SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
----
Filed by the Registrant / X /
----
----
Filed by a party other than the Registrant / /
----
Check the appropriate box:
----
/ / Preliminary Proxy Statement
----
----
/ / Confidential, for Use of the Commission Only (as permitted by
---- Rule 14a-6(e) (2))
----
/ X / Definitive Proxy Statement
----
----
/ / Definitive Additional Materials
----
----
/ / Soliciting Material Pursuant to Sec. 240.14a- 11(c) or
Sec. 240.14a - 12
----
PUTNAM CAPITAL APPRECIATION FUND
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than
Registrant)
Payment of Filing Fee (Check the appropriate box):
----
/ / No fee required
----
----
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(1)
and
0-11
----
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined) :
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
----
/ X / Fee paid previously with preliminary materials.
----
----
/ /Check box if any part of the fee is offset as provided by Exchange Act
---- Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM CAPITAL APPRECIATION FUND
The document you hold in your hands contains your proxy statement
and proxy card. A proxy card is, in essence, a ballot. When you
vote your proxy, it tells us how to vote on your behalf on
important issues relating to your fund. If you complete and sign
the proxy, we'll vote it exactly as you tell us. If you simply
sign the proxy, we'll vote it in accordance with the Trustees'
recommendations on pages 4 and 5 .
We urge you to spend a couple of minutes with the proxy statement,
fill out your proxy card, and return it to us. When shareholders
don't return their proxies in sufficient numbers, we have to incur
the expense of follow-up solicitations, which can cost your fund
money.
We want to know how you would like to vote and welcome your
comments. Please take a few moments with these materials and
return your proxy to us.
(PUTNAM LOGO APPEARS HERE)
BOSTON * LONDON * TOKYO
<PAGE>
Table of contents
A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .1
Notice of Shareholder Meeting. . . . . . . . . . . . . . . . . . . . . . .2
Trustees' Recommendations. . . . . . . . . . . . . . . . . . 4
Proxy card enclosed
If you have any questions, please contact us at the special toll-
free number we have set up for you (1-800-225-1581) or call your
financial adviser.
<PAGE>
A Message from the Chairman
(Photograph of George Putnam appears here)
Dear Shareholder:
I am writing to you to ask for your vote on important questions
that affect your investment in your fund. While you are, of
course, welcome to join us at your fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy. We are asking for your vote on the following
matters:
1. Electing Trustees to oversee your fund;
2. Ratifying the selection by the Trustees of the independent
auditors of your fund for its current fiscal year;
3. Approving amendments to certain of your fund's fundamental
investment restrictions; and
4. Approving the elimination of certain of your fund's
fundamental investment restrictions.
Although we would like very much to have each shareholder attend
their fund's meeting, we realize this is not possible. Whether or
not you plan to be present, we need your vote. We urge you to
complete, sign, and return the enclosed proxy card promptly. A
postage-paid envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders do not return their proxies, their fund may have
to incur the expense of follow-up solicitations. All shareholders
benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative at
1-800-225-1581.
Sincerely yours,
(signature of George Putnam)
George Putnam, Chairman
<PAGE>
PUTNAM CAPITAL APPRECIATION FUND
Notice of a Meeting of Shareholders
This is the formal agenda for your fund's shareholder meeting. It
tells you what matters will be voted on and the time and place of
the meeting, if you can attend in person.
To the Shareholders of Putnam Capital Appreciation Fund:
A Meeting of Shareholders of your fund will be held on December 5,
1996 at 2:00 p.m., Boston time, on the eighth floor of One Post
Office Square, Boston, Massachusetts, to consider the following:
1. Electing Trustees. See page
6 .
2. Ratifying the selection by the Trustees of the independent
auditors of your fund for its current fiscal year. See
page 23 .
3.A. Approving an amendment to the fund's fundamental investment
restriction with respect to investments in the voting
securities of a single issuer. See page 24 .
3.B. Approving an amendment to the fund's fundamental investment
restriction with respect to making loans. See page 26 .
