Putnam
Research
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
1-31-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
2000. In the following report, the fund's managers discuss performance for
the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam
Research Fund that I will be signing. After more than 30 years as Chairman
of the Trustees and President of the Putnam Funds, the time has come for
me to step aside. In June, John Hill will become Chairman. John is
currently an independent Trustee and has served on the board for the past
14 years. In addition, my son, George Putnam, III, will take on the role
of President. I am confident that the leadership of the funds will be in
exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
March 15, 2000
Report from the Fund Managers
Putnam Global Equity
Research Team
We are pleased to report that Putnam Research Fund delivered strong
competitive results in the first half of fiscal year 2000. The fund's
11.78% total return for class A shares at net asset value was more than
double the return of the S&P 500 Index, the fund's unmanaged benchmark,
over the same period.
Total return for 6 months ended 1/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------
11.78% 5.37% 11.33% 6.33% 11.39% 10.39% 11.48% 7.57%
- ---------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 5.
* STRATEGY REMAINS FOCUSED ON INDIVIDUAL STOCKS
Your fund is designed to provide long-term capital appreciation with a
portfolio that combines the stock recommendations of Putnam's more than 40
global equity analysts. These analysts recommend stocks for every Putnam
equity portfolio, but only Putnam Research Fund consists solely of stocks
that the analysts have singled out as their best ideas. Many Putnam
analysts have hands-on experience in the industries they cover, bringing a
sharper perspective to their work. All travel extensively as part of their
research, and together they visit thousands of companies around the globe
each year.
During the semiannual period, we faced an uncertain investment
environment, with fears of Y2K-related disruptions, rising interest rates,
and heady stock valuations in the United States. Market volatility
appeared to reach new extremes, with major indexes experiencing gains and
losses of 1% or more daily. Volatility notwithstanding, we maintained a
firm commitment to our strategy, identifying and recommending stocks that
we believed offered the potential for attractive returns over the long
term.
* TECHNOLOGY DOMINATES THE MARKET
Technology drives the pace of business today, and many of the fund's
top-performing holdings continue to be in technology-related fields. As
our world grows smaller and moves faster, advanced communications tools
compress the business cycle for today's most efficient companies. Thorough
research is critical when investing in today's fast-moving economy. Most
business niches can support only a few players and the market determines
these leaders more quickly than ever before.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Technology 29.5%
Financial 17.9%
Health care 12.4%
Consumer staples 11.2%
Communications
services 5.9%
Footnote reads:
*Based on net assets as of 1/31/00. Holdings will vary over time.
Nokia, up 115% for the six-month period, is rapidly becoming one of the
world's premier telecommunications providers. The company sells mobile
phones and an array of data communications services to individuals and
businesses around the globe. Another holding, AT&T Corp.'s Liberty Media
Group, has become one of the world's largest media conglomerates through
sheer financial might. Liberty Media, up 38% during the period, offers
programming services in all available media formats in addition to
wireless communications and high-speed Internet access. VERITAS Software,
which has gained 197% since we purchased it, is a leader in advanced data
storage. The company's products provide protection against data loss and
file corruption as well as the ability to back up data distributed on
large network systems without interrupting users. 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.
"Thorough research is critical when investing in today's fast-moving economy.
Most business niches can support only a few players and the market determines
these leaders more quickly than ever before."
- -- Thomas R. Haslett, Putnam Global Equity Group
* BIOTECHNOLOGY SHINES
The biotech rally that began in 1999 continued into 2000, with some
portfolio holdings returning more than 100% during the period covered by
this report. Over the past 8 years, this industry has matured, with more
companies developing multiple products rather than being dependent on just
one, and an increase in mergers and acquisitions. These changes have
appealed to investors. U.S. demographics point to the continued strength
of the health-care industry. Every 7 seconds, another baby boomer reaches
age 50, and as the population ages, the demand for innovative drugs and
treatments is likely to rise.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Microsoft Corp.
Technology
General Electric Co.
Conglomerates
Intel Corp.
Technology
Exxon Mobil Corp.
Energy
SBC Communications, Inc.
Communications services
Bell Atlantic Corp.
Communications services
Bank of America Corp.
