PUTNAM
CAPITAL
APPRECIATION
FUND
SEMIANNUAL REPORT
November 30, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
FUND HIGHLIGHTS
"Putnam Capital Appreciation Fund is characterized, above all, by
flexibility. We choose among stocks of any size, from any sector,
depending upon where we believe growth and value are most compelling.
Often, we target those stocks that are just beneath Wall Street's
notice, stocks that represent significant, yet relatively
undiscovered, opportunities."
-- Gerry Zukowski, manager,
Putnam Capital Appreciation Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
18 Financial statements
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
PUTNAM CAPITAL APPRECIATION FUND BEGAN FISCAL 1996 WITH THE DOMESTIC
STOCK MARKETS IN FULL STRIDE. THE RALLY WAS STILL UNDER WAY AT THE
PERIOD'S MIDPOINT ON NOVEMBER 30, 1995.
FUND MANAGER GERALD ZUKOWSKI TOOK FULL ADVANTAGE OF THIS SITUATION BY
FOCUSING ON THE INDUSTRY SECTORS SHOWING THE GREATEST POTENTIAL FOR
COMBINING GROWTH AND VALUE. AMONG THESE HAVE BEEN TECHNOLOGY AND
FINANCIAL SERVICES, BOTH AMPLY REPRESENTED IN THE FUND'S PORTFOLIO
DURING THE PERIOD.
GERRY ALSO SOUGHT OUT COMPANIES WHOSE REAL WORTH HAS GONE UNNOTICED
BY MOST INVESTORS. THESE STOCKS FREQUENTLY PROVIDE SIGNIFICANT GROWTH
WHEN INVESTORS FINALLY DISCOVER THEIR HIDDEN VALUE. HE DISCUSSES SOME
OF THESE COMPANIES IN THE REPORT THAT FOLLOWS.
I AM PLEASED TO ANNOUNCE THAT TONY SANTOSUS HAS JOINED GERRY IN THE
MANAGEMENT OF YOUR FUND. TONY HAS BEEN WITH PUTNAM SINCE 1985, FIRST
AS A PERFORMANCE STATISTICIAN, LATER AS A QUANTITATIVE ANALYST,
INVESTMENT TECHNOLOGIST, AND ASSOCIATE PORTFOLIO MANAGER. HE HAS 13
YEARS OF INVESTMENT EXPERIENCE.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
JANUARY 17, 1996
<PAGE>
REPORT FROM THE FUND MANAGER
GERALD S. ZUKOWSKI
ANTHONY C. SANTOSUS
U.S. investors have enjoyed a remarkably powerful and resilient rally
in domestic financial markets this year. Indeed, many mutual fund
investors are benefiting on two fronts, with both stock and bond
prices moving higher throughout 1995. After such a pronounced rise,
however, questions about the rally's durability are perhaps
inevitable; as 1996 begins, the management of Putnam Capital
Appreciation Fund will be intently scrutinizing the markets for signs
of increasing volatility.
Whatever the near future may bring, however, your fund has certainly
taken full advantage of this robust environment for equities. Over
its semiannual period, which ended November 30, 1995, the fund's
class A shares rose 15.03% at net asset value (NAV), with class B
shares gaining 14.60% at NAV. These strong results are in line with
the Standard & Poor's 500(Registered Trademark) Index rise of 14.93%
of the same period. Your fund's slight bias toward small-cap value
stocks -- which were not entirely in favor over the period -- largely
prevented the fund from significantly outperforming the broader stock
index. It should be noted that in 1994, with the broader market
languishing, these same small-cap value stocks helped bolster Putnam
Capital Appreciation Fund's performance.
STOCK MARKET CHEERED BY BOTH SHORT- AND LONG-TERM TRENDS
During 1995's dramatic rise to record levels, the stock market has
consistently defied pessimists, reacting positively to most political
and economic developments. There has been some turbulence -- surging
technology stocks, which have outpaced most other sectors, fell
periodically as investors took profits or grew apprehensive about
seemingly steep prices. In the broader market, a long-term
perspective has provided impetus for the rally: investors are
acknowledging American industry's renewed competitiveness and
efficiency.
Other factors help account for the market's performance: increased
inflows of money to equity funds, a stronger dollar,
<PAGE>
evidence of fiscal responsibility from Washington, and stable-to-
declining interest rates have all contributed to the ongoing
strength. In the months ahead, the degree of the slowdown in the
American economy will probably be the single most important
determinant of the stock market's direction.
We select issues for the portfolio based upon company fundamentals,
growth prospects, and valuations. At the same time, the fund is
managed with the larger, macroeconomic picture in mind. Therefore, we
will carefully evaluate issues regarding the overall environment
discussed above and their potential impact on the fund's holdings.
