Putnam
Research
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
1-31-99
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Research Fund ranked well ahead of other large-capitalization/
general equity funds tracked by Lipper Analytical Services over the
1- and 3-year periods ended January 31, 1999. For the 1-year period,
the fund's class A shares were 48 of 267 funds tracked, or in the top
18%; for the 3-year period, they were 15 of 146, or in the top 11%.*
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
16 Financial statements
* Lipper rankings are based on total return performance, vary over time
and do not include the effects of sales charges. The fund's class B and
class M shares were not ranked. Past performance is not indicative of
future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
As the three-year-old Putnam Research Fund continues to provide noteworthy
returns, I am pleased to announce the appointment of a new and expanded
management team from among the 45 industry analysts who contribute their
best ideas for possible inclusion in the fund's portfolio. Current team
leaders Quintin Price, Roger R. Sullivan, Karen R. Korn, and Paul E.
Marrkand are all career analysts and among them have more than 60 years of
investment experience.
Quintin, who joined Putnam in 1998 as director of global equity research,
has 15 years of investment experience. Roger, with 32 years' experience,
has been at Putnam since 1994. Karen also joined Putnam in 1994 and has 11
years of experience. Paul has been with Putnam since 1987 and an analyst
for the past 6 years.
In the report that follows, the team discusses performance of the fund's
style-neutral strategy during the fiscal year's first half and takes a
generally optimistic view of prospects for the second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
March 17, 1999
Report from the Fund Managers
Putnam Global Equity Research Team
Given the dramatic market shifts that have taken place over the past six
months, Putnam Research Fund's strategy has certainly been tested under
fire. It is a pleasure to report that our bottom-up stock selection and
proprietary portfolio construction process proved quite effective in
enabling the fund to deliver results exceeding the Standard & Poor's
500(R) Index -- along with low fluctuation in value relative to the index.
For the first half of its 1999 fiscal year, your fund's class A shares
returned 17.76% at net asset value (11.02% at public offering price),
compared with 15.02% for the S&P 500. Please turn to page 9 for results
for other share classes and over longer time periods.
* STYLE-NEUTRAL APPROACH COMBINES DIVERSIFICATION WITH OPPORTUNITY
Stocks for your fund's portfolio come directly from the recommendations of
Putnam's 45 industry analysts, who work to identify the best opportunities
in each of their respective fields. A computerized process is used to
prescribe optimum weightings for each holding in order to manage
volatility relative to the market. With this style-neutral approach, we
sidestep such questions as whether value stocks are poised to outperform
growth stocks and whether a particular industry sector should be
overweighted and focus primarily on the valuations of the individual
companies.
Much of the market volatility that occurred during the period affected the
prices of large-capitalization growth stocks. These began the period in
high favor, suffered a sharp decline, and then rebounded toward their
former levels. While the fund's portfolio certainly contains a healthy
portion of large-cap growth stocks, our emphasis on valuation during the
selection process means that we focus on those whose prices do not reflect
what we consider to be their true value. This approach means that the fund
can be expected to underperform a pure growth stock fund during
high-growth phases, but that it is more likely to outperform when these
stocks weaken.
In discussing portfolio positions, we must emphasize that while the fund
does not place top-down sector bets, industries with the potential for
outperformance tend to generate more individual stock recommendations from
our analysts and will thus be more heavily represented. It follows,
therefore, that sectors in which less potential is forecast will be
underrepresented. During the semiannual period, stocks within the
following sectors -- wireless communications, technology, retailing,
finance, and health care -- were highly recommended and contributed
substantially to performance, while industries such as basic materials and
capital goods, transportation, energy, and consumer cyclicals did not play
a significant role.
* WIRELESS AND CABLE HOLDINGS PROFIT FROM CHANGING COMMUNICATIONS TRENDS
With wireless voice communications on the increase worldwide, identifying
the strongest companies and the most attractive valuations in this
fast-changing field is essential. Putnam's global perspective was
invaluable in enabling us to single out AirTouch Communications as one of
the best opportunities to benefit from the trend. The company provides
wireless communications throughout the western half of the United States
(it is number 2 in this country after AT&T). However, our analyst noted
that much of the company's real value lay in its overseas operations,
which included joint ventures in Germany and Italy as well as 10 other
countries, and that it had been outperforming in terms of subscriber
growth. While other international wireless stocks were being valued
highly, AirTouch stock was relatively undervalued because many of the
other analysts who followed it had a domestic bias and didn't realize that
its dominant business was international. Our purchase proved rewarding
initially, but when AirTouch agreed to be acquired by Vodafone, it became
the strongest contributor to fund performance over the 6-month period,
increasing in value by 64%.
