<PAGE>
PUTNAM
CAPITAL
APPRECIATION
FUND
ANNUAL REPORT
MAY 31, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
One broad trend may help to explain the current market rally: the
dramatic moves many domestic companies have made to become more
efficient. As Business Week noted in a June 19, 1995 article, "After
years of massive restructuring, U.S. industry has reduced its
overhead, enhanced productivity, and learned how to compete in the
global market."
FISCAL 1995 RESULTS AT A GLANCE
<TABLE>
<S> <C> <C> <C> <C> <C>
CLASS A CLASS B
TOTAL RETURN NAV POP NAV CDSC
- --------------------------------------------------------------------
(change in value during
period plus reinvested
distributions)
12 months ended 5/31/95 15.61% 8.92%
Life of Class B (since 11/2/94) 11.55% 6.55%
- --------------------------------------------------------------------
CLASS A CLASS B
SHARE VALUE: NAV POP NAV
- --------------------------------------------------------------------
5/31/94 $10.74 $11.40
11/2/94 -- -- $11.08
5/31/95 12.24 12.99 12.19
- --------------------------------------------------------------------
CAPITAL GAINS
LONG- SHORT-
DISTRIBUTIONS NO. INCOME TERM TERM TOTAL
- --------------------------------------------------------------------
Class A 1 $0.030 -- $0.122 $0.152
Class B 1 0.024 -- 0.122 0.146
- --------------------------------------------------------------------
<FN>
Performance data represent past results and reflect an expense
limitation in effect during the period. Without the limitation,
results would have been lower. Performance will differ for each
share class. For performance over longer periods, see pages 8 and 9.
POP assumes 5.75% maximum sales charge. CDSC assumes 5% maximum
contingent deferred sales charge.
</TABLE>
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTMAN]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
THE STOCK MARKET MADE A REMARKABLE LEAP OUT OF THE DOLDRUMS DURING
THE SIX MONTHS ENDED MAY 31, 1995. PUTNAM CAPITAL APPRECIATION FUND
CLEARLY WAS AMONG THE BENEFICIARIES OF THIS TURNABOUT, AS YOU CAN
SEE BY THE RESULTS FOR FISCAL 1995 ON THE FACING PAGE.
DURING MOST OF THE PERIOD, HOWEVER, THE MARKET TENDED TO FAVOR
STOCKS OF LARGER, MORE ESTABLISHED COMPANIES. YOUR FUND SEEKS OUT
STOCKS WITH ABOVE-AVERAGE PROSPECTS FOR CAPITAL GROWTH. OFTEN THESE
ARE STOCKS OF SMALLER AND MEDIUM-SIZED COMPANIES. FUND MANAGER
GERALD ZUKOWSKI HAS POSITIONED THE PORTFOLIO IN A WAY HE BELIEVES
WILL DERIVE THE MOST BENEFIT FROM ANY RISE IN STOCKS OF SMALLER
COMPANIES IN THE MONTHS AHEAD.
THE INTEREST RATE CUT AFTER THE END OF THE FUND'S FISCAL PERIOD
SUGGESTS THAT THE FEDERAL RESERVE BOARD IS SATISFIED THAT THE
ECONOMY HAS SLOWED SUFFICIENTLY TO KEEP INFLATION IN CHECK. SOME
OBSERVERS ARE EVEN PREDICTING FURTHER REDUCTIONS BEFORE YEAR'S END,
A PLUS FOR STOCK MARKET PROSPECTS.
ON THE PAGES THAT FOLLOW, GERRY REVIEWS THE STOCK MARKET ENVIRONMENT
IN THE CONTEXT OF YOUR FUND'S PERFORMANCE AND PROVIDES AN OUTLOOK
FOR THE REMAINDER OF CALENDAR 1995.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
JULY 19, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
GERALD ZUKOWSKI
Putnam Capital Appreciation Fund's fiscal year ended May 31, 1995,
can be divided neatly into two periods. The first six months, from
spring through November 1994, witnessed a sluggish period for
equities, and a disastrous time for fixed-income securities.
However, just before the beginning of 1995 began a dramatic upsurge
in stock and bond prices. Investor confidence in a moderating
economy, coupled with stabilizing interest rates, helped fuel the
financial markets. Despite some concern about the U.S. economy's
overall condition, the markets' strength persists as of this
writing.
Over its fiscal year, your fund returned 15.61% at net asset value
(NAV) for class A shares, a result somewhat below the Standard &
Poor's(Registered Trademark) 500 Index's increase of 19.89% for the
same period. Your fund's class B shares returned 11.55% at NAV since
inception, compared with the S&P 500's rise of 15.90% over that
time. The fund trailed the broader index principally because of its
heavy weighting in small- capitalization stocks -- an advantageous
choice in 1993. These stocks have been lagging as a group recently,
as current market trends are being determined by larger, well-
established companies.
