Putnam
Natural
Resources
Fund
[ARTWORK OMITTED]
SEMIANNUAL REPORT
February 29, 1996
[SCALES LOGO]
BOSTON * LONDON * TOKYO
Fund highlights
*"Putnam Natural Resources Fund's new manager continues to impress.
Since she took over the fund's management in early 1994, Jeanne
Mockard has helped it earn surprisingly competitive returns. . . .
Mockard's management has been more impressive this year, because she has
adjusted to a changeable market and guided the fund to above-average
returns."
-- Morningstar Mutual Funds, December 8, 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
17 Financial statements
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
Putnam Natural Resources Fund began its new fiscal year during one of
the strongest stock market advances in recent memory. The extent of the
market's rise and management's adept positioning of the portfolio are
clearly reflected in your fund's results during the six months ended
February 29, 1996.
While we are pleased with the fund's performance, the stock market's
sharp drop just after the period's close served as an abrupt reminder
that even the strongest markets will take an occasional pause. Although
more turbulence may lie ahead, Putnam Management believes there is still
some life in the market's broad advance.
Fund Manager Jeanne Mockard, however, looks beyond the market's short-
term ups and downs as she pursues the fund's objective of seeking
capital appreciation through investing in stocks of companies in the oil
and natural-resources industries. In the report that follows, Jeanne
discusses your fund's first-half performance and looks at prospects for
the remainder of the fiscal year.
Respectfully yours,
/s/George Putnam
Chairman of the Trustees
April 17, 1996
Report from the Fund Manager
Jeanne Mockard
In Putnam Natural Resources Fund's annual report last August, we
discussed the remarkable rally that had intoxicated the U.S. financial
markets and domestic stocks in particular. During the six months since
that report, the rally maintained its momentum and, in fact, calendar
1995 turned out to be one of the U.S. stock market's strongest years. At
the same time, three factors -- a positive supply/demand situation for
oil, superb performance from a number of chemical holdings, and
strategic investments in paper stocks -- contributed to the fund's
positive performance.
For the semiannual period ended February 29, 1996, your fund's class A
shares rose by 10.23%, class B shares by 9.85%, and class M shares by
9.99%, all at net asset value. At public offering price, returns were
3.90%, 4.85% (CDSC), and 6.16% for class A, class B, and class M shares,
respectively. For performance over longer periods, see page 8.
*POSITIVE SUPPLY/DEMAND DYNAMICS FOR OIL AND GAS
During the period, the Northeast endured one of its harshest winters on
record. Rough weather arrived early, bringing frigid temperatures,
record snowfall, and a dramatic rise in heating-oil prices. In addition
to the increased demand for oil, supply levels were unusually low, in
part because of new policies within the industry designed to maintain
lean inventories. A similar supply/demand situation also affected the
price of natural gas, which is essentially a North American commodity.
This environment was good news for your fund, which was overweighted in
the oil and gas sectors as prices soared.
However, since oil is a worldwide commodity, its prices and supplies are
affected by developments far beyond U.S. borders. Recent negotiations
between the United Nations and Iraq, for example, could have a
substantial impact on oil prices in the coming months. If an agreement
is reached, Iraq will be permitted to sell oil in limited quantities for
the first time since the Persian Gulf War. The agreement would allow
Iraq to market up to $2 billion worth of oil, in renewable six-month
periods, to pay for shortages in food and medicine. The resulting surge
in oil supplies could result in some short-term weakness in price. As
the period concluded, we were watching these developments closely and
remain prepared to adjust your fund's portfolio accordingly.
*CHEMICAL STOCKS PROVIDE A BOOST FOR THE PORTFOLIO
A number of chemical company holdings brought significant strength to
your fund's portfolio during the period. W. R. Grace & Co. was a
particularly strong performer. The company has embarked on a
restructuring and cost-cutting program that should allow it to take
better advantage of growth opportunities in the specialty chemicals
business. (While this stock, along with others discussed in this report,
was viewed favorably at the end of the period, all portfolio holdings
are subject to review and adjustment in accordance with the fund's
investment strategy and may well vary in the future.) Another leading
chemical company in which your fund was invested, Union Carbide, also
had a dramatic stock price increase during the period.