[GRAPHIC OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Pharmaceuticals
and biotechnology 10.6%
Conglomerates 6.6%
Banks 6.1%
Retail 5.9%
Financial services 5.7%
Footnote reads:
*Based on net assets as of 1/31/99. Holdings will vary over time.
The cable industry is another area in which we sought companies able to
take advantage of extraordinary growth potential. The demand for
high-speed data and Internet access is exploding, and cable companies are
far ahead of telephone companies in their development of broadband
services for home use. Cable providers' expansion into telephone services
is providing another avenue of growth. Comcast, which runs cable TV
systems and produces and distributes programming, is one key holding in
this sector; MediaOne Group, one of the world's largest broadband
communications companies, is another. While these holdings, along with
others discussed in this report, were viewed favorably at the end of the
fiscal period, all are subject to review and adjustment in accordance with
the fund's investment strategy and may vary in the future.
* TECHNOLOGY HOLDINGS HELP DRIVE PERFORMANCE
At the beginning of the period, we saw a lot of controversy in the market
concerning the health of the high-tech sector. Our perception -- which was
not widely shared -- was that stock prices in this sector were looking
quite attractive and that growth was likely to continue. Consequently, we
divided this part of the market into subsectors and sought what we felt
were the strongest and best-priced companies within each one.
In the personal computer industry, we chose Gateway, which sells its
products directly to consumers without going through retailers or
distribution channels. This direct approach allowed Gateway to sidestep
the industry-wide inventory buildup over the first half of the calendar
year and helped keep its sales growth steady. It also allows the company
to keep its inventory leaner and to update its products faster and we
believe it will prove an important ingredient of future success in this
sector.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
General Electric Co.
Conglomerate
Wal-Mart Stores, Inc.
Retail
Merck & Co., Inc.
Pharmaceuticals and biotechnology
Intel Corp.
Semiconductors
Medtronic, Inc.
Medical supplies and devices
BankAmerica Corp.
Banks
Bristol-Myers Squibb Co.
Pharmaceuticals and biotechnology
Warner-Lambert Co.
Pharmaceuticals and biotechnology
Ameritech Corp.
Telephone utilities
Lucent Technologies, Inc.
Telecommunications equipment
Footnote reads:
These holdings represent 26.9% of the fund's net assets as of 1/31/99.
Portfolio holdings will vary over time.
In another technology subsector -- computer peripherals -- Seagate
Technology, a disk drive manufacturer, was recommended for acquisition
during a down period within this heavily cyclical industry. The company
had undergone some of internal change and restructuring and was one of the
more attractively priced stocks in the subsector. Furthermore, Seagate's
disk drives are designed for large computers -- servers, mainframes, and
storage systems -- so this position proved an excellent way to participate
in the growth of the Internet without risking exposure to smaller, more
speculative companies.
* CONSOLIDATION BUILDS PROFITS IN FOOD AND RETAIL
In the food retailing business, our analysts have been following the trend
toward consolidation, which allows better pricing, more efficient
procurement, and stronger purchasing power. Fund holding Fred Meyer, which
operates about 1,100 stores, including 800 supermarkets, drew our
attention because of its strong fundamentals and the fact that it began
acquiring regional grocery chains in the western United States over two
years ago. Shortly before the beginning of the period, we identified the
company as a takeover candidate itself, and in fact, it was recently
acquired by Kroger, the top U.S. supermarket chain. Over the period, the
fund's position grew in value by 42%.
* OUTLOOK OPTIMISTIC ON FUTURE VOLATILITY
While much of the market volatility we have experienced over the past 6 to
12 months was triggered by events in the emerging markets, we do not
expect this pattern to continue to the same extent. Liquidity has
increased globally, and given the powerful trends in technology and
productivity that continue to propel the developed world, the economic
impact of ongoing difficulty in the emerging markets is unlikely to hold
back the developed markets. Since your fund has limited exposure to
developing economies and is participating in some of the strongest areas
of growth worldwide, we are optimistic that the collective expertise of
our industry specialists will steer the fund toward rewarding
opportunities for the remainder of fiscal 1999 and beyond.