3.C. Approving an amendment to the fund's fundamental investment
restriction with respect to senior securities. See page
27 .
3.D. Approving an amendment to the fund's fundamental investment
restriction with respect to investments in commodities. See
page 28 .
4.A. Approving the elimination of the fund's fundamental investment
restriction with respect to investments in securities of
issuers in which management of the fund or Putnam Investment
Management owns securities. See page 29 .
4.B. Approving the elimination of the fund's fundamental investment
restriction with respect to margin transactions. See page
30 .
4.C. Approving the elimination of the fund's fundamental investment
restriction with respect to short sales. See page 32 .
4.D. Approving the elimination of the fund's fundamental investment
restriction with respect to pledging assets. See page
33 .
4.E. Approving the elimination of the fund's fundamental investment
restriction with respect to investments in restricted
securities. See page 35 .
4.F. Approving the elimination of the fund's fundamental investment
restriction with respect to investments in certain oil, gas
and mineral interests. See page 37 .
4.G. Approving the elimination of the fund's fundamental investment
restriction with respect to investing to gain control of a
company's management. See page 39 .
5. Transacting other business as may properly come before the
meeting.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Ronald J. Jackson Eli Shapiro
Elizabeth T. Kennan A.J.C. Smith
Lawrence J. Lasser W. Nicholas Thorndike
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT THE
MEETING.
October 18 , 1996
<PAGE>
Proxy Statement
This document will give you the information you need to vote on the
matters listed on the previous pages. Much of the information in
the proxy statement is required under rules of the Securities and
Exchange Commission ("SEC"); some of it is technical. If there is
anything you don't understand, please contact us at our special
toll-free number, 1-800-225-1581, or call your financial adviser.
Who is asking for my vote?
The enclosed proxy is solicited by the Trustees of Putnam Capital
Appreciation Fund for use at the Meeting of Shareholders of the
fund to be held on December 5, 1996 and, if your fund's meeting is
adjourned, at any later meetings, for the purposes stated in the
Notice of Meeting (see previous pages).
How do your fund's Trustees recommend that shareholders vote on
these proposals?
The Trustees recommend that you vote
1. For the election of all nominees;
2. For selecting Coopers & Lybrand L.L.P. as the independent
auditors of your fund;
3.A. For amending the fund's fundamental investment restriction
with respect to investments in the voting securities of a
single issuer;
3.B. For amending the fund's fundamental investment restriction
with respect to making loans;
3.C. For amending the fund's fundamental investment restriction
with respect to senior securities;
3.D. For amending the fund's fundamental investment restriction
with respect to investments in commodities;
4.A. For eliminating the fund's fundamental investment restriction
with respect to investments in securities of issuers in which
management of the fund or Putnam Investment Management owns
securities;
4.B. For eliminating the fund's fundamental investment restriction
with respect to margin transactions;
4.C. For eliminating the fund's fundamental investment restriction
with respect to short sales;
4.D. For eliminating the fund's fundamental investment restriction
with respect to pledging assets;
4.E. For eliminating the fund's fundamental investment restriction
with respect to investments in restricted securities;
4.F. For eliminating the fund's fundamental investment restriction
with respect to investments in certain oil, gas and mineral
interests;
4.G. For eliminating the fund's fundamental investment restriction
with respect to investing to gain control of a company's
management.
Who is eligible to vote?
Shareholders of record at the close of business on September 6,
1996 are entitled to be present and to vote at the meeting or any
adjourned meeting. The Notice of Meeting, the proxy, and the Proxy
Statement have been mailed to shareholders of record on or about
October 18 , 1996.
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
The Proposals
I. ELECTION OF TRUSTEES
Who are the nominees for Trustees?
The Nominating Committee of the Trustees recommends that the number
of Trustees be fixed at fourteen and that you vote for the election
of the nominees described below. Each nominee is currently a
Trustee of your fund and of the other Putnam funds.
The Nominating Committee of the Trustees consists solely of
Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of your fund or of Putnam
Investment Management, Inc., your fund's investment manager
("Putnam Management").