A POSITIVE CONFLUENCE OF EVENTS
Domestic financial markets have indeed enjoyed a breathtaking
several months. Today's prevailing investor optimism contrasts
sharply with the gloomy atmosphere six months ago. Then, equities
were stagnant and bond valuations were depressed. Successive
interest-rate increases by the Federal Reserve Board, prompted by a
too-vibrant economy, had cast a lengthy shadow over the markets.
Toward the end of 1994, however, stock and bond prices were buoyed
by hopes of a soft landing, a desirable condition where economic
growth slackens just enough to stave off inflation and to keep
interest rates stable. Growing evidence supporting the soft-landing
scenario lent momentum to the rally.
<PAGE>
With inflation apparently tamed and interest rates holding steady,
investors have been drawn to the fundamental vigor of many domestic
companies. Corporate earnings continue to surpass even optimistic
estimates; cash flows remain similarly robust. American businesses'
ongoing obsession with efficiency and cost-cutting has further
amplified positive results. Additionally, the dollar's continuing
weakness has added to American competitiveness internationally --
U.S. goods and services are cheaper, and thus more attractive,
abroad.
We believe another extremely important boost for equities over the
past six months has been the recent acceleration of stock- buyback
programs. According to Fortune magazine's June 12, 1995 issue, U.S.
companies announced share buybacks totaling $43 billion in the first
four months of 1995 alone. If implemented, stock buybacks can
increase equity demand and simultaneously reduce supply, while
strengthening per-share earnings. We believe the large number of
companies retiring their own stock is a manifestation of a growing
corporate orientation toward serving investors, which could prove a
positive development for equities.
A POSITIVE ENVIRONMENT FOR FUND'S HOLDINGS
In early 1995, with the economy apparently slowing, we positioned
the fund to take advantage of a more stable interest- rate
environment. Accordingly, we increased exposure to insurance and
finance stocks. Nearly 16% of the fund's net assets are in this
sector, which is traditionally favored by
[BAR CHART]
TOP INDUSTRY SECTORS
- ----------------------------------------------------------
Insurance and finance 15.9%
Health care 8.5%
Business equipment and services 8.4%
Real estate 6.8%
Consumer nondurables 6.3%
*Based on net assets on 5/31/95. Holdings will vary over time.
<PAGE>
moderate interest rates. Financial stocks were also helped by the
dramatic surge in the fixed-income market, whose 1994 lows caused
problems for many investment banks. Indeed, the long- depressed bond
market helped keep bank shares trading at relatively low valuations;
consequently, early in 1995, we found room for appreciation in
certain banking stocks. We have also begun adding to the fund's
holdings of health-care stocks. We believe this sector has been hit
recently by unwarranted investor pessimism; we have found a number
of health-care companies in very sound shape, with strong growth
potential.
Northwest Airlines, a solid competitor in an often-beleaguered
sector, was a positive holding for your fund over the annual period.
We believe Northwest enjoys an advantage because it is firmly
entrenched in routes that, for a number of reasons, are difficult
for smaller airlines to penetrate. Additionally, Northwest operates
one of the best management information systems (MIS) in the
industry, which allows it to make strategic pricing decisions and
plan fare reductions effectively. Northwest's significant investment
in cutting-edge information technology represents a broader
phenomenon: the automation and streamlining of American industry.
Many credit this emphasis on efficiency with helping to restore
competitiveness to American producers.
Perhaps the quintessential American restructuring story in recent
times is IBM, some of whose shares are held by your fund. After
years of losing money, IBM trimmed salaries, cut dividends, and sold
real estate (it even auctioned off many of its corporate art
holdings). Today, the company's core products, particularly large
mainframe computers, are selling well; it has accumulated some $10.5
billion in cash over two years. IBM had enough retained earnings to
purchase Lotus, a premier software developer (and has also announced
a stock buyback program). Clearly, IBM has reaped the rewards of
dramatic change, and its stock has rebounded nicely.
Over the fund's annual period, PepsiCo proved to be a strong holding
for your fund, as it improved profit margins in its food service
businesses. General Electric, currently your fund's largest holding,
also enjoyed strong earnings over the past
<PAGE>
[CHART]
TOP 10 HOLDINGS (5/31/95)
- ---------------------------------------------------------------
GENERAL ELECTRIC CO.
Services, technology, manufacturing
- ---------------------------------------------------------------
TANDY CORP.
Computer services and software
- ---------------------------------------------------------------
AVON PRODUCTS, INC.
Beauty products, fashion jewelry
- ---------------------------------------------------------------
RECKSON ASSOCIATES REALTY CORP.
Owns and manages office and industrial properties in New York
- ---------------------------------------------------------------
BRUNSWICK CORP.
Recreation products
- ---------------------------------------------------------------
GRACE & CO.
Chemicals and refining products
- ---------------------------------------------------------------
ICN PHARMACEUTICALS
Pharmaceuticals, nutritional products, and research
- ---------------------------------------------------------------
IMPERIAL OIL LTD.
