Inc.
2,603,500
----------6,675,375
GAS UTILITIES (1.3%) ---------------------------------------------------------
- -------------
20,000 Consolidated Natural Gas Co. 772,500
55,000 Pacific Enterprises
1,320,000
----------2,092,500
MACHINERY (1.2%) -------------------------------------------------------------
- ---------
56,000 Harnischfeger Industries, Inc.
2,058,000
METALS AND MINING (7.5%) -----------------------------------------------------
- -----------------
37,000 Barrick Gold Corp. 938,875
40,000 Cyprus Amax Minerals Co.
1,120,000 50,000 Euro Nevada Mining
Corp. 1,936,108
141,374 Freeport-McMoRan Copper & Gold Co., Inc.
Class A
3,304,617
38,595 Freeport-McMoRan Copper & Gold Co.,
Inc. Class B+
902,158
55,000 Freeport-McMoRan, Inc. 309,375
90,000 INDRESCO, Inc.+
1,507,500 73,000 Placer Dome,
Inc. 1,907,125 45,000 Santa Fe Pacific
Gold Corp. 545,625
-----------
12,471,383
OIL AND GAS (38.7%) ---------------------------------------------------------
- -------------
41,000 Amoco Corp.
2,613,750
67,000 Anadarko Petroleum Corp.
3,199,250 27,000 Atlantic Richfield
Co. 2,946,375 26,828 British Petroleum PLC ADR (United
Kingdom) 2,417,874 58,000 Burlington
Resources, Inc. 2,356,250 55,000
Chevron Corp. 2,660,625 52,000
Coastal Corp. 1,703,000 28,000 Columbia
Gas Systems, Inc.+ 987,000 88,000
Diamond Shamrock, Inc. 2,343,000 139,000 Exxon Corp.
9,556,250
19,000 Kerr-McGee Corp.
1,045,000 78,000 Louisiana Land & Exploration
Co. 2,983,500 65,700 McDermott
International, Inc. 1,494,675 16,000 Mobil Corp.
1,524,000
145,000 Occidental Petroleum Corp.
3,153,750 50,000 Pennzoil
Co. 2,200,000 81,000 Phillips
Petroleum Co. 2,662,875 56,000 Repsol
S.A. ADS (Spain) 1,771,000
32,000 Royal Dutch Petroleum Co. PLC ADR
(Netherlands) 3,816,000
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
OIL AND GAS (CONTINUED) -----------------------------------------------------
- -----------------
32,733 Sun Co., Inc. $
871,516 55,000 Texaco, Inc.
3,561,250 46,000 Total Corp. ADR
(France) 1,368,500 125,000 USX-Marathon
Group, Inc. 2,578,125 300,000 Ulster
Petroleum Ltd.+ 1,083,476 100,000
Ultramar Corp. 2,362,500 20,000
Unocal Corp. 582,500
-----------
63,842,041
OIL SERVICES (4.1%) ---------------------------------------------------------
- -------------
36,600 BJ Services Co.+ 915,000
70,000 Baker Hughes, Inc.
1,575,000 62,000 Dresser Industries,
Inc. 1,488,000 43,000
Schlumberger Ltd. 2,773,500
----------
6,751,500
PAPER AND FOREST PRODUCTS (2.5%) --------------------------------------------
- --------------------------
13,000 International Paper Co.
1,064,375 68,000 Weyerhaeuser
Co. 3,128,000
----------
4,192,375
RAILROADS (4.2%) ------------------------------------------------------------
- ----------
12,500 Conrail, Inc. 840,625
20,000 Norfolk Southern Corp.
1,415,000 32,651 Santa Fe Southern Pacific
Corp. 926,472 58,000 Union Pacific
Corp. 3,799,000
----------
6,981,097
REIT'S (3.8%) ---------------------------------------------------------------
- -------
8,900 Debartolo Realty Corp. 125,713
42,000 Equity Residential Properties Trust
1,239,000 58,000 Glimcher Realty
Trust 1,218,000 69,000 Kranzco
Realty Trust 1,207,500 44,000 National Health
Investors, Inc. 1,270,500 56,000 Wellsford
Residential Property Trust 1,211,000
----------
6,271,713
STEEL (3.2%) ----------------------------------------------------------------
- ------
21,000 Carpenter Technology Corp.