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 1/31/99, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Research Fund is designed for investors seeking capital appreciation
primarily through common stock investments.
TOTAL RETURN FOR PERIODS ENDED 1/31/99
Class A Class B Class M
(inception date) (10/2/95) (6/15/98) (6/15/98)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 17.76% 11.02% 17.25% 12.25% 17.39% 13.28%
- ------------------------------------------------------------------------------
1 year 34.63 26.89 33.58 28.58 33.87 29.17
- ------------------------------------------------------------------------------
Life of fund 139.69 125.88 132.33 129.33 134.23 125.89
Annual average 30.02 27.72 28.81 28.31 29.12 27.72
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/99
S&P 500 Consumer
Index Price Index
- ------------------------------------------------------------------------------
6 months 15.02% 0.86%
- ------------------------------------------------------------------------------
1 year 32.49 1.86
- ------------------------------------------------------------------------------
Life of fund 132.89 7.44
Annual average 28.83 2.17
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50% respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 1/31/99
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income -- -- --
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.044 0.044 0.044
- ------------------------------------------------------------------------------
Short-term 0.017 0.017 0.017
- ------------------------------------------------------------------------------
Total $0.061 $0.061 $0.061
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
7/31/98 $13.49 $14.31 $13.49 $13.49 $13.98
- ------------------------------------------------------------------------------
1/31/99 15.82 16.79 15.75 15.77 16.34
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 12/31/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (10/2/95) (6/15/98) (6/15/98)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 13.10% 6.61% 12.66% 7.66% 12.80% 8.84%
- ------------------------------------------------------------------------------
1 year 29.45 21.98 28.40 23.40 28.67 24.15
- ------------------------------------------------------------------------------
Life of fund 129.69 116.45 122.74 119.74 124.57 116.58
Annual average 29.16 26.82 27.94 27.41 28.27 26.84
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See
preceding page for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B 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
Standard & Poor's 500 Index is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance. It
assumes reinvestment of all distributions and interest payments and does
not take in account brokerage fees or taxes. Securities in the fund do not
match those in the index and performance of the fund will differ. It is
not possible to invest directly in an index.
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, 1999 (Unaudited)
COMMON STOCKS (98.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Airlines (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
84,500 Delta Air Lines, Inc. $ 4,610,531
189,600 Northwest Airlines Corp. Class A (NON) 5,190,300
--------------
9,800,831
Automotive (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
64,600 General Motors Corp. 5,797,850
Banks (6.1%)
- --------------------------------------------------------------------------------------------------------------------------
220,334 BankAmerica Corp. 14,734,836
76,100 Banc One Corp. 3,985,738
165,200 Charter One Financial, Inc. 4,625,600
69,800 First Union Corp. 3,673,225
80,800 Mercantile Bancorp., Inc. 3,630,950
81,100 Zions Bancorp 4,703,800
--------------
35,354,149
Cable Television (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
100,100 Comcast Corp. Class A 6,805,236
140,000 Tele-Comm Liberty Media Group, Inc. Class A (NON) 7,490,000
--------------
14,295,236
Computers (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
235,600 Compaq Computer Corp. 11,220,450
87,700 Gateway 2000, Inc. (NON) 6,774,825
--------------
17,995,275
Computer Software (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
173,300 Computer Associates Intl., Inc. 8,773,313
517,200 Parametric Technology Corp. (NON) 6,755,925
--------------
15,529,238
Conglomerates (6.6%)
- --------------------------------------------------------------------------------------------------------------------------
210,500 General Electric Co. 22,076,188
125,900 Tyco International Ltd. 9,702,169
55,000 United Technologies Corp. 6,569,063
--------------
38,347,420
Consumer Products (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
70,500 Clorox Co. 8,821,313
84,800 Colgate-Palmolive Co. 6,821,100
--------------
15,642,413
Electric Utilities (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
185,500 Duke Energy Corp. 11,466,219
414,900 Entergy Corp. 12,213,619
--------------