COMPANIES IN DIVERSE SECTORS THRIVE
Over its semiannual period, your fund had a relatively large
weighting in the thriving technology sector. However, we anticipate
near-term volatility in the techs -- and have accordingly trimmed our
weighting in this area. We saw excellent performance from several
holdings in technology. Adaptec, Inc. proved very strong throughout
the year. This company is a market leader in the booming client-
server area, which allows for speedier processing by farming out
computing tasks to a central database. Indeed, Adaptec's earnings
have grown at a rate of nearly 20% annually, yet the stock still does
not appear overpriced. Elsewhere in the sector, Computer Associates,
which creates software for mainframe computers, was similarly robust.
It too is expanding rapidly, with earnings growing at close to 20%
yearly pace. Of course, stocks of
TOP INDUSTRY SECTORS
[BAR CHART]
- ---------------------------------------------------------------------
Insurance and finance 17.40%
Technology 7.90%
Real Estate 6.90%
Retail 6.60%
Oil and gas 5.10%
- ---------------------------------------------------------------------
* Based on net assets as of 11/30/95. Holdings will vary over
time.
<PAGE>
smaller companies--which are often in the technology sector--
experience fluctuation in price.
Even as the technology sector soared, traditionally slower-paced
areas of the market surged forward. Financial services firms were
particularly strong, fueled by declining interest rates, the strong
bond market, and a spate of bank mergers. Our Chemical Bank position
performed well, as investors cheered the institution's merger with
Chase Manhattan Bank. First Interstate Bank was also buoyed as two
banks entered into a bidding war for its shares. Currently, we are
carefully examining holdings in this sector, as the sharp rise in
prices might have made valuations historically high.
SEEKING COMPANIES LARGELY UNNOTICED BY WALL STREET
One of Putnam Capital Appreciation Fund's defining characteristics is
our search for companies that have not yet attracted much attention
on Wall Street. Such companies may be quietly increasing earnings
without fanfare, and their stocks can often be bought relatively
inexpensively. Community Care of America is one such holding. It
specializes in providing health-care services for small communities,
an underserved niche. It currently is selling at a low price-to-
earnings ratio and appears poised for growth.
We are also optimistic about Duckwall-Alco Stores, a retailer that
operates in towns considered too small for Wal-Mart or other national
chains. Duckwall has increased earnings by nearly 15% annually,
although such gains have been masked by an increase in outstanding
shares (the company recently raised funds through a new stock
offering). Southern Energy Homes is another little-known company in
the fund's portfolio, one that we believe has strong growth
potential. The firm manufactures inexpensive modular homes; recently,
it shipped an initial order to a German town in need of affordable
housing. With German labor rates high, such means of cost saving are
in high demand and could lead to more business for the firm.
Finally, we continue to see excellent performance from a long-time
fund holding, Northwest Airlines. We recently trimmed our
<PAGE>
TOP 10 HOLDINGS (11/30/95)
- ---------------------------------------------------------------------
GENERAL ELECTRIC CO.
Consumer and industrial products, broadcasting
- ---------------------------------------------------------------------
PHILIP MORRIS
Tobacco, food
- ---------------------------------------------------------------------
BANCO DE A. EDWARDS (ADR)
Commercial bank
- ---------------------------------------------------------------------
IBM CORP.
Business machines
- ---------------------------------------------------------------------
TANDY CORP.
Consumer electronics retailer
- ---------------------------------------------------------------------
PEPSICO
Soft drink manufacturer
- ---------------------------------------------------------------------
FIRST INTERSTATE BANCORP
Commercial banking
- ---------------------------------------------------------------------
RECKSON ASSOCIATES REALTY CORP.
Real estate investment trust
- ---------------------------------------------------------------------
ADIDAS AG (144A ADS)
Athletic gear
- ---------------------------------------------------------------------
STERLING SOFTWARE, INC.
Markets consumer software products
- ---------------------------------------------------------------------
These holdings represent 21.0% of the fund's net assets. Portfolio
holdings will vary over time.
position in Northwest after its incredible run-up in price. However,
we believe that the stock still has momentum, as the long-derided
transportation sector is winning renewed respect from investors.
Northwest has increased its profitability in recent years, investing
heavily in computerized systems that streamline pricing and improve
efficiency.
A GLANCE FORWARD
In the aftermath of such a steep rise in stock prices, we are
carefully evaluating market conditions. As of this writing, we do not
consider domestic stocks extremely overvalued; however, we caution
that any number of factors could lead to some near-term market
instability. Ultimately, though, we remain optimistic about the long-
term outlook for U.S. companies and, in turn, the stock market. We
believe the rise in stock prices that has largely characterized the
1990s thus far reflects positive fundamental changes in American
business and industry.
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 11/30/95, there is no guarantee
the fund will continue to hold these securities in the future.