In our last report, we mentioned that we were reducing the fund's
holdings in paper and forest products. We made the decision because, in
our view, prices had climbed to record levels and we believed several
grades of paper had neared their cyclical peaks. The shift proved
prudent as paper prices declined throughout the period. However, by the
end of February, we had again built up the fund's paper holdings to
take advantage of their lower prices. Since the paper industry is among
the most sensitive to changes in the economy, we will continue to
monitor these holdings in the coming months.
[HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY WEIGHTINGS*
reading
Oil and gas 42.6%
Metals and mining 13.3%
Chemicals 6.4%
Paper and forest products 4.8%
Oil services 4.5%
Footnote reads:
*Based on net assets as of 2/29/96. Holdings will vary over time.]
*PRECIOUS METALS SHINE MORE BRIGHTLY THAN EXPECTED
During the past two years, your fund has generally underplayed holdings
in precious metals, a strategy that ultimately benefited performance.
Gold, in particular, had not been significantly represented in your
fund's portfolio for quite some time. This was a conservative strategy,
since gold prices tend to be volatile, trading less on supply and demand
than on market perceptions and often rising with anticipated, rather
than actual, inflation.
Our cautious approach proved beneficial, especially in 1994, when
periodic fears of inflation created a difficult year for gold. However,
during the first half of fiscal 1996, precious metals, especially gold,
began to show signs of strength. Although we increased the fund's
allocation to this sector, precious metals gained more ground than
expected. As a result, your fund's performance was dampened slightly in
relation to some of its peers in the natural resources universe.
Aluminum and steel stocks represented a small, but worthwhile, portion
of the fund's portfolio. Among the solid performers was Alumax, an
aluminum company recently targeted for takeover by Kaiser Aluminum.
Although the takeover bid has been withdrawn, Alumax has strong
fundamentals and could benefit if another potential acquirer should step
forward. The fund's steel holdings essentially consisted of smaller
companies, such as Carpenter Technology Corp., which recently announced
a three-year capital spending plan to expand its manufacturing of
specialty steel products. The recent environment seems to favor
specialty steel companies over larger producers.
[GRAPHIC OMITTED: TOP 10 HOLDINGS (2/29/96)*
reading
Exxon Corp.
Major petroleum developer, refiner, and marketer
Amoco Corp.
Petroleum refining, gasoline, crude oil
Chevron, Inc.
Petroleum, crude oil, natural gas, refined products
Texaco, Inc.
Petroleum and natural gas production; crude oil pipelines
Royal Dutch Petroleum PLC ADR
Major petroleum developer, refiner, and marketer
British Petroleum Co. PLC ADR
Oil operations; gas supply, trading, and distribution
Repsol S.A. ADS
Crude oil exploration, production, transport, and refining
Freeport McMoRan Copper & Gold Co., Inc. Class A
Copper ore mining and refining; gold ore
Occidental Petroleum Corp.
Diversified international energy company
Union Carbide Corp.
Petrochemicals, plastics, specialty chemicals
Footnote reads:
These holdings represent 28.8% of the fund's net assets as of
2/29/96. Portfolio holdings will vary over time.]
*PROCEEDING WITH CAUTION IN THE MONTHS AHEAD
The powerful combination of strong corporate earnings and falling
interest rates that fueled the 1995 financial markets is unlikely to
continue unabated. In fact, during the first two months of 1996, market
volatility has increased and investors are keeping a watchful eye out
for changes in U.S. economic conditions. Despite the tentativeness that
has marked the early part of 1996, we believe natural resources
industries continue to offer attractive investment opportunities.
Specifically, we anticipate an increased demand for all natural
resources products in developing countries around the world.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described
holdings were viewed favorably as of 2/29/96, there is no guarantee the
fund will continue to hold these securities in the future. Funds
investing in a single sector may be subject to more volatility than
funds investing in a diverse group of sectors.
