<PAGE>
Putnam
Capital
Appreciation
Fund
Annual Report
May 31, 1994
(Putnam logo)
Boston*London*Tokyo
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Performance highlights
During the 10-month period ended May 31, 1994, your fund
delivered a 27.58% return at net asset value. Over the same
period, the Standard & Poor's 500(R) Index, one of the best-known
indicators of stock market performance, returned a mere 3.98%.
Performance should always be considered in light of a fund's
investment strategy. Putnam Capital Appreciation Fund is
designed for investors seeking capital growth through investments
in common stocks chosen for growth potential.
FISCAL 1994 RESULTS AT A GLANCE
Total return: NAV POP
Life-of-fund
(since 8/5/93) 27.58% 20.24%
Share value: NAV POP
August 5, 1993 $8.53 $9.05
May 31, 1994 10.74 11.40
Short-term
Investment capital
Distributions: Number Income gains Total
1 $0.04 $0.09 $0.13
Performance data represent past results. Investment return and
principal value will fluctuate so an investor's shares, when
redeemed, may be worth more or less than their original cost. POP
assumes 5.75% maximum sales charge. For performance comparisons,
see page 7.
The fund began operations August 5, 1993. The fund's performance
during the short period is not indicative of its long-term
performance potential.
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<PAGE>
From the Chairman
(Picture of George Putnam)
Dear Shareholder:
Putnam Capital Appreciation Fund finished its first fiscal year
well ahead of the market. While a single period is by no means an
appropriate indication of your fund's long-term performance
potential, we are certainly pleased that it is off to a strong
start.
The fund's strong performance can be traced in large part to the
success of Fund Manager Gerald Zukowski's investment strategy. He
has pursued long-term growth by seeking out undervalued common
stocks of companies, and investing in those he regards as the
most promising. He believes these stocks have inherent or
potential value beyond their current market price.
Investing in overlooked or out-of-favor stocks can entail
above-average risk. The process requires extensive research and
daily management. However, with a carefully selected, constantly
monitored, and well-diversified portfolio, these risks can be
accompanied by above-average returns.
Although this new fund is still small, it enjoys full access to
Putnam's in-depth research facilities and long experience in the
management of domestic and foreign equities. As time goes on,
these resources should prove invaluable in helping us position
the portfolio to take full advantage of changing market
conditions.
Respectfully yours,
George Putnam
Chairman of the Trustees
July 20, 1994
<PAGE>
<PAGE>
Report from the Fund Manager
Gerald Zukowski
Putnam Capital Appreciation Fund delivered an outstanding
performance during the 10 months ended May 31, 1994. As the U.S.
stock market struggled through a series of setbacks, your fund
proved the effectiveness of its strategy by delivering a 27.58%
return at net asset value.
The fund's strategy, coupled with shrewd stock selection, was the
key to its success during the period. In one of the more
turbulent securities markets in recent memory, we were able to
identify growth opportunities that others had overlooked. These
included companies in industries that are currently out of favor,
as well as companies that are off the well-beaten paths of the
investment world.
LOOKING OVER THE OVERLOOKED
In our view, one area of potential opportunity that has been
neglected recently is real estate investment trusts. Real estate,
which had been depressed, has benefited from growing demand,
lower vacancies, and rent increases. REITs, as a group, offer
obvious advantages to income-oriented portfolios because of their
attractive yields. However, our rationale for including them in a
growth-oriented portfolio is that they are focused on areas where
strength already exists or is likely to develop.
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<PAGE>
Over 15% of your fund's assets were invested in REITs as of
May 31, 1994. Putnam Management believes that hotel REITs are
especially well positioned for the future. Your fund participated
in the success of hotel REITs during the period through holdings
in Winston Hotels and Rfs Hotel Investors, Inc.
Your fund also took advantage of opportunities in the automotive
industry. One example is Exide Corp., a cost-efficient battery
producer. Exide recently won part of the Sears DieHard contract.
The fund's exposure to the transportation industry _ with an
emphasis on specialized trucking companies _ helped enhance
performance during the period. One example is Landstar Systems,
Inc, a Connecticut-based common carrier trucking firm. With $672
million in sales, the company employs independent truckers to
create a cost-effective system of doing business. Putnam
Management believes that Landstar Systems is the type of
off-the-beaten-path company whose growth potential should prove
an asset to the portfolio.