<PAGE>
PERFORMANCE SUMMARY
PERFORMANCE SHOULD ALWAYS BE CONSIDERED IN LIGHT OF A FUND'S
INVESTMENT STRATEGY. PUTNAM CAPITAL APPRECIATION FUND IS DESIGNED FOR
INVESTORS SEEKING CAPITAL GAIN THROUGH INVESTMENTS IN EQUITIES CHOSEN
FOR THEIR GROWTH POTENTIAL.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 11/30/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
INCEPTION DATE (8/5/93) (11/2/94)
NAV POP NAV CDSC
- ---------------------------------------------------------------------
6 months 15.03% 8.39% 14.60% 9.60%
- ---------------------------------------------------------------------
1 year 34.24 26.51 33.12 28.12
- ---------------------------------------------------------------------
Life of class 69.66 59.91 27.83 23.83
Annual average 25.59 22.43 25.53 21.89
- ---------------------------------------------------------------------
COMPARATIVE RETURNS FOR PERIODS ENDED 11/30/95
STANDARD & POORS CONSUMER
500 INDEX PRICE INDEX
- ---------------------------------------------------------------------
6 months 14.93% .99%
- ---------------------------------------------------------------------
1 year 36.95 2.67
- ---------------------------------------------------------------------
Life of class A 43.64 6.44
Annual average 16.89 2.73
- ---------------------------------------------------------------------
Life of class B 31.55 2.81
Annual average 28.90 2.60
- ---------------------------------------------------------------------
RETURN FOR PERIODS ENDED 12/31/95
(most recent calendar quarter)
CLASS A CLASS B
NAV POP NAV CDSC
- ---------------------------------------------------------------------
1 year 34.50% 26.81% 33.38% 28.38%
- ---------------------------------------------------------------------
Life of class 73.58 63.61 30.72 26.72
Annual average 25.71 22.66 25.97 22.64
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
GROWTH OF A $10,0000 INVESTMENT
[MOUNTAIN CHART]
CUMULATIVE TOTAL RETURN OF A $10,000 INVESTMENT SINCE 8/5/93
FUNDOS CLASS A CONSUMER PRICE S&P 500
DATE SHARES AT POP INDEX (CPI) INDEX
- ---------------------------------------------------------------------
8/5/93 $9,425 $10,000 $10,000
11/30/93 $10,552 $10,377 $10,097
11/30/94 $11,931 $10,488 $10,367
11/30/95 $15,992 $14,364 $10,637
- ---------------------------------------------------------------------
Past performance is no assurance of future results. A $10,000
investment in the fundOs class B shares at inception on 11/2/94 would
have been valued at $12,783 on 11/30/95 ($12,383 with a redemption at
the end of the period).
PRICE AND DISTRIBUTION INFORMATION
<TABLE><CAPTION>
<S> <C> <C> <C>
6 months ended 11/30/95
CLASS A CLASS B
NAV POP NAV
- ---------------------------------------------------------------------
SHARE VALUE:
- ---------------------------------------------------------------------
5/31/95 $12.24 $12.99 $12.19
- ---------------------------------------------------------------------
11/30/95 14.08 14.94 13.97
- ---------------------------------------------------------------------
<FN>
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Fund performance
data 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. POP assumes 5.75% maximum sales
charge for class A shares. CDSC for class B shares assumes 5% maximum
contingent deferred sales charge.
</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
for class A shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at
the end of the period. Your fund's CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth
year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks
that is frequently used as a general measure of stock market
performance. 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>
PORTFOLIO OF INVESTMENTS OWNED
November 30, 1995 (Unaudited)
COMMON STOCKS (91.3%)*
<TABLE><CAPTION>
<C> <S> <C>
NUMBER OF SHARES VALUE
AUTOMOTIVE (4.2%)
- ---------------------------------------------------------------------
106,000 A.P.S. Holding Corp.+ $1,961,000
74,000 Capco Automotive Products Corp. 573,500
95,600 Echlin, Inc. 3,489,400
42,000 Ford Motor Co. 1,186,500
25,000 General Motors Corp. 1,212,500
27,000 Snap-On Inc. 1,194,750
- ---------------------------------------------------------------------
9,617,650
BASIC INDUSTRIAL PRODUCTS (2.6%)
- ---------------------------------------------------------------------
40,000 Applied Extrusion Technologies, Inc.+ 505,000