Performance summary
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.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 2/29/96
Class A Class B Class M
(inception date) 7/24/80 2/1/94 7/3/95
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 10.23% 3.90% 9.85% 4.85% 9.99% 6.16%
- ------------------------------------------------------------------------
1 year 23.09 16.00 22.27 17.27 -- --
- ------------------------------------------------------------------------
5 years 48.26 39.76 -- -- -- --
Annual average 8.19 6.92 -- -- -- --
- ------------------------------------------------------------------------
10 years 192.40 175.69 -- -- -- --
Annual average 11.33 10.67 -- -- -- --
- ------------------------------------------------------------------------
Life of class -- -- 20.18 17.18 13.38 9.38
Annual average -- -- 9.24 7.92 -- --
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/96
Lipper
Standard Natural
& Poor's Resources
500 Index Average
- ------------------------------------------------------------
6 months 15.32% 9.93%
- ------------------------------------------------------------
1 year 34.66 25.14
- ------------------------------------------------------------
5 years 101.10 49.82
Annual average 15.00 8.22
- ------------------------------------------------------------
10 years 285.67 153.03
Annual average 14.45 9.46
- ------------------------------------------------------------
Life of class B 40.29 20.25
Annual average 17.68 9.27
- ------------------------------------------------------------
Life of class M 18.95 15.88
- ------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions,
or, for class A shares, distribution fees prior to the implementation of
the class A distribution plan in 1990. Investment returns and net asset
value will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost. POP assumes 5.75% maximum
sales charge for class A shares and 3.50% for class M. CDSC for class B
shares assumes the applicable sales charge, with the maximum being 5%.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) 7/24/80 2/1/94 7/3/95
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 14.64% 8.02% 14.28% 9.28% 14.39% 10.36%
- ------------------------------------------------------------------------
1 year 23.41 16.29 22.55 17.55 -- --
- ------------------------------------------------------------------------
5 years 56.50 47.54 -- -- -- --
Annual average 9.37 8.09 -- -- -- --
- ------------------------------------------------------------------------
10 years 194.34 177.40 -- -- -- --
Annual average 11.40 10.74 -- -- -- --
- ------------------------------------------------------------------------
Life of class -- -- 25.58 22.58 18.50 14.32
Annual average -- -- 11.12 9.88 -- --
- ------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
6 months ended 2/29/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------
Income $0.335 $0.262 $0.287
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term 0.041 0.041 0.041
- ------------------------------------------------------------------------
Short-term 0.05 0.05 0.05
- ------------------------------------------------------------------------
Total $0.091 $0.091 $0.091
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
08/31/95 $16.09 $17.07 $15.94 $16.07 $16.65
- ------------------------------------------------------------------------
2/29/96 17.29 18.34 17.14 17.28 17.91
- ------------------------------------------------------------------------
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 class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Lipper Natural Resources Average is composed of funds that invest more
than 65% of their equity holdings in the natural resources industries.
Holdings differ from fund holdings, and you cannot invest in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Standard & Poor's 500 Index is an index of common stocks frequently used
as a general measure of stock market performance.
A Putnam perspective on risk and reward
You've probably been told how important it is to understand the
relationship between an investment's potential rewards and its
accompanying risks. Given the cautionary nature of such
instructions, it may take most investors a while to realize that risk
has a positive side.
Every risk signals a potential reward. Selecting only those investments
that offer the greatest degree of security generally leads to only
modest rewards. Furthermore, even insured or guaranteed investments may
be subject to changes in their rates of return or, in some cases, in
their principal values. Experienced investors know that no investment is
truly risk free and are therefore willing to take on some measure of
risk in order to increase their potential gains.
The greater the risk, the greater the potential reward. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your investment's
return. How much risk? Your financial advisor's feedback and your time
horizon can make all the difference in determining how much risk is
compatible with your investment goals and your peace of mind.
*FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards? It's helpful to understand the types of risks that
can apply to different types of investments, and to look at your own
portfolio with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and
reward potential to customize your portfolio.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's
prospectus.