CAPITALIZING ON MID-CAPITALIZATION COMPANIES
Your fund's portfolio also had a good mix of mid-capitalization
companies _ those market-valued from $300 million to $5 billion _
during the period. Midsized companies that are seasoned, yet
still growing, can often be overlooked by investors. This segment
performed particularly well versus the market during the period.
TOP INDUSTRY SECTORS (5/31/94)
Real estate 15.7%
Transportation 10.2%
Retail 9.3%
Consumer non durables 9.0%
Business equipment and services 7.7%
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<PAGE>
TOP 10 HOLDINGS (5/31/94)
Winston Hotels
Northwest Airlines Corp. Class A
Southern Petrochemical Ltd.
Crown American Realty Trust
Penn National
Nn Ball & Roller, Inc.
Exide Corp.
General Electric Co.
Norton McNaughton
Seda Specialty Packing Corp.
Reflects 29.2% of the portfolio based on net assets. Holdings
will vary in future.
OUTLOOK
In the current circumstances, we believe the market may need to
take a rest here. This is because interest rates are rising and
the Federal Reserve Board seems bent on slowing down economic
growth to make sure inflation doesn't go out of control. While
interest-rate increases could cause the market to stall in the
near term, it has not experienced the serious excesses that
existed in the 1970s. So we anticipate the market will resume its
upward bias after the Federal Reserve finishes its task.
Once investors gain comfort with the future direction of
inflation, interest rates, and the economy, we believe the
conditions will be right for continued stock market growth.
In a stronger market, your fund's growth-stock holdings should
help drive performance.
All stocks held as of May 31, 1994, were viewed favorably, but
there is no assurance that the fund will hold these securities in
the future.
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<PAGE>
Performance highlights
(line graph)
Growth of a $10,000 investment
Cumulative total return of a $10,000 investment since 8/5/93
Fund's shares at POP ******
Standard & Poor's(r) 500 Index ......
Consumer Price Index ------
Plot points:
(date/year) (CPI) (S&P 500) fund plot points at POP
8/5/93 10000 10000 9425
8/31/93 10028 10344 9591
9/30/93 10048 10312 9967
10/31/93 10090 10512 10387
11/30/93 10097 10377 10552
12/31/93 10097 10551 11476
1/31/94 10125 10894 12058
2/28/94 10159 10566 12405
3/31/94 10194 10154 11711
4/30/94 10208 10271 11868
5/31/94 10215 10398 12024
Past performance is no assurance of future results.
TERMS AND DEFINITIONS
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not including any initial or contingent deferred sales
charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales
charge.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks
that is frequently used as a general measure of stock market
performance. The index assumes reinvestment of all distributions
and does not take into account brokerage commissions or other
costs. The fund's portfolio contains securities that do not match
those in the index.
Consumer Price Index is a commonly used measure of inflation. It
does not represent an investment return.<PAGE>
<PAGE>
Report of independent accountants
For the period August 5, 1993 (commencement of operations) to May
31, 1994
To the Trustees and Shareholders of Putnam Capital Appreciation
Fund
We have audited the accompanying statement of assets and
liabilities of Putnam Capital Appreciation Fund, including the
portfolio of investments owned, as of May 31, 1994, and the
related statement of operations, the statement of changes in net
assets, and the "Financial Highlights" for the period August 5,
1993 (commencement of operations) to May 31, 1994. These
financial statements and "Financial Highlights" are the
responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and "Financial
Highlights" based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and "Financial Highlights" are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of May 31, 1994, by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and "Financial
Highlights" referred to above present fairly, in all material
respects, the financial position of Putnam Capital Appreciation
Fund as of May 31, 1994, and the results of its operations, the
changes in its net assets, and the "Financial Highlights" for the
period August 5, 1993 (commencement of operations) to May 31,
1994, in conformity with generally accepted accounting
principles.