57,000 Carbide/Graphite Group, Inc.+ 855,000
60,000 Deere (John) & Co. 1,972,500
102,000 Owens-Illinois, Inc.+ 1,326,000
58,000 Shorewood Packaging Corp.+ 819,250
32,800 Zoltek Cos., Inc.+ 459,200
- ---------------------------------------------------------------------
5,936,950
BROADCASTING (0.9%)
- ---------------------------------------------------------------------
17,000 Capital Cities/ABC, Inc. 2,101,625
BUILDING AND CONSTRUCTION (3.0%)
- ---------------------------------------------------------------------
45,000 Armstrong World Industries, Inc. 2,694,375
133,100 Congoleum Corp. Class A+ 1,380,913
53,000 Lennar Corp. 1,172,625
90,000 Southern Energy Homes, Inc.+ 1,620,000
- ---------------------------------------------------------------------
6,867,913
BUSINESS EQUIPMENT AND SERVICES (5.2%)
- ---------------------------------------------------------------------
35,000 Adaptec, Inc.+ 1,640,625
22,400 Boise Cascade Office Products+ 820,400
7,000 Cabletron Systems, Inc.+ 581,000
46,000 HA-LO Industries, Inc.+ 931,500
52,000 IBM Corp. 5,024,500
31,000 Western Digital Corp.+ 472,750
18,000 Xerox Corp. 2,468,250
- ---------------------------------------------------------------------
11,939,025
CHEMICALS (2.0%)
- ---------------------------------------------------------------------
60,000 Arcadian Corp. 1,245,000
57,000 Ethyl Corp. 712,500
42,000 Grace (W.R.) & Co. 2,551,500
44,000 Southern Petrochemical Ltd. 144A GDR (India)+ 244,200
- ---------------------------------------------------------------------
4,753,200
COMPUTER SERVICES AND SOFTWARE (4.1%)
- ---------------------------------------------------------------------
10,000 Apple Computer, Inc. 381,250
57,500 Computer Associates Intl., Inc. 3,766,250
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
COMPUTER SERVICES AND SOFTWARE (CONTINUED)
- ---------------------------------------------------------------------
5,300 Microsoft Corp.+ $ 461,763
21,000 National Computer Systems Inc. 441,000
9,000 Parametric Technology Corp.+ 636,750
64,200 Sterling Software, Inc.+ 3,787,800
- ---------------------------------------------------------------------
9,474,813
CONGLOMERATES (2.3%)
- ---------------------------------------------------------------------
26,000 ITT Corp. 3,188,250
28,600 TRW, Inc. 2,141,425
- ---------------------------------------------------------------------
5,329,675
CONSUMER NON DURABLES (4.9%)
- ---------------------------------------------------------------------
24,000 Avon Products, Inc. 1,743,000
57,000 Best Products, Inc.+ 356,250
24,000 Donnkenny, Inc.+ 792,000
56,000 Herbalife International, Inc. 413,000
44,000 Norton McNaughton, Inc.+ 594,000
69,000 Philip Morris Cos., Inc. 6,054,750
28,000 Premark International, Inc. 1,428,000
- ---------------------------------------------------------------------
11,381,000
CONSUMER RELATED (2.7%)
- ---------------------------------------------------------------------
152,800 Adidas AG 144A ADS (Germany)+ 4,144,700
65,000 Lowe's Cos., Inc. 2,047,500
- ---------------------------------------------------------------------
6,192,200
CONSUMER SERVICES (1.1%)
- ---------------------------------------------------------------------
33,000 Block (H & R), Inc. 1,468,500
62,000 Team Rental Group, Inc.+ 596,750
23,000 Young Broadcasting Corp. Class A+ 575,000
- ---------------------------------------------------------------------
2,640,250
ELECTRONICS AND ELECTRICAL EQUIPMENT (3.8%)
- ---------------------------------------------------------------------
31,100 AVX Corp. 894,125
92,000 General Electric Co. 6,187,000
36,000 Millipore Corp. 1,341,000
22,000 National Semiconductor Corp.+ 470,250
- ---------------------------------------------------------------------
8,892,375
ENTERTAINMENT (1.1%)
- ---------------------------------------------------------------------
80,000 Aztar Corp.+ 700,000
67,000 Circus Circus Enterprises, Inc.+ 1,859,250
- ---------------------------------------------------------------------
2,559,250
ENVIRONMENTAL CONTROL (0.6%)
- ---------------------------------------------------------------------
48,500 WMX Technologies, Inc. 1,430,750
FOOD AND BEVERAGES (4.0%)
- ---------------------------------------------------------------------
56,000 American Family Restaurants, Inc.+ 318,500
20,500 IBP, Inc. 1,281,250
81,500 PepsiCo, Inc. 4,502,875