*A RUNDOWN OF RISK TYPES
MARKET RISK Most important for stock funds, but relevant to all funds,
this is a measure of how sensitive a fund's holdings are to changes in
general market conditions. Remember, though, that securities that lose
value quickly in market declines may also show the strongest gains in
more favorable environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this
type of risk is a particular concern for fixed-income inves-
tors. However, interest-rate increases can also have a substantial
negative effect on the stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk
over the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the
security's issuer will not be able to meet its payment, while prepayment
risk involves the premature payoff of a loan, with a resulting loss of
interest income. Professional management and in-depth research are
invaluable in managing both these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share
prices.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 29, 1996 (Unaudited)
Common Stocks (94.7%)*
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Chemicals (6.4%)
- -------------------------------------------------------------------------------------------------------------
19,000 Dow Chemical Co. $1,524,750
19,000 du Pont (E.I.) de Nemours & Co., Ltd. 1,453,500
30,000 Georgia Gulf Corp. 956,250
20,000 Grace (W.R.) & Co. 1,380,000
21,000 Rohm & Haas Co. 1,462,125
96,000 Union Carbide Corp. 4,320,000
52,000 Witco Chemical Corp. 1,696,500
------------
12,793,125
Coal (0.5%)
- -------------------------------------------------------------------------------------------------------------
30,000 Pittston Minerals Group 453,750
33,000 Zeigler Coal Holding Co. 462,000
------------
915,750
Conglomerates (2.6%)
- -------------------------------------------------------------------------------------------------------------
40,000 Minnesota Mining & Manufacturing Co. 2,605,000
45,000 Tenneco Inc. 2,514,375
------------
5,119,375
Construction (0.3%)
- -------------------------------------------------------------------------------------------------------------
14,000 Foster Wheeler Corp. 616,000
Consumer Products (0.5%)
- -------------------------------------------------------------------------------------------------------------
30,000 Lowe's Cos., Inc. 930,000
Containers (0.3%)
- -------------------------------------------------------------------------------------------------------------
13,000 Temple Inland, Inc. 523,250
Environmental Control (0.8%)
- -------------------------------------------------------------------------------------------------------------
55,000 WMX Technologies, Inc. 1,567,500
Farm Equipment (1.7%)
- -------------------------------------------------------------------------------------------------------------
84,000 Deere (John) & Co. 3,286,500
Food and Beverages (2.0%)
- -------------------------------------------------------------------------------------------------------------
207,500 Archer Daniels Midland Co. 3,994,375
Gas Pipelines (3.3%)
- -------------------------------------------------------------------------------------------------------------
82,000 Coastal Corp. $3,013,500
33,000 El Paso Natural Gas Co. 1,113,750
85,400 Panhandle Eastern Corp. 2,444,575
------------
6,571,825
Gas Utilities (1.8%)
- -------------------------------------------------------------------------------------------------------------
28,000 Columbia Gas System, Inc. 1,225,000
20,000 Consolidated Natural Gas Co. 860,000
55,000 Pacific Enterprises 1,471,250
------------
3,556,250
Household Products (1.0%)
- -------------------------------------------------------------------------------------------------------------
25,000 Colgate-Palmolive Co. 1,956,250
Machinery (2.1%)
- -------------------------------------------------------------------------------------------------------------
65,000 BW/IP Holding, Inc. 1,007,500
81,000 Harnischfeger Industries, Inc. 3,067,875
------------
4,075,375
Metals and Mining (13.3%)
- -------------------------------------------------------------------------------------------------------------
40,000 Alumax, Inc. + 1,445,000
97,000 Barrick Gold Corp. 2,934,250
40,000 Cyprus Amax Minerals Co. 1,035,000
50,000 Euro Nevada Mining Corp. 1,895,596
9,166 Freeport McMoran, Inc. 390,701
141,374 Freeport-McMoRan Copper & Gold Co., Inc. Class A 4,523,968
