Putnam
Research
Fund
SEMIANNUAL REPORT
January 31, 1996
[GRAPHIC OMITTED: Putnam Scales Logo]
BOSTON * LONDON * TOKYO
From the Chairman
Dear Shareholder:
The new Putnam Research Fund is designed to capitalize on the strength
of one of Putnam's greatest attributes -- our equity research
organization. The investment philosophy is a simple one: pool the best
investment ideas of our analysts and invest in most of the sectors of
the Standard & Poor's 500(registered trademark) Index. Since your
fund's inception on October 2, 1995, this approach has already proved
its effectiveness: the fund's total return of 10.35% at net asset value
through January 31, 1996 outpaced the gain of 9.46% for the index, the
fund's primary benchmark.
Your fund invests primarily in common stocks formally recommended by
analysts in our Equity Research Department. Each portfolio holding
represents a company that our analysts understand thoroughly and that
they believe is undervalued. The fund's strategy is designed to manage
risk by minimizing portfolio imbalances -- such as overweighting in
certain industries or types of stocks.
* AN INVESTMENT STRATEGY BASED ON RIGOROUS ANALYSIS
Your fund typically invests in mid- to large-cap stocks -- those with
market capitalizations above $500 million. Our research analysts select
portfolio holdings using the same disciplined process they use to make
recommendations to Putnam's portfolio managers. They determine each
company's growth and earnings potential by creating five-year models of
operations and financial statements, supported by company visits and
other field work. Through this rigorous analysis, combined with the
analysts' highly specialized industry expertise and an equally rigorous
valuation discipline, we attempt to provide a steady flow of investment
candidates with attractive potential.
* FUND BENEFITS FROM COMPANIES WITH STRONG
MARKET SHARE, GLOBAL PRESENCE
Among the analysts' recommendations during the semiannual period were
Philip Morris and Eastman Kodak. (While these stocks, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may well vary in
future.) These companies -- with their strong presence in global
markets, highly successful products, and effective cost-control measures
- -- were among the top-contributing holdings in your fund's portfolio. Of
particular note was Kodak's unveiling of its new Advantix line of
cameras and film. In addition to other features, Advantix technology
allows the user to record information from the camera, such as time and
date of the exposure, digitally on the film. Developed in conjunction
with several other large film and photography companies, Advantix is
expected to draw a tremendous amount of attention to the industry,
including a potential surge in film sales.
* RESTRUCTURING INITIATIVES BRING STRENGTH TO
SOME HOLDINGS
Another highlight for the period was your fund's investment in Mobil
Corp., which recently announced a restructuring plan that is expected to
reduce pretax costs by $100 million annually. These recent changes to
Mobil's U.S. oil and gas operations are the latest in a series of
aggressive steps the company has taken toward improving its earnings
potential.
Another stellar portfolio position was Eli Lilly, a pharmaceutical
company that has made impressive progress in developing new drugs,
including potential new treatments for schizophrenia and osteoporosis.
Your fund's investment in BankAmerica Corp., the third largest banking
corporation in the United States, also proved beneficial. BankAmerica
has a dominant retail banking franchise in the western United States,
and its management has recently taken steps in an attempt to improve
profitability and enhance shareholder returns.
* A POSITIVE OUTLOOK FOR THE MONTHS AHEAD
Although the short-term results of this relatively new fund are not
necessarily indicative of its long-term prospects, Putnam Research Fund
has four months of respectable performance under its belt. The fund's
management team will continue to employ the skills and expertise of our
equity research team to invest in securities that are believed to offer
the highest potential returns. This strategy, as well as a favorable
outlook for U.S. economic conditions, should prove to be a positive
combination for your fund in the months ahead.
Respectfully yours,
/s/George Putnam
Chairman of the Trustees
March 20, 1996
The views expressed throughout this report are exclusively those of
Putnam Management. They are not meant as investment advice. Although
the described holdings were viewed favorably as of 1/31/96, there is no
guarantee the fund will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Research Fund is designed for investors seeking capital
appreciation primarily through common stock investments.
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.
TOTAL RETURN FOR PERIODS ENDED 1/31/96
Standard Consumer
& Poor's Price
NAV POP 500 Index Index
- ------------------------------------------------------------------------
Life of fund
(since 10/2/95) 10.35% 3.99% 9.46% 0.78%
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 12/31/95
(most recent calendar quarter)
NAV POP
- ------------------------------------------------------------------------
Life of fund
(since 10/2/95) 7.76% 1.55%
- ------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions. Performance data represent past
results. Investment returns and net asset value will fluctuate so an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge. The Fund's
performance reflects a voluntary expense limitation currently in effect.
Had it not been in effect the fund's total return would have been lower.
The short-term results of a relatively new fund are not necessarily
indicative of its long-term prospects.
The S&P 500 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. It
is not possible to invest directly in an index.