Coopers & Lybrand
Boston, Massachusetts
July 19, 1994
<PAGE>
<PAGE>
Portfolio of investments owned
May 31, 1994
COMMON STOCKS (93.8%)(a)
NUMBER OF SHARES Value
Real Estate (15.7%)
2,000 Alexander Haagen Properties $ 37,250
700 CenterPoint Properties Corp. 14,875
6,300 Crown American Realty Trust 86,625
2,000 LTC Properties Inc. 28,000
2,000 McArthur/Glen Realty Corp. 45,750
2,500 Mid Atlantic Realty Trust 23,437
2,000 Oasis Residential, Inc. 51,250
4,000 Rfs Hotel Investors, Inc. 72,000
11,000 Winston Hotels (b) 121,000
480,187
Transportation(10.2%)
2,000 Landstar System, Inc. (b) 52,750
4,000 Maritime Investment Fund (c) 42,500
400 Norfolk Southern Corp. 25,450
8,000 Northwest Airlines Corp.
Class A (b) 116,000
600 Railtex, Inc. (b) 14,700
4,000 Trism, Inc. (b) 60,000
311,400
Retail(9.3%)
2,000 Baker J, Inc. 38,500
3,500 Levitz Furniture Inc. (b) 38,500
1,800 Limited Inc. (The) 31,725
3,000 Oroamerica, Inc.. (b) 39,000
1,000 Penney (J.C.) Co., Inc. 51,125
1,100 Rite Aid Corp. 22,137
1,200 Ross Stores, Inc. 16,050
2,000 TJX Cos., Inc. (The) 48,500
285,537
Consumer Non Durables(9.0%)
600 Avon Products, Inc. 35,325
2,000 Burlington Industries, Inc. (b) 27,500
1,000 Donnkenny, Inc. (b) 24,625
4,000 Norton McNaughton, Inc. (b) 76,500
500 Premark International, Inc. 35,500
3,000 Seda Specialty Packing Corp. 75,750
275,200
Business Equipment and Services(7.7%)
2,800 Adaptec, Inc. (b) 49,350
1,200 Computer Associates
International, Inc. 49,950
4,000 EMC Corp. (b) 67,500
1,500 Tandy Corp. 56,063
900 Western Digital Corp. 12,600
235,463
Common Stocks (continued)
Number of Shares Value
Consumer Services(6.5%)
2,300 Circus Circus
Enterprises, Inc. (b) $ 53,187
800 Dun & Bradstreet Corp. 46,600
8,000 Penn National (b) 83,000
1,000 Shoney's Inc. (b) 16,875
199,662
Chemicals(6.2%)
1,500 Grace (W.R.) & Co. 62,625
1,000 Mallinckrodt Inc. 29,750
7,000 Southern Petrochemical Ltd. (c) 96,250
188,625
Automotive(5.4%)
4,000 Clark Automotive Products (b) 43,000
1,800 Exide Corp. 79,425
300 Ford Motor Co. 17,325
700 General Motors Corp. Class E 24,588
164,338
Health Care(5.0%)
4,000 Advocat, Inc. (b) 38,500
1,000 Elan Corp., PLC ADR (b)(d) 35,375
1,800 Gmis, Inc. 19,125
1,800 ICN Pharmaceuticals, Inc. (b) 15,975
400 Integrated Health
Services, Inc. (b) 11,700
2,000 Regency Health Services (b) 31,000
151,675
Insurance and Finance(4.6%)
500 American Express Co. 13,813
700 American General Corp. 19,075
80 Bear Stearns Companies, Inc. 1,630
5,000 Financing for Sciences (b) 32,500
200 General Re Corp. 23,950
1,000 Life Partners Group, Inc. 19,125
800 Merrill Lynch & Co., Inc. 31,200
141,293
Basic Industrial Products(2.6%)
5,000 Nn Ball & Roller, Inc. 81,250
Electronics and Electrical Equipment(2.6%)
1,600 General Electric Co. 79,400
Broadcasting(2.4%)
100 Capital Cities/ABC, Inc. 73,975
Utilities(2.2%)
400 American Telephone &
Telegraph Co. 21,800
1,200 Sprint Corp. 45,600
67,400<PAGE>
<PAGE>
Common Stocks (continued)
NUMBER OF SHARES Value
Oil and Gas(1.2%)
2,000 Offshore Pipelines Inc. (b) 37,750
Food and Beverages(1.2%)
1,000 PepsiCo, Inc. 36,000
Aerospace and Defense(1.0%)
1,600 Coltec Industries (b) 31,000
Metals and Mining(1.0%)
1,400 Ak Steel Holding Corp. (b) 29,750
Total Common Stocks
(cost $2,676,349) $ 2,869,905
CONVERTIBLE BONDS(1.4%)(a)(cost $39,150)
Principal Amount Value
30,000 LTC Properties, Inc. cv.