38,595 Freeport-McMoRan Copper & Gold Co., Inc. Class B + 1,259,162
90,000 Global Industries Technologies, Inc. + 2,103,750
50,000 Newmont Gold Co. 2,812,500
26,000 Phelps Dodge Corp. 1,589,250
133,000 Placer Dome Inc. 3,757,250
175,000 Santa Fe Pacific Gold Corp. 2,734,375
------------
26,480,802
Oil and Gas (42.6%)
- -------------------------------------------------------------------------------------------------------------
100,000 Amoco Corp. 6,950,000
67,000 Anadarko Petroleum Corp. 3,651,500
27,000 Atlantic Richfield Co. 2,956,500
40,000 Barrett Resources Corp. + 960,000
57,075 British Petroleum PLC ADR (United Kingdom) 5,728,903
58,000 Burlington Resources Inc. 2,109,750
113,300 Chevron, Inc. 6,302,313
73,000 Diamond Shamrock Inc. 2,226,500
100,000 Exxon Corp. 7,950,000
19,000 Kerr-McGee Corp. 1,132,875
78,000 Louisiana Land & Exploration Co. 3,256,500
21,000 Mobil Corp. 2,302,125
189,000 Occidental Petroleum Corp. 4,347,000
75,000 Pennzoil Co. 2,868,750
260,000 Petro-Canada - 1st Installment + 1,625,000
81,000 Phillips Petroleum Co. 2,835,000
136,000 Repsol S.A. ADS (Spain) 4,930,000
42,000 Royal Dutch Petroleum PLC ADR (Netherlands) 5,785,500
32,733 Sun, Co. Inc. 953,349
79,000 Texaco Inc. 6,300,250
46,000 Total Corp. ADR (France) 1,512,250
125,000 USX-Marathon Group Inc. 2,312,500
300,000 Ulster Petroleum Ltd. + 1,049,867
100,000 Ultramar Corp. + 2,862,500
40,000 Union Pacific Resources Group Inc. 1,030,000
20,000 Unocal Corp. 600,000
------------
84,538,932
Oil Services (4.5%)
- -------------------------------------------------------------------------------------------------------------
36,600 BJ Services Co. + 1,011,075
70,000 Baker Hughes Inc. 1,846,250
62,000 Dresser Industries, Inc. 1,743,750
65,700 McDermott International, Inc. 1,264,725
43,000 Schlumberger Ltd. 3,133,625
------------
8,999,425
Paper and Forest Products (4.8%)
- -------------------------------------------------------------------------------------------------------------
30,000 Boise Cascade Corp. 1,057,500
70,000 Fort Howard Corp. + 1,610,000
26,000 International Paper Co. 926,250
20,000 Mead Corp. 1,000,000
52,000 Potlatch Corp. 2,138,500
68,000 Weyerhaeuser Co. 2,881,500
------------
9,613,750
Railroads (2.7%)
- -------------------------------------------------------------------------------------------------------------
13,433 Burlington Northern Santa Fe Corp. 1,074,640
100,000 Canadian National Railway Co. 1,725,000
12,500 Conrail, Inc. 901,563
20,000 Norfolk Southern Corp. 1,630,000
------------
5,331,203
Retail (0.8%)
- -------------------------------------------------------------------------------------------------------------
120,000 K mart Corp. 840,000
25,000 Melville Corporation 796,875
------------
1,636,875
Steel (2.7%)
- -------------------------------------------------------------------------------------------------------------
50,000 Carpenter Technology Corp. 1,812,500
60,000 J & L Specialty Steel, Inc. 1,050,000
20,000 Nucor Corp. 1,077,500
31,000 USX-U.S. Steel Group 1,015,250
117,000 Weirton Steel Corp. + 453,375
------------
5,408,625
------------
Total Common Stocks (cost $165,918,419) $187,915,187
Convertible Preferred Stocks (2.7%)*
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
46,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. $2,783,000
25,000 Ashland, Inc. $3.125 cv. pfd. 1,546,875
36,364 Atlantic Richfield Co. $2.23 LYON
(Liquid Yield Option Notes) cv. pfd. 981,828
------------
Total Convertible Preferred Stocks (cost $5,438,906) $5,311,703
Convertible Bonds and Notes (1.2%)*
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$800,000 Apache Corp. 144A cv. sub. deb., 6s, 2002 $863,000
500,000 Pogo Producing Co. sub. notes, 5 1/2s, 2004 809,375
$1,000,000 Standard Commercial Corp. cv. sub. deb., 7 1/4s, 2007 732,500
------------
Total Convertible Bonds and Notes (cost $1,966,375) $2,404,875
Short-Term Investments (0.3%)*(cost $688,104)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$688,000 Interest in $1,108,321,000 joint repurchase agreement dated
February 29, 1996 with Morgan (J.P.) & Co., Inc. due
March 1, 1996 with respect to various U.S. Treasury
obligations--maturity value of $688,104 for an effective
yield of 5.42% $688,104
------------
Total Investments (cost $174,011,804)*** $196,319,869
- -------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $198,406,868.