92,000 Sara Lee Corp. 2,967,000
- ---------------------------------------------------------------------
9,069,625
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
FOREST PRODUCTS (0.4%)
- ---------------------------------------------------------------------
200,000 Asia Pacific Resource International Class A
(Indonesia)+
$900,000
HEALTH CARE (4.8%)
- ---------------------------------------------------------------------
25,900 Advocat, Inc.+ 268,713
10,000 Baxter International, Inc. 420,000
35,000 Beckman Instruments, Inc. 1,220,625
34,680 Columbia/HCA Healthcare Corp. 1,790,355
32,000 Community Care of America, Inc.+ 388,000
44,500 Epitope, Inc.+ 522,875
65,000 Foundation Health Corp.+ 2,973,750
12,000 Horizon/CMS Healthcare Corp.+ 259,500
31,000 Integrated Health Services, Inc. 685,875
44,000 Mid Atlantic Medical Services, Inc.+ 1,072,500
53,000 Rightchoice Managed Care, Inc. Class A+ 669,125
39,000 Sterile Concepts Holdings 546,000
8,200 United Dental Care, Inc.+ 274,700
- ---------------------------------------------------------------------
11,092,018
INSURANCE AND FINANCE (17.4%)
- ---------------------------------------------------------------------
64,500 American Express Co. 2,741,250
50,000 BHC Financial, Inc. 931,250
306,500 Banco de A. Edwards ADR (Chile)+ 5,248,823
53,200 Bank of Boston Corp. 2,467,150
34,000 BankAmerica Corp. 2,163,250
40,000 Bankers Life Holding Corp. 730,000
54,000 Chemical Banking Corp. 3,240,000
30,000 Citicorp 2,122,500
10,000 Federal National Mortgage Association 1,095,000
32,000 First Interstate Bancorp 4,288,000
27,000 Fremont General Corp. 931,500
20,500 Merrill Lynch & Co., Inc. 1,140,313
33,000 Midocean, Ltd. 1,233,375
16,500 Morgan Stanley Group, Inc. 1,423,125
10,000 NationsBank Corp. 713,750
81,000 Presidential Life Corp. 810,000
90,900 Reliance Group Holdings, Inc. 806,738
7,000 River Bank America+ 42,000
74,000 Rockford Industries, Inc.+ 693,750
52,000 The PMI Group, Inc.+ 2,470,000
80,465 Titan Holdings, Inc. 1,096,336
20,000 Union Acceptance Corp. Class A+ 305,000
49,000 United Asset Management Corp. 1,843,625
54,000 United Cos. Financial Corp. 1,782,000
- ---------------------------------------------------------------------
40,318,735
METALS AND MINING (0.6%)
- ---------------------------------------------------------------------
120,000 Zeigler Coal Holding Co. 1,350,000
OIL AND GAS (5.1%)
- ---------------------------------------------------------------------
25,000 Belden & Blake Corp.+ 412,500
81,400 Core Laboratories N.V.+ 834,350
200,000 Fortune Petroleum Corp.+ 925,000
76,000 Imperial Oil Ltd. 2,650,500
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
OIL AND GAS (CONTINUED)
- ---------------------------------------------------------------------
142,300 Petro-Canada 1st installment+ $ 782,650
125,900 Plains Resources, Inc.+ 936,381
16,000 Santa Fe Energy Resources, Inc.+ 148,000
29,300 Seitel, Inc.+ 732,500
32,900 Stone Energy Corp.+ 444,150
64,000 TransTexas Gas Corp.+ 1,024,000
130,800 Union Pacific Resources Group Inc.+ 3,041,100
- ---------------------------------------------------------------------
11,931,131
PHARMACEUTICALS (1.7%)
- ---------------------------------------------------------------------
112,000 ICN Pharmaceuticals, Inc. 2,268,000
30,000 Pfizer, Inc. 1,740,000
- ---------------------------------------------------------------------
4,008,000
PHOTOGRAPHY (0.3%)
- ---------------------------------------------------------------------
13,000 Eastman Kodak Co. 884,000
REAL ESTATE (6.9%)
- ---------------------------------------------------------------------
89,000 Alexander Haagen Properties 1,001,250
85,000 CWM Mortgage Holdings, Inc. 1,285,625
32,000 Capstone Capital Trust, Inc. 592,000
11,000 Cavalier Homes, Inc. 209,000
14,500 CenterPoint Properties Corp. 322,625
46,700 First Industrial Realty Trust, Inc. 969,025
35,000 First Washington Realty Trust, Inc. 616,875
19,200 HGI Realty, Inc. 427,200
65,000 Healthcare Realty Trust, Inc. 1,348,750
26,000 Malan Realty Investors, Inc. 321,750
35,000 National Health Investors, Inc. 1,080,625
25,000 Public Storage, Inc. 450,000
83,000 RFS Hotel Investors, Inc. 1,255,375
150,000 Reckson Associates Realty Corp. 4,181,250
12,000 Sizeler Property Investments, Inc. 103,500
15,000 Starwood Lodging Trust 414,375
21,000 Town & Country Trust 259,875
12,000 Walden Residential Props, Inc. 214,500