TERMS AND DEFINITIONS
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 formance
figures shown here assume the maximum 5.75% sales charge for class A
shares.
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.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<TABLE>
<CAPTION>
Portfolio of investments owned
January 31, 1996 (Unaudited)
COMMON STOCKS (99.4%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Aerospace (2.6%)
- ------------------------------------------------------------------------------------------------
700 Boeing Co. $ 54,338
600 Textron Inc. 47,175
------------------
101,513
Alcoholic Beverages (2.0%)
- ------------------------------------------------------------------------------------------------
1,100 Anheuser-Busch Cos., Inc. 76,450
Apparel (0.5%)
- ------------------------------------------------------------------------------------------------
300 Nike, Inc. 20,925
Automotive (5.0%)
- ------------------------------------------------------------------------------------------------
500 Echlin, Inc. 18,438
900 General Motors Corp. 47,363
400 General Motors Corp. Class H 22,800
1,400 Magna International, Inc. Class A 57,925
600 TRW, Inc. 50,700
------------------
197,226
Banks (7.6%)
- ------------------------------------------------------------------------------------------------
3,000 BankAmerica Corp. 202,125
600 Citicorp 44,325
700 NationsBank Corp. 48,906
------------------
295,356
Business Services (0.6%)
- ------------------------------------------------------------------------------------------------
1,000 Officemax, Inc. + 23,000
Chemicals (1.8%)
- ------------------------------------------------------------------------------------------------
600 Air Products & Chemicals Inc. 32,025
300 Grace (W.R.) & Co. 18,488
800 Lyondell Petrochemical Co. 19,700
------------------
70,213
Computer Software (3.5%)
- ------------------------------------------------------------------------------------------------
300 Computer Associates Intl., Inc. 20,513
600 General Motors Corp. Class E 33,300
700 Microsoft Corp. + 64,750
300 Parametric Technology Corp. + 19,425
------------------
137,988
Computers (3.7%)
- ------------------------------------------------------------------------------------------------
900 Cabletron Systems, Inc. + 69,413
700 IBM Corp. 76,125
------------------
145,538
Consumer Durable Goods (1.7%)
- ------------------------------------------------------------------------------------------------
2,100 Lowe's Cos., Inc. 65,363
Consumer Non Durables (1.4%)
- ------------------------------------------------------------------------------------------------
700 Kimberly-Clark Corp. 56,438
Electric Utilities (3.3%)
- ------------------------------------------------------------------------------------------------
1,800 Carolina Power & Light Co. 66,600
1,700 Public Service Co. 61,200
------------------
127,800
Electronics and Electrical Equipment (1.6%)
- ------------------------------------------------------------------------------------------------
400 Honeywell, Inc. 20,350
800 Motorola, Inc. 43,000
------------------
63,350
Entertainment (3.8%)
- ------------------------------------------------------------------------------------------------
1,100 Disney (Walt) Productions, Inc. 70,675
1,900 Viacom, Inc. Class B, + 76,950
------------------
147,625
Farm Equipment (0.9%)
- ------------------------------------------------------------------------------------------------
900 Deere (John) & Co. 33,750
Financial Services (2.7%)
- ------------------------------------------------------------------------------------------------
1,600 Franklin Resources, Inc. 85,800
500 MBNA Corp. 20,375
------------------
106,175
Food and Beverages (3.2%)
- ------------------------------------------------------------------------------------------------
1,000 Archer Daniels Midland Co. 19,000
2,600 IBP, Inc. 69,225
600 Nabisco Holdings Corp. Class A 20,850
800 Whitman Corporation 18,200
------------------
127,275
Gas Pipelines (0.5%)
- ------------------------------------------------------------------------------------------------
500 Enron Corp. 18,500
Gas Utilities (0.4%)
- ------------------------------------------------------------------------------------------------
400 Columbia Gas System, Inc. + 17,350
Health Care Services (0.5%)
- ------------------------------------------------------------------------------------------------
300 United Healthcare Corp. 18,863
Household Products (0.5%)
- ------------------------------------------------------------------------------------------------
600 Corning, Inc. 18,750
Insurance (1.7%)
- ------------------------------------------------------------------------------------------------
800 AON Corp. 43,500
600 American General Corp. 22,650
------------------
66,150
Machinery (1.0%)
- ------------------------------------------------------------------------------------------------
600 Black & Decker Manufacturing Co. 20,325
600 Harnischfeger Industries, Inc. 20,325
------------------
40,650
Medical Supplies and Devices (0.6%)
- ------------------------------------------------------------------------------------------------
400 Medtronic, Inc. 22,850
Metals and Mining (1.0%)
- ------------------------------------------------------------------------------------------------
1,400 Freeport-McMoRan Copper & Gold Co., Inc. Class A 40,600
Oil and Gas (8.3%)
- ------------------------------------------------------------------------------------------------
500 British Petroleum PLC ADR (United Kingdom) 48,813
1,400 Mobil Corp. 155,050
3,500 Total Corp. ADR (France) 120,750
------------------
324,613
Pharmaceuticals and Biotechnology (9.2%)
- ------------------------------------------------------------------------------------------------
500 Astra AB ADR A (Sweden) 20,375
1,400 Lilly (Eli) & Co. 80,500
1,000 Pfizer, Inc. 68,750
3,400 Smithkline Beecham PLC ADR (United Kingdom) 191,250
------------------
360,875
Photography (4.8%)
- ------------------------------------------------------------------------------------------------
2,300 Eastman Kodak Co. 168,763
400 Polaroid Corp. 17,950
------------------
186,713
Publishing (3.9%)
- ------------------------------------------------------------------------------------------------
3,400 Harcourt General, Inc. 132,600
300 Tribune Co. 18,788
------------------
151,388
Railroads (2.9%)
- ------------------------------------------------------------------------------------------------
1,400 Burlington Northern Santa Fe Corp. 114,625
Semiconductors (2.4%)
- ------------------------------------------------------------------------------------------------
1,700 Intel Corp. 93,898
Soft Drinks (2.9%)
- ------------------------------------------------------------------------------------------------
1,900 PepsiCo, Inc. 113,288
Telecommunication Equipment (0.6%)
- ------------------------------------------------------------------------------------------------
500 Tellabs, Inc. + 22,000
Telephone Services (1.6%)
- ------------------------------------------------------------------------------------------------
1,400 GTE Corp. 64,400
Telephone Utilities (7.6%)
- ------------------------------------------------------------------------------------------------
1,500 Bell Atlantic Corp. 103,313
3,400 SBC Communications, Inc. 192,525
------------------
295,838
Tobacco (3.1%)