+ Non-income producing security.
*** The aggregate identified cost on a tax cost basis is $174,128,102, resulting in gross unrealized
appreciation and depreciation of $27,273,780 and $5,082,013, respectively, or net unrealized appreciation
of $22,191,767.
ADR or ADS after the name of a foreign holding stands for American Depository Receipt or American Depository Shares,
respectively, representing ownership of 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
Statement of assets and liabilities
February 29,1996 (Unaudited)
Assets
- ------------------------------------------------------------------------
Investments in securities, at value
(identified cost $174,011,804) (Note 1) $ 196,319,869
- ------------------------------------------------------------------------
Cash 763,414
- ------------------------------------------------------------------------
Dividends and interest receivable 813,903
- ------------------------------------------------------------------------
Receivable for shares of the fund sold 2,170,642
- ------------------------------------------------------------------------
Total assets 200,067,828
Liabilities
- ------------------------------------------------------------------------
Payable for securities purchased 762,944
- ------------------------------------------------------------------------
Payable for shares of the fund repurchased 350,265
- ------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 334,530
- ------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 308
- ------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,455
- ------------------------------------------------------------------------
Payable for distribution fees (Note 2) 98,401
- ------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 68,742
- ------------------------------------------------------------------------
Other accrued expenses 44,315
- ------------------------------------------------------------------------
Total liabilities 1,660,960
- ------------------------------------------------------------------------
Net assets $198,406,868
Represented by
- ------------------------------------------------------------------------
Paid-in-capital (Note 4) $ 171,082,460
- ------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (311,982)
- ------------------------------------------------------------------------
Accumulated net realized gain on investment
transactions (Note 1) 5,328,325
- ------------------------------------------------------------------------
Net unrealized appreciation of investments 22,308,065
- ------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $198,406,868
Computation of net asset value and offering price
- ------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($153,196,878 divided by 8,859,138 shares) $17.29
- ------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $17.29)* $18.34
- ------------------------------------------------------------------------
Net asset value and offering price of class B shares
($44,253,168 divided by 2,581,330 shares)** $17.14
- ------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($956,822 divided by 55,367 shares) $17.28
- ------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.28)* $17.91
- ------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 29,1996 (Unaudited)
Investment Income
- -------------------------------------------------------------------------
<S> <C>
Interest $ 239,564
- -------------------------------------------------------------------------
Dividends (net of foreign tax of $36,446) 2,482,738
- -------------------------------------------------------------------------
Total investment income 2,722,302
Expenses:
- -------------------------------------------------------------------------
Compensation of Manager (Note 2) 624,437
- -------------------------------------------------------------------------
Investor Servicing and custodian fees (Note 2) 183,969
- -------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,854
- -------------------------------------------------------------------------
Reports to shareholders 17,689
- -------------------------------------------------------------------------
Auditing 12,666
- -------------------------------------------------------------------------
Legal 1,831
- -------------------------------------------------------------------------
Postage 15,763
- -------------------------------------------------------------------------
Registration Fees 17,040
- -------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 178,647
- -------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 174,805
- -------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,987
- -------------------------------------------------------------------------
Administrative services (Note 2) 4,325
- -------------------------------------------------------------------------
Other expenses 6,196
- -------------------------------------------------------------------------
Total expenses 1,246,209
- -------------------------------------------------------------------------
Expense reduction (Note 2) (46,093)
- -------------------------------------------------------------------------
Net expenses 1,200,116
- -------------------------------------------------------------------------
Net investment income 1,522,186
- -------------------------------------------------------------------------
Net realized gain on investments 6,701,674
- -------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 9,440,504
- -------------------------------------------------------------------------
Net gain on investments 16,142,178
- -------------------------------------------------------------------------
Net increase in net assets resulting from operations $17,664,364
- -------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
February 29 August 31
1996* 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------
Net investment income 1,522,186 2,613,107
- --------------------------------------------------------------------------------------------------
Net realized gain on investment transactions 6,701,674 5,165,887
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 9,440,504 7,326,520
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 17,664,364 15,105,514
- --------------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------------
From net investment income:
Class A (2,904,915) (1,974,126)