1,601,250 35,000 Inland Steel Industries,
Inc. 958,125 20,000 Nucor Corp. 980,000
31,000 USX-U.S. Steel Group
1,015,250 117,000 Weirton Steel
Corp.+ 658,124
----------
5,212,749
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS (cost $141,193,652) $153,744,296
- ----------------------------------------------------------------------
<PAGE>
CONVERTIBLE BONDS AND NOTES (1.7%)*
PRINCIPAL AMOUNT VALUE
OIL AND GAS (1.3%) ----------------------------------------------------------
- ------------
$ 800,000 Apache Corp. 144A cv. sub. deb. 6s, 2002 $
914,000
1,000,000 Pogo Producing Co. sub. notes 5 1/2s, 2004
1,182,500 --------
--2,096,500
TOBACCO (0.4%) --------------------------------------------------------------
- -------
1,000,000 Standard Commercial Corp. cv. sub. deb.
7 1/4s, 2007 743,750
- ----------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS AND NOTES
(cost $2,426,375) $2,840,250
- ---------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (1.4%)*
NUMBER OF SHARES VALUE
OIL AND GAS (1.4%) -----------------------------------------------------------
- -----------
25,000 Ashland, Inc. $3.125, cv. pfd.
$1,331,250
36,364 Atlantic Richfield Co. $2.23 LYON cv. pfd. 972,737
- ----------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $2,400,945) $2,303,987
- ----------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.9%)* (cost $3,073,491)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------
$3,073,000Interest in $514,241,000 joint repurchase agreement dated August 31, 1995
with Morgan (J.P.) & Co. due September 1, 1995 with respect to various U.S. Treasury
obligations--maturity value of $3,073,491 for an effective yield of 5.75%
$3,073,491
- ----------------------------------------------------------------------
Total Investments (cost $149,094,463)*** $161,962,024
- ----------------------------------------------------------------------
<FN>
* Percentages indicated are based on net assets of $165,292,174
which correspond to a net asset value per share of class A, class
B and class M shareholders of $16.09, $15.94 and $16.07
respectively.
+ Non-income-producing security.
*** The aggregate identified cost on a tax cost basis is
$149,101,061, resulting in gross unrealized appreciation and
depreciation of $17,410,711 and $4,549,748, respectively, or
net unrealized appreciation of $12,860,963.
ADR or ADS after the name of a foreign holding stands for
American Depository Receipt or American Depository Shares,
respectively, representing ownership of foreign securities on
deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S>
<C>
ASSETS -------------------------------------------------------------
- --------Investments in securities, at value
(identified cost $149,094,463) (Note 1)
$161,962,024
- --------------------------------------------------------------------
- -Cash
510
- --------------------------------------------------------------------
- -Dividends, interest and other receivables
735,663 ------------------------------------------------------------
- ---------Receivable for shares of the fund sold
3,237,587 ----------------------------------------------------------
- -----------TOTAL ASSETS
165,935,784
LIABILITIES --------------------------------------------------------
- -------------Payable for shares of the fund repurchased
209,331 ------------------------------------------------------------
- ---------Payable for compensation of Manager (Note 2)
282,295 ------------------------------------------------------------
- ---------Payable for investor servicing and custodian fees (Note 2)
36,811
- --------------------------------------------------------------------
- -Payable for compensation of Trustees (Note 2)
301
- --------------------------------------------------------------------
- -Payable for administrative services (Note 2)
1,611
- --------------------------------------------------------------------
- -Payable for distribution fees (Note 2)
80,998
- --------------------------------------------------------------------
- -Other accrued expenses
32,263
- --------------------------------------------------------------------
- -TOTAL LIABILITIES
643,610 ------------------------------------------------------------
- ---------NET ASSETS
$165,292,174 -------------------------------------------------------
- ---------------
REPRESENTED BY
Paid-in capital (Notes 1 and 4)
$151,168,451 -------------------------------------------------------
- --------------Undistributed net investment income (Note 1)
1,641,770 ----------------------------------------------------------
- -----------Accumulated net realized loss on investment transactions
(Note 1)
(385,608) ----------------------------------------------------------
- -----------Net unrealized appreciation of investments
12,867,561 ---------------------------------------------------------
- ------------TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING
$165,292,174 -------------------------------------------------------
- ---------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE ------------------
- ---------------------------------------------------Net asset value
and redemption price per class A share
($135,330,400 divided by 8,410,149 shares)
$16.09
- --------------------------------------------------------------------
- -Offering price per share (100/94.25 of $16.09)*
$17.07
- --------------------------------------------------------------------
- -Net asset value and offering price per class B share
($29,915,619 divided by 1,876,290 shares)**
$15.94
- --------------------------------------------------------------------
- -Net asset value and redemption price per class M share
($46,155 divided by 2,872 shares)
$16.07
- --------------------------------------------------------------------
- -Offering price per share (100/96.5 of $16.07)*
$16.65