deb. 9 3/4s, 2004 $42,037
WARRANTS(0.1%)(a)(b)(cost $500)
Number Expiration
of Warrants Date Value
5,000 Financing
for Sciences (b) 5/20/99 $2,500
SHORT-TERM INVESTMENTS(6.3%)(a)(cost $194,023)
Principal Amount Value
$194,000 Interest in $489,000,000
repurchase agreement dated
May 31, 1994, with Kidder
Peabody Co., Inc., due
June 1, 1994, with respect to
various U.S. Treasury
obligations-maturity value
of $194,023 for an
effective yield of 4.24% $194,023
Total Investments
(cost $2,910,022)(e) $ 3,108,465
<PAGE>
Notes
(a) Percentages indicated are based on total net assets of
$3,062,000, which correspond to a net asset value per share of
$10.74.
(b) Non-income-producing security.
(c) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At May 31, 1994, these securities were
valued at $138,750 or 4.5% of net assets.
(d) Securties whose value is determined or significantly
influenced by trading or exchanges not in the United States or
Canada. ADR after the name of foreign holding stands for American
Depository Receipt, representing ownership of foreign securties
on deposit with a domestic custodian bank.
(e) The aggregate identified cost on a federal income tax basis
is $2,910,022, resulting in gross unrealized appreciation and
depreciation of $322,076 and $123,633, respectively, or net
unrealized appreciation of $198,443.
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
Statement of assets and liabilities
May 31, 1994
Assets
Investments in securities at value (identified
cost $2,910,022) (Note 1) $3,108,465
Cash 389
Dividends and interest receivable 8,576
Receivable for shares of the fund sold 2,899
Receivable for securities sold 283,860
Receivable from manager (Note 3) 14,437
Unamortized organization expenses (Note 1) 14,274
Total assets 3,432,900
Liabilities
Payable for securities purchased 330,170
Payable for compensation of Manager (Note 3) 13,632
Payable for investor servicing and custodian
fees (Note 3) 3,395
Payable for organization expense (Note 1) 17,091
Other accrued expenses 6,612
Total liabilities 370,900
Net assets $3,062,000
Represented by
Paid-in capital (Note 4) $2,527,180
Undistributed net investment income 10,771
Accumulated net realized gain on investments 325,606
Net unrealized appreciation of investments 198,443
Total-Representing net assets applicable to
capital shares outstanding $3,062,000
Computation of net asset value and offering price
Net asset value and redemption price per share
($3,062,000 divided by 285,216 shares) $10.74
Offering price per share (100/94.25 of $10.74)* $11.40
*On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
Statement of operations
For the period August 5, 1993 (commencement of operations) to May
31, 1994 *
Investment income
Dividends $ 27,051
Interest 11,619
Total investment income 38,670
Expenses:
Compensation of Manager (Note 3) $ 13,632
Investor servicing and custodian fees (Note 3) 9,370
Compensation of Trustees (Note 3) 501
Reports to shareholders 138
Registration fee 869
Auditing 12,697
Legal 10,403
Postage87
Administrative services (Note 3) 27
Amortization of organization expenses (Note 1) 2,817
Other expenses 49
Fees waived and other expenses absorbed by Manager
(Note 3) (30,611)
Total expenses 19,979
Net investment income 18,691
Net realized gain on investments (Notes 1 and 4) 347,288
Net unrealized appreciation of investments during
the period 198,443
Net gain on investments 545,731
Net increase in net assets resulting from operations $564,422
*See Note 2
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
Statement of changes of net assets
For the period
August 5, 1993
(commencement of operations)
to May 31
1994*
Increase in net assets
Operations:
Net investment income $ 18,691
Net realized gain on investments 347,288
Net unrealized appreciation of investments 198,443
Net increase in net assets resulting from operations 564,422
Distributions to shareholders from:
Net investment income (9,697)
Net realized gain on investments (21,817)
Increase from capital share transactions (Note 5) 528,779
Total increase in net assets 1,061,687
Net Assets:
Beginning of period 2,000,313
End of period (including undistributed net
investment income of $10,771) $3,062,000
*See Note 2.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
For the period
August 5, 1993
(commencement
of operations) to
May 31
1994
Net Asset Value, Beginning of Period $8.53
Investment Operations
Net Investment Income .07(a)(b)
Net Realized and Unrealized Gain on Investments 2.27
Total from Investment Operations 2.34
Less Distributions:
From Net Investment Income (.04)
From Net Realized Gain on Investments (.09)
Total Distributions (.13)
Net Asset Value, End of Period $10.74
Total Investment Return at Net Asset Value (%) (c) 33.63(d)
Net Assets, End of period (in thousands) $3,062
Ratio of Expenses to Average Net Assets (%) .95(b)(d)
Ratio of Net Investment Income to Average Net
Assets (%) .89(b)(d)
Portfolio Turnover (%) 102.99(e)
* See Note 2.