23,679,838
Electronics and Electrical Equipment (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
92,400 Rockwell International Corp. 4,013,625
148,100 Seagate Technology, Inc. (NON) 6,025,819
--------------
10,039,444
Entertainment (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
131,700 Time Warner, Inc. 8,231,250
Environmental Control (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
74,600 Waste Management, Inc. 3,725,338
Financial Services (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
60,000 American Express Co. 6,172,500
166,500 Associates First Capital Corp. 6,753,656
200,700 Citigroup, Inc. 11,251,744
98,000 Lehman Brothers Holding, Inc. 5,359,375
106,000 Wells Fargo Co. 3,703,375
--------------
33,240,650
Food and Beverages (3.6%)
- --------------------------------------------------------------------------------------------------------------------------
263,100 Coca-Cola Enterprises, Inc. 9,307,163
81,700 Groupe Danone ADR (France) 4,605,838
173,500 Nabisco Holdings Corp. Class A 7,297,844
--------------
21,210,845
Gas Pipelines (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
40,500 Williams Cos., Inc. 1,336,500
Gas Utilities (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
110,100 Columbia Gas System, Inc. 5,697,675
Health Care (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
106,350 Cardinal Health, Inc. 7,863,253
Insurance (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
102,600 American General Corp. 7,316,663
Lodging (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
494,100 Starwood Hotels & Resorts Worldwide, Inc. 12,352,500
Medical Supplies and Devices (3.5%)
- --------------------------------------------------------------------------------------------------------------------------
75,000 Baxter International, Inc. 5,320,313
190,985 Medtronic, Inc. 15,219,095
--------------
20,539,408
Networking (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
146,450 3Com Corp. (NON) 6,883,150
Oil and Gas (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
132,200 Burlington Resources Inc. 3,999,050
292,100 Conoco, Inc. 5,823,744
144,300 El Paso Energy Corp. 4,761,900
121,500 Ente Nazionale Idrocarburi S.P.A. (ENI) ADR (Italy) 7,290,000
94,800 Mobil Corp. 8,312,775
--------------
30,187,469
Packaging and Containers (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
111,500 Sealed Air Corp. (NON) 5,916,460
Pharmaceuticals and Biotechnology (10.6%)
- --------------------------------------------------------------------------------------------------------------------------
112,200 Bristol-Myers Squibb Co. 14,382,638
156,000 Centocor, Inc. (NON) 6,561,750
109,000 Merck & Co., Inc. 15,995,750
196,400 Pharmacia & Upjohn, Inc. 11,293,000
186,200 Warner-Lambert Co. 13,441,313
--------------
61,674,451
Restaurants (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
74,100 McDonald's Corp. 5,840,006
151,200 Tricon Global Restaurants, Inc. (NON) 7,191,450
--------------
13,031,456
Retail (5.9%)
- --------------------------------------------------------------------------------------------------------------------------
89,500 Costco Companies, Inc. (NON) 7,417,313
133,000 Fred Meyer, Inc. (NON) 8,312,500
217,800 Wal-Mart Stores, Inc. 18,730,800
--------------
34,460,613
Semiconductors (5.0%)
- --------------------------------------------------------------------------------------------------------------------------
112,300 Intel Corp. 15,827,281
82,900 Micron Technology, Inc. (NON) 6,476,563
67,800 Texas Instruments, Inc. 6,703,725
--------------
29,007,569
Telecommunication Equipment (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
114,200 Lucent Technologies, Inc. 12,854,638
45,400 Nokia Corp. ADR (Finland) 6,537,600
50,800 Tellabs, Inc. (NON) 4,356,100
--------------
23,748,338
Telecommunications (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
132,900 MediaOne Group Inc. (NON) 7,450,706
96,800 U S West, Inc. 5,971,350
--------------
13,422,056
Telephone Services (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
236,500 SBC Communications, Inc. 12,771,000
102,900 Sprint Corp. 8,630,738
--------------
21,401,738
Telephone Utilities (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
204,800 Ameritech Corp. 13,337,600
Wireless Communications (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
103,400 AirTouch Communications, Inc. (NON) 9,984,563
--------------
Total Common Stocks (cost $494,823,128) $ 571,051,239
SHORT-TERM INVESTMENTS (1.2%) (a) (cost $7,035,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 7,035,000 Interest in $407,512,000 joint repurchase agreement
dated January 29, 1999 with Warburg Securities
due February 1, 1999 with respect to various
U.S. Treasury obligations -- maturity value of
$7,037,755 for an effective yield of 4.70% $ 7,035,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $501,858,128) (b) $ 578,086,239
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $581,476,602.