Domestic oil and gas producer
- ---------------------------------------------------------------
CHEMICAL BANKING CORP.
Banking, financial services
- ---------------------------------------------------------------
ITT CORP.
Hotel services, technology, insurance conglomerate
- ---------------------------------------------------------------
These holdings represent 18.4% of the fund's net assets. Holdings
will vary over time.
several quarters. Additionally, GE announced plans to retire $5
billion worth of stock over the next two years -- a massive stock
buyback. Capital Cities Broadcasting, owner of ABC, had strong cash
flows over the year, and continues to be a positive holding for your
fund.
CHALLENGES AND OPPORTUNITIES IN THE COMING MONTHS
We believe the next several months may be marked by a moderating
U.S. economy. The degree of the economic slowdown will probably have
a significant impact on financial markets. We are cautiously
optimistic that domestic companies will continue to report strong
earnings, which could in turn support equity prices. Whatever
happens, however, you should try to maintain a longer-term outlook
when evaluating your fund's performance, as time tends to smooth out
fluctuations in the economy and in stock prices.
[FN]
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 May 31, 1995, there is no
guarantee the fund will continue to hold these securities in the
future.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions back into the fund. We show
total return in two ways: on a cumulative long-term basis and on
average how the fund might have grown each year over varying
periods.
Performance should always be considered in light of a fund's
investment strategy. Putnam Capital Appreciation Fund is designed
for investors seeking capital appreciation through investments in
equities chosen for their growth potential.
TOTAL RETURN FOR PERIODS ENDED 5/31/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------
STANDARD &
CLASS A CLASS B POOR'S 500
NAV POP NAV CDSC INDEX CPI
- --------------------------------------------------------------------
1 year 15.61% 8.92% -- -- 19.89% 3.19%
- --------------------------------------------------------------------
Life of class A 47.49 39.02 -- -- 24.98 5.40
- --------------------------------------------------------------------
Annual average 23.80 19.84 -- -- 13.03 2.93
- --------------------------------------------------------------------
Life of class B -- -- 11.55% 6.55% 15.90 1.81
- --------------------------------------------------------------------
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 6/30/95
(most recent calendar quarter)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
NAV POP NAV CDSC
- --------------------------------------------------------------------
1 year 24.18% 17.00% -- --
- --------------------------------------------------------------------
Life of class A 51.35 42.65 -- --
Annual average 24.23 20.44 -- --
- --------------------------------------------------------------------
Life of class B -- -- 14.38% 9.38%
- --------------------------------------------------------------------
<FN>
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions and reflect an expense
limitation in effect during the period. Without the limitation,
results would have been lower. The fund began operations on 8/5/93
offering shares now known as class A. Class B shares became
available 11/2/94. Performance data represent past results and will
differ for each share class. Investment returns and principal value
will fluctuate so an investor's shares, when sold, may be worth more
or less than their original cost.
</TABLE>
<PAGE>
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
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.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at
the end of the period. Your fund's CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth
year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks
that is frequently used as a general measure of stock market
performance. 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 (CPI) is a commonly used measure of inflation;
it does not represent an investment return.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
for the year ended May 31, 1995
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, 1995, and the related statement of
operations for the year then ended, the statement of changes in net
assets for the year then ended and for the period August 5, 1993
(commencement of operations) to May 31, 1994 and the "Financial
highlights" for each of the periods indicated therein. 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 audits.
We conducted our audits 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, 1995, 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 audits
provide 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,
1995, and the results of its operations for the year then ended, the
changes in its net assets for the year then ended and for the period
August 5, 1993 (commencement of operations) to May 31, 1994 and the
"Financial highlights" for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
July 14, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
May 31, 1995
<TABLE>
<C> <S>
<C>
COMMON STOCKS (94.5%)*
NUMBER OF SHARES VALUE
AUTOMOTIVE (4.0%)
- --------------------------------------------------------------------
106,000 A.P.S. Holding Corp.+
$ 2,756,000
60,000 Capco Automotive Products Corp.
495,000
28,600 Echlin, Inc.
1,029,600
42,000 Ford Motor Co.
1,228,500
25,000 General Motors Corp.
1,200,000
27,000 Snap-On Inc.
958,500
- -------------
7,667,600
BASIC INDUSTRIAL PRODUCTS (3.9%)
- --------------------------------------------------------------------
32,000 Deere (John) & Co.
2,768,000
18,000 Millipore Corp.
1,181,250
102,000 Owens-Illinois, Inc.+
1,351,500
35,000 Raychem Corp.
1,273,125
58,000 Shorewood Packaging Corp.+
913,500
- -------------
7,487,375
BUILDING AND CONSTRUCTION (2.4%)
- --------------------------------------------------------------------
45,000 Armstrong World Industries, Inc.
2,323,125
44,000 Cavalier Homes, Inc.