(a) Per share net investment income for the period ended May 31,
1994, has been determined on the basis of the weighted average
number of shares outstanding during the period.
(b) Reflects a voluntary expense limitation during the period.
As a result of these limitations, expenses of the fund for the
period ended May 31, 1994, reflect a reduction of $.11 per share.
See Note 3
(c) Total investment return assumes dividend reinvestment and
does not reflect the effects of sales charges.
(d) Annualized.
(e)Not annualized.
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Notes to financial statements
May 31, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940,
as amended, as a diversified open-end management investment
company. The fund seeks capital appreciation by investing
primarily in common stocks that offer potential for
capital appreciation.
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
A Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported
- - as in the case of some securities traded over-the-counter - the
last reported bid price, except that certain U.S. government
obligations are stated at the mean between the bid and asked
prices. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates the
market, and other investments are stated at fair value following
procedures approved by the Trustees. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at the
current exchange rate.
B Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the fund may transfer
uninvested cash balances to a joint trading account, along with
the cash and certain other accounts of other registered
investment companies managed by Putnam Investment Management
Inc., (Putnam Management) the fund's Manager, a wholly owned
subsidiary of Putnam Investments , Inc. These balances may be
invested in one or more repurchase agreements and/or short-term
money market instruments.
C Repurchase agreements The fund, 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.
The fund's Manager 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.
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D Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are
recorded as soon as the fund is informed of the ex-dividend date.
Foreign currency-denominated receivables and payables are
"marked-to-market" daily using the current exchange rate. The
fluctuation between the original exchange rate and the current
exchange rate is recorded daily as unrealized gain or loss. Upon
receipt or payment, the fund realizes a gain or loss amounting to
the difference between the original value and the ending value of
the receivable or payable. Foreign currency gains and losses
related to interest and dividends receivable are reported as part
of dividend income.
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<PAGE>
E Federal income taxes It is the policy of the fund to
distribute all of its income within the prescribed time and
otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. It is also the
intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986. Therefore, no provision has been made for
federal taxes on income, capital gains or unrealized appreciation
of securities held, and excise tax on income and capital gains.
F Distributions to shareholders Distributions to shareholders
are recorded by the fund on the ex-dividend date. Permanent book
and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital.
G 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 aggregated $17,091.
These expenses are being amortized by the fund on a straight-line
basis over a five-year period.
Note 2
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust under
the laws of the Commonwealth of Massachusetts on May 4, 1993.
During the period May 4, 1993, to August 4, 1993, the fund had no
operations other than those related to organizational matters,
including the initial capital contribution of $100,000 and the
issuance of 11,765 shares to Putnam Investments, Inc. on June 14,
1993. Putnam Investments, Inc. made a subsequent capital
contribution of $1,900,000 and was issued 222,743 shares on
August 3, 1993. During the period June 14, 1993, to August 4,
1993, invested initial capital resulted in interest income of
$313. Regular investment operations commenced on August 5, 1993.
At May 31, 1994, Putnam Investments, Inc. was deemed to own
237,612 shares outstanding of the fund, valued at $2,551,953.