(b) The aggregate identified cost on a tax basis is $501,851,133, resulting in gross unrealized appreciation and
depreciation of $85,954,563 and $9,719,457, respectively, or net unrealized appreciation of $76,235,106.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository Receipts representing ownership of
foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
January 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $501,858,128) (Note 1) $578,086,239
- -----------------------------------------------------------------------------------------------
Cash 1,758,624
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 312,508
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 8,415,590
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 33,213,331
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,944
- -----------------------------------------------------------------------------------------------
Total assets 621,789,236
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 38,415,455
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 614,164
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 772,738
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 42,946
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,184
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,696
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 286,741
- -----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 8,843
- -----------------------------------------------------------------------------------------------
Other accrued expenses 167,867
- -----------------------------------------------------------------------------------------------
Total liabilities 40,312,634
- -----------------------------------------------------------------------------------------------
Net assets $581,476,602
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $500,494,809
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (708,613)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 5,462,295
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 76,228,111
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $581,476,602
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($275,203,913 divided by 17,395,049 shares) $15.82
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $15.82)* $16.79
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($280,240,769 divided by 17,795,395 shares)** $15.75
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($26,031,920 divided by 1,650,890 shares) $15.77
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $15.77)* $16.34
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended January 31, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $4,115) $ 1,881,513
- -----------------------------------------------------------------------------------------------
Interest 136,021
- -----------------------------------------------------------------------------------------------
Total investment income 2,017,534
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,127,535
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 280,593
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,620
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,732
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 214,553
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 814,522
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 57,564
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,339
- -----------------------------------------------------------------------------------------------
Reports to shareholders 42,571
- -----------------------------------------------------------------------------------------------
Registration fees 162,213
- -----------------------------------------------------------------------------------------------
Auditing 19,804
- -----------------------------------------------------------------------------------------------
Legal 1,512
- -----------------------------------------------------------------------------------------------
Postage 24,604
- -----------------------------------------------------------------------------------------------
Other 22,073
- -----------------------------------------------------------------------------------------------
Total expenses 2,780,235
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (54,088)
- -----------------------------------------------------------------------------------------------
Net expenses 2,726,147
- -----------------------------------------------------------------------------------------------
Net investment loss (708,613)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,530,157
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 76,725,601
- -----------------------------------------------------------------------------------------------
Net gain on investments 82,255,758
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $81,547,145
- -----------------------------------------------------------------------------------------------
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
January 31 July 31
-------------------------------
1999* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (708,613) $ (2,532)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 5,530,157 2,560,691
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 76,725,601 (3,181,873)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 81,547,145 (623,714)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A -- (62,767)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (886,577) (1,635,912)
- ---------------------------------------------------------------------------------------------------------------
Class B (903,596) --
- ---------------------------------------------------------------------------------------------------------------
Class M (80,338) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 337,956,669 154,656,956
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 417,633,303 152,334,563
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 163,843,299 11,508,736
- ---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $708,613 and $--, respectively) $581,476,602 $163,843,299
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 Oct. 2, 1995+
operating performance (Unaudited) Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.49 $13.58 $9.75 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income --(c) .02(c)(d) .10(d) .09(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.39 2.03 4.52 1.21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.39 2.05 4.62 1.30
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.08) (.09) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.06) (2.06) (.70) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (2.14) (.79) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.82 $13.49 $13.58 $9.75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 17.76* 18.00 49.62 15.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $275,204 $90,282 $11,509 $6,619
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .62* 1.04 (d) 1.00 (d) .86*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.01)* .28 (d) .82 (d) .92*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 56.10* 129.01 119.20 80.74*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. Total return reflects
an expense limitation in effect during the period. Without the limitation total return would have been lower.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the
period.
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses of
the fund reflect a reduticion of $0.01 for class A, and less than $0.01 for Class B and Class M for the period ending
July 31, 1998. Expenses for the periods ending July 31, 1997 and July 31, 1996, reflect a reduction of $0.02 and
$0.05 per share, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 June 15+
operating performance (Unaudited) to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $13.49 $13.00
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (c) (.06) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.38 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.32 .49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.75 $13.49
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 17.25* 3.77*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $280,241 $66,317
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .99* .26*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.39)* (.12)*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 56.10* 129.01
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. Total return reflects
an expense limitation in effect during the period. Without the limitation total return would have been lower.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the
period.