- ------------------------------------------------------------------------------------------------
1,300 Philip Morris Cos., Inc. 120,900
------------------
Total Common Stocks (cost $3,576,135) *** $3,888,236
- ------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,910,068.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is $3,576,135, resulting in gross unrealized
appreciation and depreciation of $366,267 and $54,166, respectively, or net unrealized appreciation
of $312,101.
ADR after the name of a foreign security stands for American Depository Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
January 31,1996 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $ 3,576,135) (Note 1) $3,888,236
- ---------------------------------------------------------------------------------------------------
Cash 24,532
- ---------------------------------------------------------------------------------------------------
Dividends receivable 6,158
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 200
- ---------------------------------------------------------------------------------------------------
Receivable from Manager (Note 3) 9,008
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 8,585
- ---------------------------------------------------------------------------------------------------
Total assets 3,936,719
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 240
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 65
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 3) 4
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 5,939
- ---------------------------------------------------------------------------------------------------
Payable for organizational expenses (Note 1) 8,843
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 11,560
- ---------------------------------------------------------------------------------------------------
Total liabilities 26,651
- ---------------------------------------------------------------------------------------------------
Net assets $3,910,068
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in-capital (Notes 2 and 5) $3,563,912
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (5,017)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
(Note 1) 39,072
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 312,101
- ---------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $3,910,068
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($3,910,068 divided by 416,630 shares) $9.38
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $9.38)* $9.95
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
For the period October 2, 1995 (commencement of operations)
to January 31, 1996 (unaudited)
<S> <C>
Investment Income:
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $36) $ 21,410
- ---------------------------------------------------------------------------------------------------
Interest 1,891
- ---------------------------------------------------------------------------------------------------
Total investment income 23,301
Expenses:
- ---------------------------------------------------------------------------------------------------
Compensation of Manager (Note 3) 7,282
- ---------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 10,937
- ---------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 253
- ---------------------------------------------------------------------------------------------------
Reports to shareholders 296
- ---------------------------------------------------------------------------------------------------
Auditing 5,434
- ---------------------------------------------------------------------------------------------------
Legal 5,543
- ---------------------------------------------------------------------------------------------------
Postage 83
- ---------------------------------------------------------------------------------------------------
Registration fees 352
- ---------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 258
- ---------------------------------------------------------------------------------------------------
Administrative services (Note 3) 4
- ---------------------------------------------------------------------------------------------------
Fees waived by Manager (Note 3) (19,000)
- ---------------------------------------------------------------------------------------------------
Other expenses 19
- ---------------------------------------------------------------------------------------------------
Total expenses 11,461
- ---------------------------------------------------------------------------------------------------
Expense reduction (Note 3) (948)
- ---------------------------------------------------------------------------------------------------
Net expenses 10,513
- ---------------------------------------------------------------------------------------------------
Net investment income 12,788
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 39,072
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the period 312,101
- ---------------------------------------------------------------------------------------------------
Net gain on investments 351,173
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $363,961
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
October 2, 1995
(commencement
of operations) to
January 31, 1996*
<S> <C>
- ---------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------
Net investment income $ 12,788
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments 39,072
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 312,101
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 363,961
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------
From net investment income (17,805)
- ---------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 5) 1,563,912
- ---------------------------------------------------------------------------------------------------
Total increase in net assets 1,910,068
- ---------------------------------------------------------------------------------------------------
Net assets
- ---------------------------------------------------------------------------------------------------
Beginning of period 2,000,000
- ---------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $5,017) $3,910,068
- ---------------------------------------------------------------------------------------------------
* Unaudited.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
October 2, 1995
(commencement
of operations) to
January 31
1996*+
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.50
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .04 (c)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .89
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .93
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions
From net investment income (.05)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.05)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.38
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 10.35 (d)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,910
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) .34 (c)(d)
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .38 (c)(d)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 19.43 (d)
- --------------------------------------------------------------------------------------------------------------------------------
* Unaudited.