489,500
130,100 Congoleum Corp. Class A+
1,886,450
- -------------
4,699,075
BUSINESS EQUIPMENT AND SERVICES (8.3%)
- --------------------------------------------------------------------
52,000 Adaptec, Inc.+
1,566,500
22,400 Boise Cascade Office Products+
554,400
12,500 CMC Group, Inc.
28,125
20,000 Cabletron Systems, Inc.+
1,070,000
44,000 Computer Associates International, Inc.
2,882,000
70,000 Corrpro Cos., Inc.+
1,260,000
36,000 EMC Corp.+
828,000
26,000 IBM Corp.
2,424,500
33,000 Parametric Technology Corp.+
1,402,500
35,000 Sensormatic Electronics Corp.
1,028,129
68,000 Tandem Computers Inc. United States+
901,000
31,000 Western Digital Corp.+
546,375
14,000 Xerox Corp.
1,587,250
- -------------
16,078,779
CHEMICALS (2.5%)
- --------------------------------------------------------------------
45,000 Dexter Corp.
1,063,125
48,000 Grace (W.R.) & Co.
3,084,000
44,000 Southern Petrochemical Ltd. 144A
341,000
11,000 Witco Chemical Corp.
302,500
- -------------
4,790,625
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
COMPUTER SERVICES AND SOFTWARE (4.2%)
- --------------------------------------------------------------------
33,600 Bell & Howell Holdings Co.+
$ 621,600
5,000 CBT Group PLC ADR (Ireland)+
178,750
21,000 National Computer Systems Inc.
399,000
35,000 STB Systems, Inc.+
271,250
64,200 Sterling Software, Inc.
2,174,775
96,000 Tandy Corp.
4,488,000
2,000 Tivoli Systems, Inc.+
72,500
- -------------
8,205,875
CONGLOMERATES (2.6%)
- --------------------------------------------------------------------
26,000 ITT Corp.
2,908,750
28,600 TRW, Inc.
2,255,825
- -------------
5,164,575
CONSUMER NON DURABLES (6.1%)
- --------------------------------------------------------------------
65,000 Avon Products, Inc.
4,379,375
35,600 Collins & Aikman Corp.+
249,200
37,500 Dimon Inc.+
646,875
13,000 Donnkenny, Inc.+
247,000
56,000 Herbalife International, Inc.
581,000
59,000 Lowe's Cos., Inc.
1,607,750
14,000 Norton McNaughton, Inc.+
199,500
20,500 OroAmerica, Inc.+
89,687
43,000 Premark International, Inc.
2,144,625
60,000 RJR Nabisco Holdings Corp.+
1,710,000
-------------
11,855,012
CONSUMER SERVICES (3.5%)
- --------------------------------------------------------------------
33,000 Block (H & R), Inc.
1,192,125
2,500 CBS, Inc.
167,500
23,000 Capital Cities/ABC, Inc.
2,219,500
14,500 Dun & Bradstreet Corp.
768,500
14,000 Service Corp. International
400,750
21,000 Sports Club Co., Inc.+
105,000
45,000 Team Rental Group, Inc.+
343,125
13,500 Tribune Co.
804,937
35,000 Young Broadcasting Corp. Class A+
739,375
- -------------
6,740,812
ELECTRONICS AND ELECTRICAL EQUIPMENT (4.1%)
- --------------------------------------------------------------------
18,000 Diebold, Inc.
749,250
82,000 General Electric Co.
4,756,000
13,000 Holophane Corp.+
269,750
27,000 Nokia Corp. ADR
1,255,500
130,000 Richey Electronics, Inc.+
893,750
- -------------
7,924,250
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
ENTERTAINMENT (1.4%)
- --------------------------------------------------------------------
80,000 Aztar Corp.+
$ 750,000
46,000 Circus Circus Enterprises, Inc.+
1,535,250
19,000 Speedway Motorsports, Inc.+
391,875
- -------------
2,677,125
ENVIRONMENTAL CONTROL (0.5%)
- --------------------------------------------------------------------
35,000 WMX Technologies, Inc.
953,750
FOOD AND BEVERAGES (3.0%)
- --------------------------------------------------------------------
56,000 American Family Restaurants, Inc.+
238,000
9,000 Canandaigua Wine, Inc. Class A+
389,250
51,500 PepsiCo, Inc.
2,523,500
92,000 Sara Lee Corp.
2,564,500
- -------------
5,715,250
FOREST PRODUCTS (0.8%)
- --------------------------------------------------------------------
200,000 Asia Pacific Resource International
Class A (Indonesia)+ 1,525,000
HEALTH CARE (8.5%)
- --------------------------------------------------------------------
25,900 Advocat, Inc.+
288,137
22,500 Baxter International, Inc.
784,687
30,000 Beckman Instruments, Inc. New
832,500
34,680 Columbia/HCA Healthcare Corp.
1,417,545
53,000 Elan Corp., PLC ADR
1,848,375
40,500 Epitope, Inc.+
597,375
59,200 Foundation Health Corp.+
1,665,000
22,000 Health Systems International, Inc. Class A+
585,750
12,000 Horizon Healthcare Corp.+
219,000
150,399 ICN Pharmaceuticals, Inc.