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses of
the fund reflect a reduticion of $0.01 for class A, and less than $0.01 for Class B and Class M for the period ending
July 31, 1998. Expenses for the periods ending July 31, 1997 and July 31, 1996, reflect a reduction of $0.02 and
$0.05 per share, respectively.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 June 15+
operating performance (Unaudited) to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $13.49 $13.00
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (c) (.04) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.38 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.34 .49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.77 $13.49
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 17.39* 3.77*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $26,032 $7,244
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .87* .23*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.27)* (.08)*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 56.10* 129.01
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. Total return reflects
an expense limitation in effect during the period. Without the limitation total return would have been lower.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the
period.
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses of
the fund reflect a reduticion of $0.01 for class A, and less than $0.01 for Class B and Class M for the period ending
July 31, 1998. Expenses for the periods ending July 31, 1997 and July 31, 1996, reflect a reduction of $0.02 and
$0.05 per share, respectively.
</TABLE>
Notes to financial statements
January 31, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Research Fund ("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 fund offers class A, class B and class M shares. Effective February 1,
1999, the fund began offering class C 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 ongoing
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 holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or 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.
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 and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended January 31, 1999, the fund had no borrowings against the line of
credit.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
H) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $8,843. These expenses are being amortized on
projected net asset levels over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.65% 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.
The base fee is subject to a performance adjustment based on the
investment performance of the fund compared to changes in the value of the
Standard & Poor's 500 (S&P 500) composite Stock Price Index. Performance
will be calculated for these purposes at the beginning of each fiscal
quarter, for the thirty-six month period immediately preceding such
quarter or the life of the fund, if shorter. The applicable base fee will
be increased or decreased for each calendar quarter by an incentive
payment or penalty at the annual rate of 0.01% of the fund's average net
assets for each 1% increment by which the fund outperforms or
underperforms the S&P 500 in excess of 3.0%, subject to a maximum increase
or decrease of 0.07% of average net assets. There was no such adjustment
as of January 31, 1999.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through July 31, 1999, to the extent that
expenses of the fund (exclusive of brokerage commissions, interest, taxes,
deferred organizational and extraordinary expense, credits from Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
and payments under the Trust's distribution plan) would exceed an annual
rate of 1.00% of the fund's average net assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended January 31, 1999, fund expenses were reduced by
$54,088 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $720 has
been allocated to the fund, and an additional fee for each Trustee's
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 has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B 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 to 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 January 31, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $694,750 and $49,114
from the sale of class A and class M shares, respectively and $111,822 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 January 31, 1999, Putnam Mutual
Funds Corp., acting as underwriter received $1,793 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended January 31, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$522,330,102 and $192,163,292, respectively. There were no purchases and
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 4
Capital shares
At January 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
January 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 12,722,977 $174,614,634
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 58,597 852,001
- -----------------------------------------------------------------------------
12,781,574 175,466,635
Shares
repurchased (2,076,818) (28,553,159)
- -----------------------------------------------------------------------------
Net increase 10,704,756 $146,913,476
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,991,170 $81,964,420
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 149,268 1,698,679
- -----------------------------------------------------------------------------
6,140,438 83,663,099
Shares
repurchased (297,573) (3,999,887)
- -----------------------------------------------------------------------------
Net increase 5,842,865 $79,663,212
- -----------------------------------------------------------------------------
Six months ended
January 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,919,933 $190,189,921
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 57,921 839,275
- -----------------------------------------------------------------------------
13,977,854 191,029,196
Shares
repurchased (1,099,901) (15,290,898)
- -----------------------------------------------------------------------------
Net increase 12,877,953 $175,738,298
- -----------------------------------------------------------------------------
For the period
June 15, 1998
(commencement of operations)
to July 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,949,915 $68,095,469
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
4,949,915 68,095,469
Shares
repurchased (32,473) (449,769)
- -----------------------------------------------------------------------------
Net increase 4,917,442 $67,645,700
- -----------------------------------------------------------------------------
Six months ended
January 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,353,260 $18,604,667
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,415 78,568
- -----------------------------------------------------------------------------
1,358,675 18,683,235
Shares
repurchased (244,795) (3,378,340)
- -----------------------------------------------------------------------------
Net increase 1,113,880 $15,304,895
- -----------------------------------------------------------------------------
For the period
June 15, 1998
(commencement of operations)
to July 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 554,900 $7,592,143
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
554,900 7,592,143
Shares
repurchased (17,890) (244,099)
- -----------------------------------------------------------------------------
Net increase 537,010 $7,348,044
- -----------------------------------------------------------------------------
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Richard A. Monaghan
Vice President
John R. Verani
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.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
SA067 49950 2AQ 3/99