Financial
Johnson & Johnson
Health care
American International Group, Inc.
Financial
Warner-Lambert Co.
Health care
Footnote reads:
These holdings represent 27.5% of the fund's net assets as of 1/31/00.
Portfolio holdings will vary over time.
One of our top-performing biotech stocks during the period was Immunex
Corp., up 121%. Immunex is a biopharmaceutical company that discovers,
develops, manufactures, and markets innovative products for the treatment
of cancer, infectious diseases, and immunological disorders. Another
standout was Genentech, up 92% since its purchase. Genentech uses human
genetic information to discover, develop, manufacture, and market
pharmaceutical products. A third stellar performer was MedImune, Inc., up
75%. MedImune develops and markets products for the prevention and
treatment of infectious diseases and for use in transplants. (We took
profits on Immunex and MedImune during the period.)
Of course, not every stock produced such strong results. With a portfolio
of more than 70 holdings, there are bound to be a few that fail to live up
to our expectations and deliver returns that detract from the fund's
overall performance. For example, a change in a company's fundamentals can
cause its share price to fall. In some cases, we used the opportunity to
increase the fund's shares in the company. In others, we acknowledge our
mistaken assumptions and move forward.
The decision to sell
Although we pride ourselves on thorough fundamental research, there are times
when even our best picks do not pan out as planned. When possible, we try to
anticipate these disappointments and remove stocks from the portfolio before
they fall too far, as was the case with Coca-Cola Enterprises. The bottling
company pushed through a price increase and encountered unexpected opposition
from supermarkets. When sales volumes declined more than expected, we cut our
losses and looked for better opportunities.
In other cases in which we see a short-term disappointment in an otherwise
solid company, we may use a stock's price weakness as an opportunity to buy
more shares. This happened with SBC Communications, a leading
telecommunications service provider. The company announced a $6 billion
investment to provide broadband access to its subscribers. In our view, the
capital expenditure plan held promise over the long term, but it would most
likely result in a short-term dilution of earnings. Investors chose to focus on
the latter. As the stock fell, we added to the fund's shares, confident in the
view that SBC's investment in broadband will ultimately help cement its
position as a leader in the telecommunications industry.
* STOCK PICKER'S MARKET
In the months ahead, we expect volatility will continue to dominate the
investment landscape. Although the market broadened somewhat in 1999,
there was a shrinking group of companies in most sectors that exhibited
above-average returns. For some stocks, valuations remain at expensive
levels by traditional measures. Only those companies that can sustain
revenue and profit growth over an extended period of time justify these
valuations. The stakes are high because a fall from grace has severe
consequences for one's stock price. In other words, we face a true stock
picker's market. Against this background, we believe your fund will
continue to do what it does best: distill the best ideas from Putnam's
Global Equity Research Group into a single portfolio designed to deliver
above-average performance over the long term.
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 1/31/00, 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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 1/31/00
Class A Class B Class C Class M
(inception dates) (10/2/95) (6/15/98) (2/1/99) (6/15/98)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 11.78% 5.37% 11.33% 6.33% 11.39% 10.39% 11.48% 7.57%
- ---------------------------------------------------------------------------------------------
1 year 17.29 10.52 16.34 11.34 16.60 15.60 16.71 12.64
- ---------------------------------------------------------------------------------------------
Life of fund 181.14 164.94 170.62 168.62 172.28 172.28 174.96 165.42
Annual average 26.96 25.23 25.85 25.63 26.03 26.03 26.31 25.29
- ---------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/00
S&P 500 Consumer
Index price index
- ---------------------------------------------------------------------------
6 months 5.59% 1.44%
- ---------------------------------------------------------------------------
1 year 10.35 2.67
- ---------------------------------------------------------------------------
Life of fund 156.98 10.38
Annual average 24.31 2.30
- ---------------------------------------------------------------------------
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. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C 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 1/31/00
Class A Class B Class C Class M
- -----------------------------------------------------------------------------
Distributions (number) 1 1 1 1
- -----------------------------------------------------------------------------
Income -- -- -- --
- -----------------------------------------------------------------------------
Capital gains
Long-term $0.141 $0.141 $0.141 $0.141
- -----------------------------------------------------------------------------
Short-term 0.882 0.882 0.882 0.882
- -----------------------------------------------------------------------------
Total $1.023 $1.023 $1.023 $1.023
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- -----------------------------------------------------------------------------
7/31/99 $16.60 $17.61 $16.46 $16.55 $16.51 $17.11
- -----------------------------------------------------------------------------
1/31/00 17.51 18.58 17.28 17.39 17.36 17.99