+ Per share net investment income for the period October 2, 1995 (commencement of operations) to January 31, 1996 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) The ratio of expenses to average net assets for the period October 2, 1995 (commencement of operations) to
January 31, 1996 includes amounts paid through expense offset arrangements (See Note 3).
(c) Reflects an expense limitation in effect during the period (See Note 3). As a result of such limitation, expenses for the
fund reflect a reduction of $0.06 per share.
(d) Not annualized.
</TABLE>
Notes to financial statements
For the period October 2, 1995
(commencement of operations) to
January 31, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is one of a series of Putnam Investment Funds (the "Trust")
which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
objective of the fund is to seek capital appreciation by investing
primarily in common stocks.
The following is a summary of significant accounting policies followed
by the fund in the preparation of its financial statements. The
preparation of financial statements are 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, except that certain U.S. government obligations are stated at the
mean between the bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value, and other investments are stated at
fair market value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account, along with the cash of other
registered investment companies 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 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.
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 on securities held and for excise tax on income and capital
gains.
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 annually. The amount and character of income and gains to be
distributed will be determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
G) Expenses of the Trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $8,843. These expenses are being amortized
on a straight-line basis over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Initial capitalization and offering price of shares
The Trust was established as a Massachusetts business trust on October
31, 1994. During the period October 31, 1994 to October 2, 1995, the
fund had no operations other than those related to organizational
matters, including the initial capital contribution of $2,000,000, less
$8,843 of initial offering expenses, and the issuance of 235,294 shares
to Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments, Inc.
At January 31, 1996, Putnam Management, owned 323,260 shares of the fund
(77.3% of shares outstanding), valued at $3,032,179.
Note 3
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: 0.65%
of the first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion,
0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of
the next $5 billion, and 0.38% thereafter.
Through June 30, 1996, the Putnam Management has agreed to limit it's
compensation to the extent that expenses of the fund (exclusive of
brokerage, interest, taxes, deferred organizational and extraordinary
expenses, and payments under the fund's distribution plan) exceed an
annual rate of 1.00% of the fund's average net assets.
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.
Trustees of the fund receive an annual Trustee's fee of $100 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 Deferal Plan (the "Plan") which allows
the trustees to defer the reciept 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.
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 period October 2, 1995 (commencement of operations) to January
31, 1996, the fund expenses were reduced by $948 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.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, although the fund is not
currently making any payments pursuant to the Plan. The purpose of the
Plan 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 Trustees
have approved payment by the fund to Putnam Mutual Funds Corp. at an
annual rate of up to 0.35% of the fund's average net assets.
During the period October 2, 1995 (commencement of operations) to
January 31, 1996, Putnam Mutual Funds Corp., acting as the underwriter,
received no net commissions from the sale of shares of the fund.
Note 4
Purchases and sales of securities
During the period October 2, 1995 (commencement of operations) to
January 31, 1996, purchases and sales of investment securities other
than short-term investments aggregated $4,218,788 and $681,726,
respectively. There were no purchases or sales of U.S. government
obligations. In determining the net gain or loss on securities sold, the
cost of securities has been determined on the identified
cost basis.
Note 5
Capital shares
For the period October 2, 1995 (commencement of operations) to January
31, 1996, there was an unlimited number of shares of beneficial interest
authorized. Transactions in capital shares were as follows:
For the period
October 2, 1995
(commencement of
operations)
to January 31, 1996
- ----------------------------------------------------
Shares Amount
- ----------------------------------------------------
Shares sold 196,787 $1,703,117
- ----------------------------------------------------
Shares
repurchased (15,451) (139,205)
- ----------------------------------------------------
Net increase 181,336 $1,563,912
- ----------------------------------------------------
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
Thomas R. Bogan
Vice President and Fund Manager
Patrick O'Donnell
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Research
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.
23310-2AQ 3/96