- --------------------------------------------------------------------
- -<FN>
* 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.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year ended August 31, 1995
<TABLE>
<S>
<C>
INVESTMENT INCOME: -------------------------------------------------
- --------------------Dividends (net of foreign tax of $36,545)
$4,036,787
- --------------------------------------------------------------------
- -Interest
345,825
- --------------------------------------------------------------------
- -TOTAL INVESTMENT INCOME
4,382,612
- --------------------------------------------------------------------
- --
EXPENSES: ----------------------------------------------------------
- -----------Compensation of Manager (Note 2)
$1,010,493
- --------------------------------------------------------------------
- -Investor servicing and custodian fees (Note 2)
104,034
- --------------------------------------------------------------------
- -Compensation of Trustees (Note 2)
13,140
- --------------------------------------------------------------------
- -Reports to shareholders
67,425
- --------------------------------------------------------------------
- -Auditing
29,414
- --------------------------------------------------------------------
- -Legal
13,039
- --------------------------------------------------------------------
- -Postage
37,005
- --------------------------------------------------------------------
- -Administrative services (Note 2)
8,894
- --------------------------------------------------------------------
- -Distribution fees (Note 2) ----------------------------------------
- -----------------------------Class A
291,271
- --------------------------------------------------------------------
- -Class B
179,379
- --------------------------------------------------------------------
- -Class M
29
- --------------------------------------------------------------------
- -Other
15,382
- --------------------------------------------------------------------
- -TOTAL EXPENSES
1,769,505
- --------------------------------------------------------------------
- -NET INVESTMENT INCOME
2,613,107
- --------------------------------------------------------------------
- -Net realized gain on investments (Notes 1 and 3)
5,165,887
- --------------------------------------------------------------------
- -Net unrealized appreciation of investments during the year
7,326,520 ----------------------------------------------------------
- -----------NET GAIN ON INVESTMENTS
12,492,407
- --------------------------------------------------------------------
- -NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$15,105,514 --------------------------------------------------------
- -------------</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S>
<C>
Year ended August
31 ------------------
----
1995
1994
- --------------------------------------------------------------------
- -INCREASE IN NET ASSETS
- --------------------------------------------------------------------
- -Operations: -------------------------------------------------------
- --------------Net investment income
$2,613,107 $1,566,736
- --------------------------------------------------------------------
- -Net realized gain (loss) on investments 5,165,887
(2,295,993) --------------------------------------------------------
- -------------Net unrealized appreciation (depreciation)
of investments 7,326,520
(11,413,778)
- --------------------------------------------------------------------
- -NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 15,105,514
(12,143,035)
- --------------------------------------------------------------------
- -Distributions to shareholders from: -------------------------------
- --------------------------------------Net investment income: -------
- --------------------------------------------------------------Class
A (1,974,126)
(1,197,888)
- --------------------------------------------------------------------
- -Class B (195,630)
- --
- --------------------------------------------------------------------
- -Net realized gain on investments -- class A --
(18,784,262) In excess of net realized gain on
investments -- class A --
(3,255,502)
- --------------------------------------------------------------------
- -Increase from capital share transactions
(Note 4) 12,663,019
41,489,102
- --------------------------------------------------------------------
- -INCREASE IN NET ASSETS 25,598,777
6,108,415
- --------------------------------------------------------------------
- -NET ASSETS --------------------------------------------------------
- -------------Beginning of year
139,693,397 133,584,982
- --------------------------------------------------------------------
- -END OF YEAR (including undistributed net investment
income of $1,641,770 and $1,530,057,
respectively) $165,292,174
$139,693,397
- --------------------------------------------------------------------
- -</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C>
<C>
July 3, 1995 February 1,
1994 (commencement
(commencement
of operations) to Year ended of operations)
to August 31 August 31
August 31
- --------------------------------------------------------------------
-1995 1995
1994*
- --------------------------------------------------------------------
-Class M
Class B
- --------------------------------------------------------------------
- -NET ASSET VALUE,
BEGINNING OF PERIOD $15.59 $14.65
$14.78
- --------------------------------------------------------------------
- -Investment operations
Net investment income .03 .16
.13
Net realized and unrealized gain
(loss) on investments .45 1.33
(.26)
- --------------------------------------------------------------------
- --
TOTAL FROM INVESTMENT OPERATIONS .48 1.49
(.13)
- --------------------------------------------------------------------
- -LESS DISTRIBUTIONS FROM:
Net investment income -- (.20)
- --
Net realized gain on investments -- --
- --
In excess of net realized gain
on investments -- --
- --
- --------------------------------------------------------------------
- -TOTAL DISTRIBUTIONS -- (.20)
- --
- --------------------------------------------------------------------
- -NET ASSET VALUE, END OF PERIOD $16.07 $15.94
$14.65 -------------------------------------------------------------
- --------TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 3.08(B) 10.38
(.88)(B)
- --------------------------------------------------------------------
- -NET ASSETS, END OF PERIOD
(in thousands) $46 $29,916
$10,244
- --------------------------------------------------------------------
- -Ratio of expenses to average
net assets (%) .28(b) 1.87
1.11(b)
- --------------------------------------------------------------------
- -Ratio of net investment income
to average net assets (%) .44(b) 1.20
.90(b)
- --------------------------------------------------------------------
- -Portfolio turnover (%) 42.75 42.75
189.83
- --------------------------------------------------------------------
- -</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE><CAPTION>
<C> <C> <C> <C>
<C>
YEAR ENDED AUGUST 31
- --------------------------------------------------------------------
-1995 1994 1993 1992
1991
CLASS A
- --------------------------------------------------------------------
- --
$14.73 $20.51 $17.57 $17.74
$17.94
- --------------------------------------------------------------------
- --
.29 .19 .23 .35
.46
- --------------------------------------------------------------------
- --
1.31 (2.37) 3.41 .44
.59
- --------------------------------------------------------------------
-1.60 (2.18) 3.64 .79
1.05
- --------------------------------------------------------------------
- --
(.24) (.19) (.18) (.39)
(.52)
- --------------------------------------------------------------------
--- (2.91) (.52) (.57)
(.73)
- --------------------------------------------------------------------
--- (.50) -- --
--
- --------------------------------------------------------------------
-(.24) (3.60) (.70) (.96)
(1.25)
- --------------------------------------------------------------------
-$16.09 $14.73 $20.51 $17.57
$17.74
- --------------------------------------------------------------------
-11.10 (9.67) 21.79 5.12
6.62
- --------------------------------------------------------------------
-$135,330 $129,449 $133,585 $109,705
$125,607
- --------------------------------------------------------------------
-1.13 1.24 1.18 1.61
1.53
- --------------------------------------------------------------------
- --
1.89 1.24 1.25 2.13
2.65 ---------------------------------------------------------------
- ------
42.75 189.83 170.54 28.33
38.03
- --------------------------------------------------------------------
- -<FN>
* Per share net investment income has been determined on the
basis
of the weighted average number of shares outstanding during the
period.
(a) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(b) Not annualized
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
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. 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 class A, class B and class M shares. The
fund commenced its public offering of class M shares on July 3,
1995. 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
redeemed within six years of purchase. Class M shares are sold
with a maximum frontend sales charge of 3.50% and pay an ongoing
distribution fee that is higher than class A but lower than class
B. In addition, the Trustees declare separate dividends on each
class of shares. Expenses of the fund are borne
pro-rata by the shareholders 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 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 followed 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 available are stated at market value, which is
determined using the last reported sale price, or, if no sales are
reported -- as in the case of some securities traded over-the-
counter -- the last 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,
and other investments are stated at fair value following
procedures approved by the Trustees.
<PAGE>
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 managed by
Putnam Investment Management Inc. (Putnam Management), the fund's
investment 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 custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Putnam Management is responsible for
determining that the value of these underlying securities is at
all times at least equal to the resale price, including accrued
interest.
D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis 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 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 Internal Revenue Code applicable to
regulated investment companies. It is also the intention of
the fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held and excise tax on income and capital gains.
At August 31, 1995, the fund had a capital loss carryover
of approximately $199,000 available to offset future net capital
gain, if any, which will expire on August 31, 2003.
<PAGE>
F 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. These
differences include the treatment of wash sale transactions
and non-taxable dividends.
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, 1995, the fund reclassified $331,638 to decrease
undistributed net investment income and $331,638 to increase paid-in
capital.
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 for the quarter. 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
distribution fees, brokerage, interest, 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
Putnam Management on the fund's portfolio transactions.