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 12/31/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (10/2/95) (6/15/98) (2/1/99) (6/15/98)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 13.70% 7.15% 13.20% 8.20% 13.19% 12.19% 13.42% 9.47%
- ---------------------------------------------------------------------------------------------
1 year 27.57 20.27 26.55 21.55 26.69 25.69 26.92 22.46
- ---------------------------------------------------------------------------------------------
Life of fund 193.02 176.14 182.21 180.21 183.87 183.87 186.68 176.73
Annual average 28.78 27.00 27.65 27.44 27.83 27.83 28.12 27.06
- ---------------------------------------------------------------------------------------------
</TABLE>
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 first
page of performance section 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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
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 into 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.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
January 31, 2000 (Unaudited)
COMMON STOCKS (99.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Basic Materials (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
219,800 Avery Dennison Corp. $ 14,891,450
293,100 Sealed Air Corp. (NON) 16,450,238
847,700 Smurfit-Stone Container Corp. (NON) 16,795,056
--------------
48,136,744
Capital Goods (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
557,200 Boeing Co. 24,690,925
Communication Services (5.9%)
- --------------------------------------------------------------------------------------------------------------------------
620,800 Bell Atlantic Corp. 38,450,800
968,235 SBC Communications, Inc. 41,755,132
100,500 Telephone and Data Systems, Inc. 10,452,000
--------------
90,657,932
Conglomerates (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
420,400 General Electric Co. 56,070,850
555,100 Tyco International Ltd. (NON) 23,730,525
--------------
79,801,375
Consumer Cyclicals (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
456,600 Lowe's Cos., Inc. 20,375,775
576,500 Wal-Mart Stores, Inc. (NON) 31,563,375
--------------
51,939,150
Consumer Staples (11.2%)
- --------------------------------------------------------------------------------------------------------------------------
136,000 AMFM, Inc. (NON) 10,608,000
456,500 AT&T Corp.- Liberty Media (NON) 23,338,563
176,600 CBS Corp. (NON) 10,297,988
168,900 CheckFree Holdings Corp. (NON) 9,965,100
257,300 Clear Channel Communications, Inc. (NON) 22,224,288
241,300 Comcast Corp. Class A (NON) 11,099,800
579,200 CVS Corp. 20,235,800
207,000 Interpublic Group Cos. Inc. (NON) 9,522,000
104,900 Omnicom Group, Inc. 9,827,817
250,200 Time Warner, Inc. 20,000,363
254,100 Viacom, Inc. Class B (NON) 14,070,788
188,500 Young & Rubicam, Inc. 10,155,438
--------------
171,345,945
Energy (5.3%)
- --------------------------------------------------------------------------------------------------------------------------
497,300 Baker Hughes, Inc. 12,246,013
330,700 Burlington Resources Inc. 10,603,069
686,500 Conoco, Inc. 16,004,031
517,996 Exxon Mobil Corp. 43,252,666
--------------
82,105,779
Financial (17.9%)
- --------------------------------------------------------------------------------------------------------------------------
284,100 American General Corp. 17,454,394
320,600 American International Group, Inc. (NON) 33,382,475
566,600 Associates First Capital Corp. 11,332,000
758,700 Bank of America Corp. 36,749,531
433,200 Capital One Financial Corp. 17,761,200
774,800 Charter One Financial, Inc. 15,060,175
572,500 Citigroup, Inc. 32,882,969
295,300 Comerica, Inc. 13,048,569
1,338,339 Firstar Corp. (NON) 31,952,842
23,600 M & T Bank Corp. 9,699,600
417,500 Paine Webber Group Inc. 16,047,656
232,200 Providian Financial Corp. 19,591,875
344,500 Zions Bancorp 20,368,563
--------------
275,331,849
Health Care (12.4%)
- --------------------------------------------------------------------------------------------------------------------------
385,200 Baxter International, Inc. 24,604,650
143,700 Genentech, Inc. (NON) 20,189,850
406,700 Johnson & Johnson 35,001,619
156,500 PE Corp.-PE Biosystems Group (NON) 23,435,875
493,200 Pharmacia & Upjohn, Inc. 23,180,400
701,100 Schering-Plough Corp. 30,848,400
350,500 Warner-Lambert Co. 33,275,594
--------------
190,536,388
Technology (29.5%)
- --------------------------------------------------------------------------------------------------------------------------
193,300 ADC Telecommunications Inc. (NON) 12,745,719
417,500 America Online, Inc. (NON) 23,771,406
148,000 Apple Computer, Inc. (NON) 15,355,000
120,900 Applied Materials, Inc. (NON) 16,593,525
277,200 Computer Associates International, Inc. 19,040,175
107,500 Corning Inc. 16,581,875
637,200 Dell Computer Corp. (NON) 24,492,375
273,000 Electronic Data Systems Corp. 18,461,625
260,300 Gateway, Inc. (NON) 15,927,106
257,500 Hewlett-Packard Co. 27,874,375
474,100 Intel Corp. (NON) 46,906,269
173,100 Lexmark International Group, Inc. Class A (NON) 16,314,675
164,000 LSI Logic Corp. (NON) 13,407,000
593,800 Microsoft Corp. (NON) 58,118,175
239,000 Motorola, Inc. 32,683,250
88,400 Nokia Corp. ADR (Finland) 16,177,200
270,100 Nortel Networks Corp. (Canada) (NON) 25,828,314
987,900 Parametric Technology Corp. (NON) 21,178,106
155,000 QUALCOMM, Inc. 19,685,000
77,400 VERITAS Software Corp. (NON) 11,290,725
--------------
452,431,895
Transportation (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
660,300 Burlington Northern Santa Fe Corp. 15,888,469
Utilities (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
539,300 El Paso Energy Corp. 17,392,425
698,300 Entergy Corp. 17,413,856
277,000 Williams Cos., Inc. 10,733,750
--------------
45,540,031
--------------
Total Common Stocks (cost $1,404,429,633) $1,528,406,482
SHORT-TERM INVESTMENTS (0.6%) (a) (cost $9,250,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 9,250,000 Interest in $565,613,000 joint repurchase agreement