<PAGE>
Note 3
Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management, Inc., the fund's
Manager, a wholly owned subsidiary of Putnam Investments, Inc.,
for management and investment advisory services is paid quarterly
based on the average net assets of the fund for the quarter. Such
fee is based on the following annual rates: 0.65% of the first
$500 million of average net assets, 0.55% of the next $500
million, 0.5% of the next $500 million, 0.45% of any amount over
$1.5 billion, subject to reduction in any year to the extent that
expenses (exclusive of distribution fees, brokerage, interest and
taxes) of the fund exceed 2.5% of the first $30 million of
average net assets, 2.0% of the next $70 million, and 1.5% of any
amount over $100 million and by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of
the Manager on the fund's portfolio transactions.
Until December 31, 1994, the Manager voluntarily agreed to reduce
its compensation and, if necessary, absorb other fund expenses to
the extent that expenses of the fund exceed an annual rate of
1.0% of the fund's average net assets. The fund's expenses
subject to this limitation were exclusive of brokerage, interest,
taxes, insurance, amortization of deferred organization expenses
and extraordinary expenses, if any, and expenses incurred under
the fund's distribution plan described below. This limitation was
accomplished by a reduction of the compensation payable under the
management contract to the Manager. As a result of the voluntary
limitation, expenses for the period ended May 31, 1994, were
reduced by $30,611.
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<PAGE>
The fund also reimburses the Manager 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. For the period ended May 31, 1994, the fund paid $27
for these services.
Trustees of the fund receive an annual Trustee's fee of $100 and
an additional fee for each Trustees' meeting attended. Trustees
who are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions were
provided by Putnam Investor Services, a division of PFTC. Fees
paid for these investor servicing and custodial functions for the
period ended May 31, 1994, amounted to $9,370.
Investor servicing and custodian fees reported in the Statement
of Operations for the period ended May 31, 1994 have been reduced
by credits allowed by PFTC.
Although a distribution plan has been adopted under Rule 12b-1 of
the Investment Company Act of 1940, the fund is not currently
making any payments pursuant to the plan. For the period ended
May 31, 1994, the fund paid no monies in distribution fees.
During the period ended May 31, 1994, Putnam Mutual Funds Corp.,
acting as an underwriter, received no net commissions from the
sale of shares of the fund.
A deferred sales charge of up to 1.00% is assessed on certain
redemptions of shares purchased as part of an investment of $1
million or more. For the period ended
May 31, 1994, Putnam Mutual Funds Corp., acting as underwriter,
received no monies on redemptions.
Note 4
Purchases and sales of securities
During the period ended May 31, 1994, purchases and sales of
investment securities other than U.S. government obligations and
short-term investments aggregated $4,745,048 and $2,376,337,
respectively. Purchases of U.S. government obligations aggregated
$819,859. In determining the net gain or loss on securities sold,
the cost of securities has been determined on the identified cost
basis.
<PAGE>
Note 5
Capital shares
At May 31, 1994, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
For the period
August 5, 1993
(commencement of
operations) to
May 31, 1994
Shares Amount
Shares sold 66,369 $694,673
Shares issued in connection
with reinvestment of distributions 3,209 31,514
69,578 726,187
Shares repurchased (18,870) (197,408)
Net increase 50,708 $528,779
<PAGE>
<PAGE>
Federal tax information
For federal income tax purposes, distributions from net
investment income of $0.04 and short-term capital gain of $0.09
constitute "dividend income." The fund has designated 6.91% of
the distributions as qualifying for the dividends-received
deductions for corporations.
The Form 1099 you receive in January 1995 will show the tax
status of all distributions paid to your account in calendar
1994.
If you are a shareholder in an IRA or other tax-sheltered
retirement plan, this statement is for information only and will
serve as a record of distributions reinvested in your account
during the fiscal year. Money invested in these plans generally
is not subject to federal income tax until you withdraw it.
As required by law, your fund reports to the Internal Revenue
Service on a calendar year basis the amount of distributions paid
to each shareholder.
<PAGE>
<PAGE>
Fund Information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O.Box 41203
Providence, RI 02940-1203
1-800-225-1581
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
<PAGE>
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Gerald Zukowski
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information
of shareholders of Putnam Capital Appreciation 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 Putnam Quarterly Performance Summary.
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers) are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