The fund also reimburses Putnam Management for the compensation
and related expenses of certain officers of the fund and their
staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually
by the Trustees. <PAGE>
Trustees of the fund receive an annual Trustee's fee of $890 and
an additional fee for each Trustees' meeting attended. Trustees who
are not interested persons of Putnam Management and who serve
on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the fund's assets are being provided by
Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of
Putnam Investments, Inc. Investor servicing agent functions are
provided by Putnam Investor Services, a
division of PFTC.
Investor servicing and custodian fees reported in the Statement
of operations for the year ended August 31, 1995, have been reduced
by credits allowed by PFTC, which amounted to $277,864.
The fund has adopted distribution plans (the "Plans") with respect
to its class A, class B and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans
is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Mutual Funds Corp.
at an annual rate up to
0.35%, 1.00% and 1.00% of the average net assets attributable to
class A, class B and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%,
1.00% and 0.75% of the average net assets attributable to class A,
class B and class M shares respectively.
<PAGE>
For the year ended August 31, 1995, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $65,096 from the
sale of class A shares and $231 for the sale of class M shares.
There was $23,827 in contingent deferred sales charges from
redemptions of class B shares. A deferred sales charge of up to 1%
is assessed on certain redemptions of class A shares purchased as
part of an investment of $1 million or more. For the year ended
August 31, 1995, Putnam Mutual Funds Corp., acting as
underwriter received $2,133 on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended August 31, 1995, purchases and sales
of investment securities other than U.S. government obligations and
shortterm investments aggregated $73,107,109 and $59,229,435,
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.
<PAGE>
NOTE 4
CAPITAL SHARES
At August 31, 1995, there was an unlimited number of shares
of beneficial interest authorized divided into three classes,
class A, class B and class M capital stock. Transactions in capital
shares were as follows:
<TABLE><CAPTION>
<S> <C>
<C>
YEAR ENDED AUGUST
31 -----------------------------------------------------------------
- ----
19
95
- --------------------------------------------------------------------
- -CLASS A SHARES
AMOUNT
- --------------------------------------------------------------------
- -Shares sold 4,798,056
$71,673,351
Shares issued in connection with
reinvestment of distributions 122,251
1,684,613
- --------------------------------------------------------------------
-4,920,307
73,357,964
Shares repurchased (5,298,324)
(78,546,991) -------------------------------------------------------
- --------------NET DECREASE (378,017)
$(5,189,027)
- --------------------------------------------------------------------
-YEAR ENDED AUGUST
31
- --------------------------------------------------------------------
-
19
94
- --------------------------------------------------------------------
- -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
- --------------------------------------------------------------------
-
19
95
- --------------------------------------------------------------------
- -CLASS B SHARES
AMOUNT
- --------------------------------------------------------------------
- -Shares sold 1,929,084
$28,984,624
Shares issued in connection with
reinvestment of distributions 11,905
163,219
- --------------------------------------------------------------------
-1,940,989
29,147,843
- --------------------------------------------------------------------
- -Shares repurchased (763,872)
(11,341,889)
- --------------------------------------------------------------------
- -NET INCREASE 1,177,117
$17,805,954
- --------------------------------------------------------------------
-FEBRUARY 1,
1994
(COMMENCEME
NT
OF OPERATIONS)
TO
AUGUST
31
- --------------------------------------------------------------------
-
19
94
- --------------------------------------------------------------------
- -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
- --------------------------------------------------------------------
-JULY 3,
1995
(COMMENCEMENT
OF OPERATIONS)
TO
AUGUST
31
- --------------------------------------------------------------------
-
19
95
- --------------------------------------------------------------------
- -CLASS M SHARES
AMOUNT
- --------------------------------------------------------------------
- -Shares sold 2,872
$46,092
- --------------------------------------------------------------------
- -NET INCREASE 2,872
$46,092
- --------------------------------------------------------------------
- -</TABLE>
<PAGE>
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 100% of the distributions from net
investment income as qualifying for the dividends received
deduction for corporations.
The Form 1099 you receive in January 1996 will show the tax status
of all distributions paid to your account in calendar 1995.
<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
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Jeanne L. Mockard
Vice President and Fund Manager
William N. Shiebler
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
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 objectives, and operating
policies of the fund, and the most recent copy of the Putnam
Quarterly Performance Summary.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC),
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk
Rate U.S.
Postage
PA
ID
Putnam
Investmen
ts
20428-0/501/2AD
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of
these financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