dated January 31, 2000 with Morgan (J.P.) & Co., Inc.
due February 1, 2000 with respect to various U.S.
Treasury obligations -- maturity value of $9,251,459
for an effective yield of 5.68% $ 9,250,000
--------------
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,413,679,633) (b) $1,537,656,482
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,535,896,541.
(b) The aggregate identified cost on a tax basis is $1,418,332,055, resulting in gross unrealized appreciation and
depreciation of $203,907,235 and $84,582,808, respectively, or net unrealized appreciation of $119,324,427.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depositary 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, 2000 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,413,679,633) (Note 1) $1,537,656,482
- -----------------------------------------------------------------------------------------------
Cash 714
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 765,832
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 9,937,951
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 15,879,103
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 1,172
- -----------------------------------------------------------------------------------------------
Total assets 1,564,241,254
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 21,539,354
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,528,239
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,123,834
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 138,344
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,468
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,495
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 843,457
- -----------------------------------------------------------------------------------------------
Other accrued expenses 163,522
- -----------------------------------------------------------------------------------------------
Total liabilities 28,344,713
- -----------------------------------------------------------------------------------------------
Net assets $1,535,896,541
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,355,484,189
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (2,665,744)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 59,101,247
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 123,976,849
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,535,896,541
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($683,875,191 divided by 39,060,172 shares) $17.51
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $17.51)* $18.58
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($732,030,558 divided by 42,354,539 shares)** $17.28
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class C share
($64,970,670 divided by 3,736,924 shares)** $17.39
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($55,020,122 divided by 3,169,993 shares) $17.36
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.36)* $17.99
- -----------------------------------------------------------------------------------------------
* 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, 2000 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 6,223,190
- -----------------------------------------------------------------------------------------------
Interest 292,816
- -----------------------------------------------------------------------------------------------
Total investment income 6,516,006
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,768,245
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 933,320
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,601
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 11,793
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 714,342
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,027,045
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 238,529
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 179,706
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 67
- -----------------------------------------------------------------------------------------------
Reports to shareholders 66,102
- -----------------------------------------------------------------------------------------------
Registration fees 103,097
- -----------------------------------------------------------------------------------------------
Auditing 12,954
- -----------------------------------------------------------------------------------------------
Legal 5,842
- -----------------------------------------------------------------------------------------------
Postage 105,066
- -----------------------------------------------------------------------------------------------
Other 129,259
- -----------------------------------------------------------------------------------------------
Total expenses 9,308,968
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (127,218)
- -----------------------------------------------------------------------------------------------
Net expenses 9,181,750
- -----------------------------------------------------------------------------------------------
Net investment loss (2,665,744)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 89,056,989
- -----------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 97,420
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 54,667,004
- -----------------------------------------------------------------------------------------------
Net gain on investments 143,821,413
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $141,155,669
- -----------------------------------------------------------------------------------------------
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
2000* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (2,665,744) $ (1,711,150)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 89,154,409 49,808,576
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 54,667,004 69,807,335