- --------------------------------------------------------------------------------------------------
Class B (559,193) (195,630)
- --------------------------------------------------------------------------------------------------
Class M (11,830) --
- --------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (789,766) --
- --------------------------------------------------------------------------------------------------
Class B (194,224) --
- --------------------------------------------------------------------------------------------------
Class M (3,751) --
- --------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 19,914,009 12,663,019
- --------------------------------------------------------------------------------------------------
Total increase in net assets 33,114,694 25,598,777
- --------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------
Beginning of period 165,292,174 139,693,397
- --------------------------------------------------------------------------------------------------
End of period (including distributions in excess of net
investment income and undistributed net investment
income of $311,982 and $1,641,770, respectively) $198,406,868 $165,292,174
- --------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------------
July 31, 1995
Six months (commencement Six months
ended of operations) ended Year ended
February 29 August 31 February 29 August 31
- ----------------------------------------------------------------------------------------------------------------
1996*+ 1995 1996*+ 1995
- ----------------------------------------------------------------------------------------------------------------
Class M Class B
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.07 $15.59 $15.94 $14.65
- ----------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------
Net investment income .11 .03 .12 .16
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.48 .45 1.43 1.33
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.59 .48 1.55 1.49
- ----------------------------------------------------------------------------------------------------------------
Less distributions from
- ----------------------------------------------------------------------------------------------------------------
Net investment income (.29) -- (.26) (.20)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (.09) -- (.09) --
- ----------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (.38) -- (.35) (.20)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.28 $16.07 $17.14 $15.94
- ----------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 9.99(b) 3.08(b) 9.85(b) 10.38
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $957 $46 $44,253 $29,916
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .88(b) .28(b) 1.00(b) 1.87
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) .70(b) .44(b) .56(b) 1.20
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 19.91(b) 42.75 19.91(b) 42.75
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------------
February 1, 1995
(commencement Six months
of operations) ended Year ended
August 31 February 29 August 31
- ----------------------------------------------------------------------------------------------------------------
1994** 1996* 1995 1994
- ----------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.78 $16.09 $14.73 $20.51
- ----------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------
Net investment income .13 .15 .29 .19
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (.26) 1.48 1.31 (2.37)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations (.13) 1.63 1.60 (2.18)
- ----------------------------------------------------------------------------------------------------------------
Less distributions from
- ----------------------------------------------------------------------------------------------------------------
Net investment income -- (.34) (.24) (.19)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments -- (.09) -- (2.91)
- ----------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- -- (.50)
- ----------------------------------------------------------------------------------------------------------------
Total distributions -- (.43) (.24) (3.60)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.65 $17.29 $16.09 $14.73
- ----------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) (.88)(b) 10.23(b) 11.10 (9.67)
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $10,244 $153,197 $135,330 $129,449
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.11(b) .62(b) 1.13 1.24
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) .90(b) .92(b) 1.89 1.24
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 189.83 19.91(b) 42.75 189.83
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
- -------------------------------------------------------------------------------------------------
Year ended August 31
- -------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $17.57 $17.74 $17.94
- -------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------
Net investment income .23 .35 .46
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 3.41 .44 .59
- -------------------------------------------------------------------------------------------------
Total from investment operations 3.64 .79 1.05
- -------------------------------------------------------------------------------------------------
Less distributions from
- -------------------------------------------------------------------------------------------------
Net investment income (.18) (.39) (.52)
- -------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (.52) (.57) (.73)
- -------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- --
- -------------------------------------------------------------------------------------------------
Total distributions (.70) (.96) (1.25)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $20.51 $17.57 $17.74
- -------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 21.79 5.12 6.62
- -------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $133,585 $109,705 $125,607
- -------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.18 1.61 1.53
- -------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 1.25 2.13 2.65
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 170.54 28.33 38.03
- -------------------------------------------------------------------------------------------------
* Unaudited.