20,000 Wellsford Residential Property Trust 417,500
39,000 Winston Hotels 463,125
- ---------------------------------------------------------------------
15,934,225
RECREATION (0.5%)
- ---------------------------------------------------------------------
29,000 Brunswick Corp. 619,875
33,000 Outboard Marine Corp. 676,500
- ---------------------------------------------------------------------
1,296,375
RETAIL (6.6%)
- ---------------------------------------------------------------------
20,000 Bed Bath & Beyond, Inc.+ 657,500
90,300 Circle K Corp.+ 2,144,625
96,500 Duckwall-Alco Stores, Inc. 916,750
50,000 InterTAN, Inc.+ 418,750
93,700 Intimate Brands, Inc. 1,557,763
67,000 Limited, Inc. (The) 1,197,625
11,000 Penney (J.C.) Co., Inc. 515,625
80,000 Rite Aid Corp. 2,500,000
<PAGE>
COMMON STOCKS
NUBER OF SHARES VALUE
RETAIL (CONTINUED)
- ---------------------------------------------------------------------
96,000 Tandy Corp. $4,572,000
44,000 Waban, Inc.+ 814,000
- ---------------------------------------------------------------------
15,294,638
TRANSPORTATION (2 .7%)
- ---------------------------------------------------------------------
25,000 AMR Corp.+ 1,915,625
74,600 Canadian National Railway Co. (Canada)+ 1,119,000
26,000 Jinhui Shipping & Transportation Ltd. ADR
(Hong Kong)+ 32,500
4,200 Maritime Investment Fund (Norway)+ 43,050
14,000 Norfolk Southern Corp. 1,102,500
10,000 Northwest Airlines Corp. Class A+ 503,750
27,000 Pittston Services Group 823,500
31,000 Qantas Airways Ltd. 144A ADR (Australia) 523,125
10,000 Trism, Inc.+ 80,000
- ---------------------------------------------------------------------
6,143,050
UTILITIES (1.8%)
- ---------------------------------------------------------------------
9,000 Bell Atlantic Corp. 567,000
39,000 GTE Corp. 1,662,380
42,000 Sprint Corp. 1,680,000
13,000 US West, Inc. 406,250
- ---------------------------------------------------------------------
4,315,630
- ---------------------------------------------------------------------
TOTAL COMMON STOCKS (cost $175,779,101) $211,654,103
- ---------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (1.7%)*
NUMBER OF SHARES VALUE
40,00 Unisys Corp. Ser. A, $3.75 cv. pfd. $1,220,000
8,000 Service Corp. International $6.25 cv. pfd. 576,000
30 Credit Depot Corp. $9.00 cv. pfd.
(acquired 10/13/95, cost $600,000)++ 600,000
32,700 Callon Petroleum Co. $2.125 cv. pfd. 829,763
16,400 Continental Airlines 144A $4.25 cv. pfd. 820,000
- ---------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $4,058,325) $4,045,763
- ---------------------------------------------------------------------
CONVERTIBLE BONDS AND NOTES (0.9%)*
PRINCIPAL AMOUNT VALUE
$1,200,000 Danka Business Systems cv. sub. notes 6 3/4s,
2002 $1,608,000
500,000 Emerson Radio Corp. cv. sr. sub. deb. 8 1/2s,
2002 400,000
- ---------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS AND NOTES
(cost $1,700,000) $2,008,000
- ---------------------------------------------------------------------
PREFERRED STOCKS (0.2%)* (cost $245,648)
NUMBER OF SHARES VALUE
7,000 Nokia Corp. ADR $ 379,750
- ---------------------------------------------------------------------
SHORT-TERM INVESTMENTS (4.7%)* (cost $10,885,772)
PRINCIPAL AMOUNT VALUE
$10,884,000 Interest in $798,484,000 joint repurchase
agreement dated November 30, 1995 with JP
Morgan Securities due December 1, 1995 with
respect to various U.S. Treasury obligations--
maturity value of $10,885,772 for an effective
yield of 5.86% $10,885,772
- ---------------------------------------------------------------------
TOTAL INVESTMENTS (cost $192,668,846)*** $228,973,378
- ---------------------------------------------------------------------
<PAGE>
<FN>
NOTES
* Percentages indicated are based on net assets of $231,714,670.
+ Non-income producing security.
++ Restricted, excluding 144A securities, as to public resale. At
the date of acquisition these securities were valued at cost.
There were no outstanding unrestricted securities of the same
class as those held. Total market value of restricted securities
owned at November 30, 1995 was $600,000 or 0.3% of net assets.
*** The aggregate identified cost on a tax basis is $192,668,846,
resulting in gross unrealized appreciation and depreciation of
$41,466,334 and $5,161,815, respectively, or net unrealized
appreciation of $36,304,522.