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 141,155,669 117,904,761
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (34,762,869) (886,819)
- ---------------------------------------------------------------------------------------------------------------
Class B (37,359,407) (903,792)
- ---------------------------------------------------------------------------------------------------------------
Class C (3,121,131) --
- ---------------------------------------------------------------------------------------------------------------
Class M (2,839,707) (80,348)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 428,095,448 764,851,437
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 491,168,003 880,885,239
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,044,728,538 163,843,299
- ---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net
investment loss of $2,665,744 and $--, respectively) $1,535,896,541 $1,044,728,538
- ---------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.60 $13.49 $13.58 $9.75 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income --(c) .02(c) .02(c)(d) .10(d) .09(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.93 3.15 2.03 4.52 1.21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.93 3.17 2.05 4.62 1.30
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.08) (.09) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.02) (.06) (2.06) (.70) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) (.06) (2.14) (.79) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.51 $16.60 $13.49 $13.58 $9.75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.78* 23.57(e) 18.00(e) 49.62(e) 15.28*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $683,875 $475,954 $90,282 $11,509 $6,619
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .53* 1.08 1.04(d) 1.00(d) .86*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.01)* .10 .28(d) .82(d) .92*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.95* 126.14 129.01 119.20 80.74*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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. As a result of such limitation, expenses of the fund reflect a
reduction 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.
(e) Total return reflects an expense limitation in effect during the period. Without the limitation total return would have been
lower.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended Year For the period
Per-share January 31 ended June 15, 1998+
operating performance (Unaudited) July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $16.46 $13.49 $13.00
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (c) (.07) (.11) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.91 3.14 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.84 3.03 .49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.02) (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.28 $16.46 $13.49
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.33* 22.53(e) 3.77*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $732,031 $494,452 $66,317
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .91* 1.83 .26*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.38)* (.66) (.12)*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.95* 126.14 129.01
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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. As a result of such limitation, expenses of the fund reflect a
reduction 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.
(e) Total return reflects an expense limitation in effect during the period. Without the limitation total return would have been
lower.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 Feb. 1, 1999+
operating performance (Unaudited) to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $16.55 $15.81
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (c) (.07) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.93 .79
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.86 .74
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.39 $16.55
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.39* 4.68*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $64,971 $31,963
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .91* .91*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.39)* (.35)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.95* 126.14
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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. As a result of such limitation, expenses of the fund reflect a
reduction 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.
(e) Total return reflects an expense limitation in effect during the period. Without the limitation total return would have been
lower.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended Year For the period
Per-share January 31 ended June 15, 1998+
operating performance (Unaudited) July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $16.51 $13.49 $13.00
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (c) (.04) (.06) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.91 3.14 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.87 3.08 .49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.02) (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.36 $16.51 $13.49
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.48* 22.90(e) 3.77*(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $55,020 $42,359 $7,244
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .78* 1.58 .23*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.25)* (.40) (.08)*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.95* 126.14 129.01
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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. As a result of such limitation, expenses of the fund reflect a
reduction 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.