** 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.
(c) The ratio of expenses to average net assets for the period ended February 29, 1996 includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts.
(See Note 2).
</TABLE>
Notes to financial statements
February 29, 1996 (Unaudited)
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 seeks 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. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an on-going distribution fee that is lower than class B shares and
higher than class A shares.
Expenses of the fund are borne pro-rata by the 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 as a class only with respect to its own distribution plan or
other matters on which a class vote is required by law or determined by
the Trustees. Shares of each class would receive their pro-rata share of
the net assets of the fund, if the fund were liquidated. In addition,
the Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. 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. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value.
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 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 102% of 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
102% of 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
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation of securities held and for 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.
F) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid semiannually. The amount and character of income and gains to
be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
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 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.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended February 29, 1996, fund expenses were reduced
by $46,093 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
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.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
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.
For the six months ended February 29, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $44,331 and $2,663
from the sale of class A and class M shares, respectively and received
$31,070 in contingent deferred sales charges from redemptions of class B
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the six months ended February 29,
1996, Putnam Mutual Funds Corp., acting as underwriter received $490 on
class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 29, 1996, purchases and sales of
investment securities other than
short-term investments aggregated $58,359,162 and $37,734,384,
respectively. There were no purchases or sales of U.S. government
obligations during the period. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At February 29, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
February 29, 1996
- -------------------------------------------------------------
Class A Shares Amount
- -------------------------------------------------------------
Shares sold 4,598,709 $76,833,993
- -------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 196,982 3,248,225
- -------------------------------------------------------------
4,795,691 80,082,218
Shares
repurchased (4,346,702) (72,744,255)
- --------------------------------------------------------------
Net increase 448,989 $7,337,963
- --------------------------------------------------------------
Year ended
August 31, 1995
- --------------------------------------------------------------
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)
- ----------------------------------------------------------------
Six months ended
February 29, 1996
- -----------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------
Shares sold 2,594,647 $43,160,025
- -----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 39,359 644,300
- -----------------------------------------------------------------
2,634,006 43,804,325
Shares
repurchased (1,928,966) (32,106,191)
- -----------------------------------------------------------------
Net increase 705,040 $11,698,134
- -----------------------------------------------------------------
Year ended
August 31, 1995
- ------------------------------------------------------------------
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
- ------------------------------------------------------------------
Six months ended
February 29, 1996
- ------------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------------
Shares sold 83,119 $1,388,225
- ------------------------------------------------------------------
Shares issued
in connection with
reinvestment of
distributions 735 12,120
- ------------------------------------------------------------------
83,854 1,400,345
Shares
repurchased (31,359) (522,433)
- ------------------------------------------------------------------
Net increase 52,495 $877,912
- ------------------------------------------------------------------
July 3, 1995
(commencement of
operations) to
August 31, 1995
- ------------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------------
Shares sold 2,872 $46,092
- ------------------------------------------------------------------
Shares issued
in connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------------
2,872 46,092
Shares
repurchased -- --
- ------------------------------------------------------------------
Net increase 2,872 $46,092
- ------------------------------------------------------------------
Our commitment to quality service
*CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
*HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
*SWITCH FUNDS EASILY
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 the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To 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.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
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
John D. Hughes
Senior Vice President and Treasurer
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
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 Putnam's Quarterly Performance Summary. For
more information, or to request a prospectus, call toll free: 1-800-225-
1581.
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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -------------------
24029-018/501/2AD 4/96