ADR/ADS/GDR 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
November 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS
- ---------------------------------------------------------------------
Investments in securities, at value
(identified cost $192,668,846) (Note 1) $228,973,368
- ---------------------------------------------------------------------
Cash 492
- ---------------------------------------------------------------------
Dividends, interest, and other receivables 357,385
- ---------------------------------------------------------------------
Receivable for shares of the fund sold 162,307
- ---------------------------------------------------------------------
Receivable for securities sold 4,921,523
- ---------------------------------------------------------------------
Unamortized organization expenses (Note 1) 10,485
- ---------------------------------------------------------------------
TOTAL ASSETS 234,425,560
LIABILITIES
- ---------------------------------------------------------------------
Payable for securities purchased 1,820,200
- ---------------------------------------------------------------------
Payable for shares of the fund repurchased 181,009
- ---------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 367,167
- ---------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 94
- ---------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 137,813
- ---------------------------------------------------------------------
Payable for organization expense (Note 1) 17,091
- ---------------------------------------------------------------------
Payable for distribution fees (Note 2) 138,133
- ---------------------------------------------------------------------
Payable for administrative services (Note 2) 1,345
- ---------------------------------------------------------------------
Other accrued expenses 48,038
- ---------------------------------------------------------------------
TOTAL LIABILITIES 2,710,890
- ---------------------------------------------------------------------
NET ASSETS $231,714,670
- ---------------------------------------------------------------------
REPRESENTED BY
- ---------------------------------------------------------------------
Paid-in capital (Note 4) $185,230,998
- ---------------------------------------------------------------------
Undistributed net investment income 1,336,728
- ---------------------------------------------------------------------
Accumulated net realized gain on investments 8,842,422
- ---------------------------------------------------------------------
Net unrealized appreciation of investments 36,304,522
- ---------------------------------------------------------------------
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $231,714,670
- ---------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ---------------------------------------------------------------------
Net asset value and redemption price per class A share
($122,416,678 divided by 8,695,822 shares) $14.08
- ---------------------------------------------------------------------
Offering price per share (100/94.25 of $14.08)* $14.94
- ---------------------------------------------------------------------
Net asset value and offering price per class B share
($109,297,992 divided by 7,824,408 shares)+ $13.97
- ---------------------------------------------------------------------
<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
Six months ended November 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
- ---------------------------------------------------------------------
Dividends (net of foreign tax of $4,290) 2,261,803
- ---------------------------------------------------------------------
Interest 293,110
- ---------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,554,913
EXPENSES:
- ---------------------------------------------------------------------
Compensation of Manager (Note 2) 712,238
- ---------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 423,480
- ---------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,664
- ---------------------------------------------------------------------
Reports to shareholders 32,357
- ---------------------------------------------------------------------
Registration fee 42,328
- ---------------------------------------------------------------------
Auditing 14,028
- ---------------------------------------------------------------------
Legal 10,612
- ---------------------------------------------------------------------
Postage 38,273
- ---------------------------------------------------------------------
Administrative services (Note 2) 4,789
- ---------------------------------------------------------------------
Distribution fees -- class A (Note 2) 144,966
- ---------------------------------------------------------------------
Distribution fees -- class B (Note 2) 514,499
- ---------------------------------------------------------------------
Amortization of organization expenses (Note 1) 376
- ---------------------------------------------------------------------
Other expenses 3,070
- ---------------------------------------------------------------------
TOTAL EXPENSES 1,945,680
- ---------------------------------------------------------------------
NET INVESTMENT INCOME 609,233
- ---------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 8,876,117
- ---------------------------------------------------------------------
Net unrealized appreciation of investments during the period20,147,12
8
- ---------------------------------------------------------------------
NET GAIN ON INVESTMENTS 29,023,245
- ---------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 29,632,478
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30 MAY 31
- ---------------------------------------------------------------------
1995* 1995
- ---------------------------------------------------------------------
INCREASE IN NET ASSETS
- ---------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------
Net investment income $609,233 $950,057
- ---------------------------------------------------------------------
Net realized gain on investments 8,876,117 208,076
- ---------------------------------------------------------------------
Net unrealized appreciation of
investments 20,147,128 15,958,951
- ---------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 29,632,478 17,117,084
- ---------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
- ---------------------------------------------------------------------
Net investment income
- ---------------------------------------------------------------------
Class A -- (127,251)
- ---------------------------------------------------------------------
Class B -- (67,212)
- ---------------------------------------------------------------------
Net realized gain on investments
- ---------------------------------------------------------------------
Class A -- (329,475)
- ---------------------------------------------------------------------
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) 8,565,069 174,100,271
- ---------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 38,197,547 190,455,123
- ---------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------
Beginning of period 193,517,123 3,062,000
- ---------------------------------------------------------------------
END OF PERIOD (including undistributed net
investment income of $1,336,728 and
$727,495 respectively) $231,714,670 $193,517,123
- ---------------------------------------------------------------------
<FN>
* Unaudited
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 2, 1994 AUGUST 5, 1993
SIX MONTHS (COMMENCEMENT SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) ENDED YEAR ENDEDOF OPERATIONS)
NOVEMBER 30 TO MAY 31 NOVEMBER 30 MAY 31 TO MAY 31
- --------------------------------------------------------------------------------
- --------------
1995* 1995 1995* 1995 1994
- --------------------------------------------------------------------------------
- --------------
CLASS B CLASS A
- --------------------------------------------------------------------------------
- --------------
NET ASSET VALUE,
BEGINNING OF PERIOD $12.19 $11.08 $12.24 $10.74 $8.53
- --------------------------------------------------------------------------------
- --------------
INVESTMENT OPERATIONS
Net investment income .01 .06 .05 .06 .07(a)
Net realized and unrealized
gain on investments 1.77 1.20 1.79 1.59 2.27
- --------------------------------------------------------------------------------
- --------------
TOTAL FROM INVESTMENT
OPERATIONS 1.78 1.26 1.84 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 $13.97 $12.19 $14.08 $12.24 $10.74
- --------------------------------------------------------------------------------
- --------------
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE (%)(c) 14.60(d) 11.55(d) 15.03(d) 15.61 27.58(d)
- --------------------------------------------------------------------------------
- --------------
NET ASSETS, END
OF PERIOD
(in thousands) $109,298 $89,962 $122,417 $103,555 $3,062
- --------------------------------------------------------------------------------
- --------------
Ratio of expenses to
average net assets (%)(a) 1.10(d) 1.12(b)(d) .72(d) 1.13(b) .78(b)(d)
- --------------------------------------------------------------------------------
- --------------
Ratio of net investment
income to average net
assets (%) .08(d) .65(b)(d) .46(d) 1.89(d) .73(d)
- --------------------------------------------------------------------------------
- --------------
Portfolio turnover (%) 34.08(d) 15.32(d) 34.08(d) 15.32(d) 102.99(d)
- --------------------------------------------------------------------------------
- --------------
<FN>
* Unaudited.