2,556,785
31,000 Integrated Health Services, Inc.
1,034,625
59,000 Mid Atlantic Medical Services, Inc.+
1,224,250
43,100 Owens & Minor, Inc. Holding Co.
560,300
6,000 Oxford Health Plans Inc.
303,000
15,000 Pfizer, Inc.
1,321,875
53,000 Rightchoice Managed Care, Inc. Class A +
695,625
42,000 Sterile Concepts Holdings
477,750
- -------------
16,412,579
INSURANCE AND FINANCE (15.9%)
- --------------------------------------------------------------------
64,500 American Express Co.
2,297,813
9,500 American General Corp.
327,750
12,500 Banco Commercial S.A. ADS+
212,500
53,200 Bank of Boston Corp.
1,941,800
34,000 BankAmerica Corp.
1,776,500
34,000 Bankers Life Holding Corp.
663,000
13,000 CIGNA Corp.
971,750
9,000 Capital One Financial Corp.
189,000
64,000 Chemical Banking Corp.
2,952,000
22,000 Citicorp
1,177,000
10,000 Federal National Mortgage Association
930,000
4,500 First Financial Management Corp.
319,500
32,000 First Interstate Bancorp
2,688,000
22,000 Fremont General Corp.
555,500
6,000 General RE Corp.
812,250
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
INSURANCE AND FINANCE (continued)
- --------------------------------------------------------------------
40,000 Life Partners Group, Inc.
$ 750,000
20,500 Merrill Lynch & Co., Inc.
963,500
25,500 Midocean, Ltd.+
723,562
5,500 Morgan (J.P.) & Co., Inc.
389,812
7,500 Morgan Stanley Group, Inc.
570,937
25,500 NationsBank Corp.
1,443,937
81,000 Presidential Life Corp.
587,250
90,900 Reliance Group Holdings, Inc.
579,484
7,000 River Bank America
50,750
9,000 Signet Banking Corp.
203,625
33,000 St. Paul Cos., Inc.
1,678,875
58,000 The PMI Group, Inc.+
2,370,750
45,465 Titan Holdings, Inc.
488,749
13,000 Transnational Re Corp.+
256,750
49,000 United Asset Management Corp.
1,800,750
- -------------
30,673,094
METALS AND MINING (2.3%)
- --------------------------------------------------------------------
46,800 Mapco, Inc.
2,755,350
23,000 Minerals Technologies, Inc.
759,000
31,000 Pittston Minerals Group
341,000
60,000 Zeigler Coal Holding Co.
690,000
- -------------
4,545,350
OIL AND GAS (2.3%)
- --------------------------------------------------------------------
76,000 Imperial Oil Ltd.
2,954,500
14,000 Nuevo Energy Co.+
299,250
16,000 Santa Fe Energy Resources, Inc.+
156,000
13,500 Seitel, Inc.
381,375
17,000 TransTexas Gas Corp.+
244,375
20,000 Union Texas Petroleum Hldgs., Inc.
452,500
- -------------
4,488,000
PHOTOGRAPHY (0.4%)
- --------------------------------------------------------------------
13,000 Eastman Kodak Co.
784,875
REAL ESTATE (6.9%)
- --------------------------------------------------------------------
89,000 Alexander Haagen Properties
979,000
6,000 Bradley Real Estate Trust, Inc.
94,500
85,000 CWM Mortgage Holdings, Inc.
988,125
32,000 Capstone Capital Trust, Inc.
552,000
14,500 CenterPoint Properties Corp.
288,188
41,000 Crown American Realty Trust
486,875
9,000 FelCor Suite Hotels, Inc.
227,250
51,000 First Industrial Realty Trust, Inc.
937,125
6,000 LTC Properties, Inc.
77,250
26,000 Malan Realty Investors, Inc.
367,250
30,000 McArthur/Glen Realty Corp.
435,000
11,000 Mid Atlantic Realty Trust
101,062
35,000 National Health Investors, Inc.
905,625
83,000 RFS Hotel Investors, Inc.
1,250,183
150,000 Reckson Associates Realty Corp.+
3,656,253
12,000 Sizeler Property Investments, Inc.
123,000
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
REAL ESTATE (continued)
- --------------------------------------------------------------------
25,000 Storage Equities, Inc.
$ 396,875
7,000 Sun Communities, Inc.
167,125
21,000 Town & Country Trust
299,250
12,000 Walden Residential Props, Inc.
222,000
20,000 Wellsford Residential Property Trust
430,000
39,000 Winston Hotels
370,500
- -------------
13,354,436
RECREATION (2.3%)
- --------------------------------------------------------------------
194,000 Brunswick Corp.
3,564,750
48,000 Outboard Marine Corp.
966,000
- -------------
4,530,750
RETAIL (4.3%)
- --------------------------------------------------------------------
26,000 Baker J, Inc.