(e) Total return reflects an expense limitation in effect during the period. Without the limitation total return would have been
lower.
</TABLE>
Notes to financial statements
January 31, 2000 (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, class C and class M shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing distribution
fee than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class C
shares are subject to the same fees and expenses as class B shares, except
that class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front end sales charge of 3.50% and pay an ongoing distribution
fee that is higher than class A shares but lower than class B and class C
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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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 sales price on its principal exchange, 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. 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). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on 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, 2000, the fund had no borrowings against the line of
credit.
F) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
G) 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.
H) 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.
I) 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.
J) 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 under
performs the S&P 500 in excess of 3.0%, subject to a maximum increase or
decrease of 0.07% of average net assets. As of January 31, 2000, the
management fee has been increased by the maximum of 0.07% at each tier.
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 Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For six months ended January 31, 2000, fund expenses were reduced by
$127,218 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 $1,781
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
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, class C 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 annual rates up to 0.35%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund to an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the six months ended January 31, 2000, Putnam Mutual Funds Corp.,
acting as underwriter, received net commissions of $549,384 and $21,822
from the sale of class A and class M shares, respectively and $462,725 and
$8,454 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the six months
ended January 31, 2000, Putnam Mutual Funds Corp., acting as underwriter
received $5,612 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended January 31, 2000, purchases and sales of
investment securities other than short-term investments aggregated
$1,468,558,908 and $1,119,052,521, respectively. There were no purchases
and sales of U.S. government obligations.
Note 4
Capital shares
At January 31, 2000, there were an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended January 31, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 12,259,559 $210,877,165
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,952,291 33,442,733
- -----------------------------------------------------------------------------
14,211,850 244,319,898
Shares
repurchased (3,823,047) (66,019,616)
- -----------------------------------------------------------------------------
Net increase 10,388,803 $178,300,282
- -----------------------------------------------------------------------------
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 26,408,659 $397,013,773
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 58,245 880,850
- -----------------------------------------------------------------------------
26,466,904 397,894,623
Shares
repurchased (4,485,828) (67,855,299)
- -----------------------------------------------------------------------------
Net increase 21,981,076 $330,039,324
- -----------------------------------------------------------------------------
Six months ended January 31, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,136,795 $222,750,959
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,036,238 34,473,504
- -----------------------------------------------------------------------------
15,173,033 257,224,463
Shares
repurchased (2,854,123) (48,565,879)
- -----------------------------------------------------------------------------
Net increase 12,318,910 $208,658,584
- -----------------------------------------------------------------------------
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 27,970,416 $417,009,888
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 57,453 896,930
- -----------------------------------------------------------------------------
28,027,869 417,906,818
Shares
repurchased (2,909,682) (44,577,274)
- -----------------------------------------------------------------------------
Net increase 25,118,187 $373,329,544
- -----------------------------------------------------------------------------
Six months ended January 31, 2000
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,824,978 $31,167,208
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 152,278 2,593,298
- -----------------------------------------------------------------------------
1,977,256 33,760,506
Shares
repurchased (171,308) (2,937,166)
- -----------------------------------------------------------------------------
Net increase 1,805,948 $30,823,340
- -----------------------------------------------------------------------------
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,987,362 $32,284,383
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,987,362 32,284,383
Shares
repurchased (56,386) (925,968)
- -----------------------------------------------------------------------------
Net increase 1,930,976 $31,358,415
- -----------------------------------------------------------------------------
Six months ended January 31, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 835,643 $14,293,274
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 162,864 2,767,064
- -----------------------------------------------------------------------------
998,507 17,060,338
Shares
repurchased (394,862) (6,747,096)
- -----------------------------------------------------------------------------
Net increase 603,645 $10,313,242
- -----------------------------------------------------------------------------
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,469,280 $36,684,699
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,391 79,877
- -----------------------------------------------------------------------------
2,474,671 36,764,576
Shares
repurchased (445,333) (6,640,422)
- -----------------------------------------------------------------------------
Net increase 2,029,338 $30,124,154
- -----------------------------------------------------------------------------
Fund information
WEB SITE
www.putnaminv.com
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
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
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' Web site: 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
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA067 58957 2AQ/2JK/2JL/2JM 3/00