(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
November 30, 1995 (Unaudited)
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. 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 eight years, 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 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 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 of
other registered investment companies managed by Putnam Investment
Management Inc., ("Putnam Management"), the fund's Manager, a wholly-
owned subsidiary of Putnam Investments, Inc. and certain other
accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
<PAGE>
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 102% of the resale
price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at
all times at least equal to 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.
E FOREIGN CURRENCY TRANSLATION The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income
and withholding taxes are translated at prevailing exchange rates
when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such fluctuations are
included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and the
difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized gains
and losses on foreign currency transactions arise from changes in the
value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in
the exchange rate.
F FEDERAL TAXES It is the policy of the fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the fund
to distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held and
excise tax on income and capital gains.
<PAGE>
G DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders from
net investment income are recorded by the fund on the ex-dividend
date. Capital gain distributions, if any, are recorded on the ex-
dividend date and paid 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.
H 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 were $17,091. These expenses
are being amortized by the fund on a straight- line basis over a five-
year period. The fund will reimburse Putnam Management for payment of
these expenses.
NOTE 2
<PAGE>
During the period ended November 30, 1995, the fund adopted a Trustee
Fee Deferral Plan (the "Plan") which allows the Trustees to defer the
receipt of all or a portion of Trustees Fees payable on or after July
1, 1995. The deferred fees remain in the fund and are invested in the
fund or in other Putnam funds until distribution in accordance with
the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, Inc., a division of PFTC.
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
0.25% and 1.00% of the average net assets attributable to class A and
class B shares, respectively.
For the six months ended November 30, 1995, Putnam Mutual Funds
Corp., acting as an underwriter, received net commissions of $45,554
from the sale of class A shares. A deferred sales charge of up to
1.00% is assessed on certain redemptions of class A shares and
$63,782 in contingent deferred sales charges from redemptions of
class B shares. For the six months ended November 30, 1995, Putnam
Mutual funds Corp., acting as underwriter, received $26 on class A
redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended November 30, 1995, purchases and sales of
investment securities other than
short-term investments aggregated $80,911,934 and $69,765,694,
respectively. There were no purchases and sales of U.S. government
obligations. In determining the net gain or loss on securities sold,
the cost of securities has been determined on the identified cost
basis.
<PAGE>
NOTE 4
CAPITAL SHARES
At November 30, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED
NOVEMBER 30
- ---------------------------------------------------------------------
1995
- ---------------------------------------------------------------------
CLASS A SHARES AMOUNT
- ---------------------------------------------------------------------
Shares sold 1,182,867 $15,596,860
Shares issued in connection
with reinvestment of distributions -- --
- ---------------------------------------------------------------------
1,182,867 15,596,860
- ---------------------------------------------------------------------
Shares repurchased (949,338) (12,620,744)
- ---------------------------------------------------------------------
NET INCREASE 233,529 $2,976,116
- ---------------------------------------------------------------------
YEAR ENDED
MAY 31
- ---------------------------------------------------------------------
1995
- ---------------------------------------------------------------------
CLASS A 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
- ---------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30
- ---------------------------------------------------------------------
1995
- ---------------------------------------------------------------------
CLASS B SHARES AMOUNT
- ---------------------------------------------------------------------
Shares sold 991,706 $12,912,127
Shares issued in connection
with reinvestment of distributions 49 517
- ---------------------------------------------------------------------
991,755 12,912,644
- ---------------------------------------------------------------------
Shares repurchased (549,176) (7,323,691)
- ---------------------------------------------------------------------
NET INCREASE 442,579 $5,588,953
- ---------------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 2, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31
- ---------------------------------------------------------------------
1995
- ---------------------------------------------------------------------
CLASS B 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>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
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
Senior 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
2218 433/948 1/96
<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.