341,250
57,000 Best Products, Inc.+
370,500
47,000 Borders Group, Inc.+
687,375
27,500 Circle K Corp.+
464,065
36,000 InterTAN, Inc.+
261,000
54,000 Limited, Inc. (The)
1,201,500
40,000 Penney (J.C.) Co., Inc.
1,885,000
80,000 Rite Aid Corp.
1,900,000
- -------------
7,110,690
TRANSPORTATION (3.0%)
- --------------------------------------------------------------------
25,000 AMR Corp. United States+
1,706,250
26,000 Jinhui Shipping & Transportation+
32,591
4,000 Landstar System, Inc.+
106,000
4,000 Maritime Investment Fund 144A
41,500
22,000 Norfolk Southern Corp.
1,507,000
60,000 Northwest Airlines Corp. Class A+
1,702,500
25,000 Ryder System, Inc.
634,375
17,000 Trism, Inc.
136,000
- -------------
5,866,216
UTILITIES (1.9%)
- --------------------------------------------------------------------
9,000 Bell Atlantic Corp.
501,750
27,000 GTE Corp.
901,125
49,100 Shandong Huaneng Power ADR (China)
362,113
42,000 Sprint Corp.
1,407,000
13,000 US WEST, Inc.
536,250
- -------------
3,708,238
- --------------------------------------------------------------------
TOTAL COMMON STOCKS (cost $167,173,812)
$182,959,331
- --------------------------------------------------------------------
<PAGE>
CONVERTIBLE PREFERRED STOCKS (1.1%)*
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------
BUSINESS EQUIPMENT AND SERVICES (0.9%)
- --------------------------------------------------------------------
40,000 Unisys Corp. Ser. A, $3.75 cv. pfd.
$1,710,000
CONSUMER SERVICES (0.2%)
- --------------------------------------------------------------------
8,000 Service Corp. International $6.25 cv. pfd.
456,000
- --------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,820,825) $2,166,000
- --------------------------------------------------------------------
CONVERTIBLE BONDS AND NOTES (0.9%)*
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------
$ 440,000 ICN Pharmaceuticals cv. deb. 8 1/2s,
11/15/1999 $438,900
1,200,000 Danka Business Systems 144A cv. sub.
notes 6 3/4s, 2002
1,230,000
- --------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS AND NOTES
(cost $1,642,200) $1,668,900
- --------------------------------------------------------------------
SHORT-TERM INVESTMENTS (6.1%)*
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------
$11,000,000 Federal National Mortgage Assn. 5.88s,
July 21, 1995 $10,908,369
940,000 Interest in $523,899,000 repurchase
agreement dated May 31, 1995 with
Goldman, Sachs & Co. due June 1, 1995
with respect to various U.S. Treasury
obligations -- maturity value of
$940,159 for an effective yield of 6.07% 940,159
- --------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(cost $11,848,528) $11,848,528
- --------------------------------------------------------------------
TOTAL INVESTMENTS (cost $182,485,365)**
$198,642,759
- --------------------------------------------------------------------
<PAGE>
<FN>
NOTES
- --------------------------------------------------------------------
* Percentages indicated are based on net assets of $193,517,123,
which correspond to a net asset value per class A share and
class B share of $12.24 and $12.19, respectively.
+ Non-income-producing security.
** The aggregate identified cost for federal income tax purposes is
$182,486,958, resulting in gross unrealized appreciation and
depreciation of $20,246,439 and $4,090,638, respectively, or net
unrealized appreciation of $16,155,801.
ADR or ADS after the name of a holding stands for American
Depository Receipt or American Depository Shares, respectively,
representing ownership of foreign securities on deposit with a
domestic custodian bank.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
<TABLE>
<S> <C>
ASSETS
- --------------------------------------------------------------------
Investments in securities, at value
(identified cost $182,485,365) (Note 1) $198,642,759
- --------------------------------------------------------------------
Cash 498
- --------------------------------------------------------------------
Dividends, interest and other receivables 426,461
- --------------------------------------------------------------------
Receivable for shares of the fund sold 703,598
- --------------------------------------------------------------------
Receivable for securities sold 1,404,872
- --------------------------------------------------------------------
Unamortized organization expenses (Note 1) 10,861
- --------------------------------------------------------------------
TOTAL ASSETS 201,189,049
LIABILITIES
- --------------------------------------------------------------------
Payable for securities purchased 7,072,465
- --------------------------------------------------------------------
Payable for shares of the fund repurchased 192,823
- --------------------------------------------------------------------
Payable for compensation of Manager and
other affiliates (Note 2) 225,430
- --------------------------------------------------------------------
Payable for distribution fees (Note 2) 114,144
- --------------------------------------------------------------------
Payable for administrative services (Note 2) 714
- --------------------------------------------------------------------
Payable to affiliate for organization expenses (Note 2) 17,091
- --------------------------------------------------------------------
Other accrued expenses 49,259
- --------------------------------------------------------------------
TOTAL LIABILITIES 7,671,926
- --------------------------------------------------------------------
NET ASSETS $193,517,123
- --------------------------------------------------------------------
REPRESENTED BY
- --------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $176,665,929
- --------------------------------------------------------------------
Undistributed net investment income (Note 1) 727,495
- --------------------------------------------------------------------
Accumulated net realized loss on investments (33,695)
- --------------------------------------------------------------------
Net unrealized appreciation of investments 16,157,394
- --------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $193,517,123
- --------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- --------------------------------------------------------------------
Net asset value and redemption price of class A shares
($103,555,000 divided by 8,462,293 shares) $12.24
- --------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.24)* $12.99
- --------------------------------------------------------------------
Net asset value and redemption price of class B shares
($89,962,123 divided by 7,381,829 shares)+ $12.19
- --------------------------------------------------------------------
<FN>
* 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.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year ended May 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
- --------------------------------------------------------------------
Dividends (net of foreign tax of $7,633) $1,431,141
- --------------------------------------------------------------------
Interest 421,536
- --------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,852,677
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Compensation of Manager (Note 2) 395,267
- --------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 70,538
- --------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,862
- --------------------------------------------------------------------
Reports to shareholders 30,632
- --------------------------------------------------------------------
Registration fee 33,351
- --------------------------------------------------------------------
Auditing 9,579
- --------------------------------------------------------------------
Legal 13,015
- --------------------------------------------------------------------
Postage 2,867
- --------------------------------------------------------------------
Administrative services (Note 2) 805
- --------------------------------------------------------------------
Distribution fees -- class A (Note 2) 84,775
- --------------------------------------------------------------------
Distribution fees -- class B (Note 2) 266,028
- --------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,413
- --------------------------------------------------------------------
Other expenses 4,642
- --------------------------------------------------------------------
Fees waived by Manager (Note 2) (15,154)
- --------------------------------------------------------------------
TOTAL EXPENSES 902,620
- --------------------------------------------------------------------
NET INVESTMENT INCOME 950,057
- --------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 208,076
- --------------------------------------------------------------------
Net unrealized appreciation of investments during the year15,958,951
- --------------------------------------------------------------------
NET GAIN ON INVESTMENTS 16,167,027
- --------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,117,084
- --------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
FOR THE PERIOD
AUGUST 5, 1993
YEAR ENDED (COMMENCEMENT OF
MAY 31 OPERATIONS) TO
------------- -----------------
1995 1994
- --------------------------------------------------------------------
INCREASE IN NET ASSETS
- --------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------
Net investment income $950,057 $18,691
- --------------------------------------------------------------------
Net realized gain on investments 208,076 347,288
- --------------------------------------------------------------------
Net unrealized appreciation
of investments 15,958,951 198,443
- --------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 17,117,084 564,422
- --------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------
From net investment income
- --------------------------------------------------------------------
Class A (127,251) (9,697)
- --------------------------------------------------------------------
Class B (67,212) --
- --------------------------------------------------------------------
From net realized gain on investments
- --------------------------------------------------------------------
Class A (329,475) (21,817)
- --------------------------------------------------------------------
Class B (204,599) --
- --------------------------------------------------------------------
In excess of realized gain on investments
- --------------------------------------------------------------------
Class A (20,787) --
- --------------------------------------------------------------------
Class B (12,908) --
- --------------------------------------------------------------------
Increase from capital share
transactions (Note 4) 174,100,271 528,779
- --------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 190,455,123 1,061,687
- --------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,062,000 2,000,313
- --------------------------------------------------------------------
END OF PERIOD (including
undistributed net investment
income of $727,495 and
$10,771, respectively) $193,517,123 $3,062,000
- --------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<S> <C> <C> <C>
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 2, 1994 AUGUST 5, 1993
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED OPERATIONS) TO
MAY 31 MAY 31 MAY 31
- --------------------------------------------------------------------
1995 1995 1994
- --------------------------------------------------------------------
CLASS B CLASS A
- --------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $11.08 $10.74 $8.53
- --------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income .06 .06 .07(a)(b)
Net realized and unrealized gain
on investments 1.20 1.59 2.27
- --------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 1.26 1.65 2.34
- --------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
- --------------------------------------------------------------------
From net investment income (.03) (.03) (.04)
- --------------------------------------------------------------------
From net realized gain
on investments (.10) (.10) (.09)
- --------------------------------------------------------------------
In excess of realized gain
on investments (.02) (.02) --
- --------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.15) (.15) (.13)
- --------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $12.19 $12.24 $10.74
- --------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(c) 11.55(d) 15.61 27.58(d)
- --------------------------------------------------------------------
NET ASSETS, END OF
PERIOD (in thousands) $89,962 $103,555 $3,062
- --------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 1.12(b)(d) 1.13(b) .78(b)(d)
- --------------------------------------------------------------------
Ratio of net investment
income to average net assets (%).65(d) 1.89 .73(b)(d)
- --------------------------------------------------------------------
Portfolio turnover (%) 15.32 15.32 102.99(d)
- --------------------------------------------------------------------
<FN>
(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 an 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 $0.11 per share.
For the period ended May 31, 1995 the reduction was less than
$0.01 per share for both class A and class B. See Note 2.
(c) Total investment return assumes dividend reinvestment and
does not reflect the effects of sales charges.
(d) Not annualized.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
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 and current income by investing
primarily in common stocks that offer potential for capital
appreciation.
The fund offers both class A and class B shares. As of April 21,
1995 only existing shareholders are able to purchase additional
shares. The fund commenced its public offering of class B shares on
November 2, 1994. Class A shares are sold with a maximum front-end
sales charge of 5.75%. Class B shares do not pay a front-end sales
charge, but pay a higher ongoing distribution fee than class A
shares, and may be subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Expenses of
the fund are borne pro-rata by the holders of both classes of
shares, except that each class bears expenses unique to that class
(including distribution fees applicable to such class) and 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 should 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
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 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 into 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
<PAGE>
underlying securities is at all times at least equal to the resale
price, including accrued interest.
D) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis 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.
E) FEDERAL 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 as
amended. 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.
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. These
differences include treatment of non-taxable dividends, wash sales
and post October loss deferral. Reclassifications are made to the
fund's capital accounts as necessary so that they reflect income and
gains available for distribution (or available capital loss
carryovers) under income tax regulations. During the year ended May
31, 1995, the fund reclassified $38,870 to decrease undistributed
net investment income and $392 to increase net realized gain, and to
increase paid-in-capital by $38,478.
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 state 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
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of The Putnam Investment Management, Inc., the fund's
Manager, a wholly- owned subsidiary of The 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, and 0.45% of the next $5.0 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
<PAGE>
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 February 28,1995 the Manager agreed to reduce its compensation
to the extent that expenses of the fund exceed 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.
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. The
fund has agreed to reimburse the offering and organizational costs
paid on behalf of Putnam Management.
Trustees of the fund receive an annual Trustee's fee of $350 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 The Putnam
Investments, Inc. Investor servicing agent functions were provided
by Putnam Investor Services, Inc., a division of PFTC.
Investor servicing and custodian fees reported in the Statement of
Operations for the year ended May 31, 1995 have been reduced by
credits allowed by PFTC. These credits amount to $93,876 for the
year ended May 31, 1995.
The fund has adopted distribution plans (the "Plans") with respect
to its class A shares and class B 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
Trustees have approved payment by the fund at an annual rate of .25%
and 1.00% of the average net assets attributable to class A and
class B shares respectively.
For the year ended May 31, 1995, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $331,537 from the sale of
class A shares and $32,760 in contingent deferred sales charges from
redemptions of class B shares. A deferred sales charge of up to 1%
is assessed on certain redemptions of class A shares purchased as
part of an investment of $1 million or more.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended May 31, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$177,614,811 and $9,693,972, respectively. In determining the net
gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
<PAGE>
NOTE 4
CAPITAL SHARES
At May 31, 1995, there was an unlimited number of shares of
beneficial interest authorized divided into two shares. Transactions
in capital shares were as follows:
<TABLE>
<S> <C> <C>
YEAR ENDED MAY 31
- --------------------------------------------------------------
CLASS A 1995
- --------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------
Shares sold 8,977,882 $100,455,028
Shares issued in
connection with
reinvestment of
distributions 8,592 90,470
- --------------------------------------------------------------
8,986,474 100,545,498
- --------------------------------------------------------------
Shares repurchased (809,397) (9,031,629)
- --------------------------------------------------------------
NET INCREASE 8,177,077 $91,513,869
- --------------------------------------------------------------
FOR THE PERIOD
AUGUST 5, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31
- --------------------------------------------------------------
CLASS A 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
- --------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 2, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31
- --------------------------------------------------------------
CLASS B 1995
- --------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------
Shares sold 7,750,225 $86,801,011
Shares issued in
connection with
reinvestment of
distributions 4,256 44,813
- --------------------------------------------------------------
7,754,481 86,845,824
- --------------------------------------------------------------
Shares repurchased (372,652) (4,259,422)
- --------------------------------------------------------------
NET INCREASE 7,381,829 $82,586,402
- --------------------------------------------------------------
</TABLE>
<PAGE>
FEDERAL TAX INFORMATION
May 31, 1995
The fund has designated 100% of the distributions as qualifying for
the dividends-received deductions for corporations.
The Form 1099 you receive in January 1996 will show the tax status
of all distributions paid to your account in calendar 1995.
<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
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Gerald Zukowski
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
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 copy of Putnam's Quarterly
Performance Summary. For more information or to request a
prospectus, call toll-free: 1-800-225-1581.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
<PAGE>
PUTNAM INVESTMENTS
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
18996-433/948
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of
these financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