Jameson Adkins Baxter
[Insert Picture]
Ms. Baxter, age 53, is the President of Baxter Associates, Inc., a
management and financial consulting firm which she founded in 1986.
During that time, she was also a Vice President and Principal of
the Regency Group, Inc., and a Consultant to First Boston
Corporation, both of which are investment banking firms. From 1965
to 1986, Ms. Baxter held various positions in investment banking
and corporate finance at First Boston.
Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Federal Savings Bank, and ASHTA Chemicals,
Inc. She is also the Chairman Emeritus of the Board of Trustees of
Mount Holyoke College, having previously served as Chairman for
five years and as a Board member for thirteen years; an Honorary
Trustee and past President of the Board of Trustees of the Emma
Willard School; and Chair of the Board of Governors of Good
Shepherd Hospital. Ms. Baxter is a graduate of Mount Holyoke
College.
Hans H. Estin
[Insert Picture]
Mr. Estin, age 68, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Director of The Boston
Company, Inc., a registered investment adviser which provides
administrative and investment management services to mutual funds
and other institutional investors, and Boston Safe Deposit and
Trust Company; a Corporation Member of Massachusetts General
Hospital; and a Trustee of New England Aquarium. He previously
served as the Chairman of the Board of Trustees of Boston
University and is currently active in various other civic
associations, including the Boys & Girls Clubs of Boston, Inc. Mr.
Estin is a graduate of Harvard College and holds honorary
doctorates from Merrimack College and Boston University.
John A. Hill
[Insert Picture]
Mr. Hill, age 54, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate Director
of the Office of Management and Budget and Deputy Administrator of
the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, PetroCorp Incorporated, an
exploration and production company, Weatherford Enterra, Inc., an
oil field service company, various private companies controlled by
First Reserve Corporation, and various First Reserve Funds. He is
also a Member of the Board of Advisors of Fund Directions. He is
currently active in various business associations, including the
Economic Club of New York, and lectures on energy issues in the
United States and Europe. Mr. Hill is a graduate of Southern
Methodist University.
Ronald J. Jackson
[Insert Picture]
Mr. Jackson, age 52, was Chairman of the Board, President and Chief
Executive Officer of Fisher-Price, Inc., a major toy manufacturer,
from 1990 to 1993. He previously served as President and Chief
Executive Officer of Stride-Rite, Inc., a manufacturer and
distributor of footwear, from 1989 to 1990, and as President and
Chief Executive Officer of Kenner Parker Toys, Inc., a major toy
and game manufacturer, from 1985 to 1987. Prior to that, he held
various financial and marketing positions at General Mills, Inc.
from 1966 to 1985, including Vice President, Controller and Vice
President of Marketing for Parker Brothers, a toy and game company,
and President of Talbots, a retailer and direct marketer of women's
apparel.
Mr. Jackson currently serves as a Director of Safety 1st, Inc., a
company which markets a wide range of child care and safety
products. He also serves as a Trustee of Salem Hospital and an
Overseer of the Peabody Essex Museum. He previously served as a
Director of a number of public companies including Fisher-Price,
Inc., Kenner Parker Toys, Inc., Stride-Rite, Inc., and Mattel,
Inc., a major toy manufacturer. Mr. Jackson is a graduate of
Michigan State University Business School.
Elizabeth T. Kennan
[Insert Picture]
Ms. Kennan, age 58, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President of
Mount Holyoke College. From 1966 to 1978, she was on the faculty
of Catholic University, where she taught history and published
numerous articles.
Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities, the
Kentucky Home Life Insurance Companies, and Talbots. She also
serves as a Member of The Folger Shakespeare Library Committee.
She is currently active in various educational and civic
associations, including the Committee on Economic Development and
the Council on Foreign Relations. Ms. Kennan is a graduate of
Mount Holyoke College, the University of Washington and St. Hilda
College at Oxford University and holds several honorary doctorates.
Lawrence J. Lasser*
[Insert Picture]
Mr. Lasser, age 53, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh & McLennan
Companies, Inc., the parent company of Putnam Management, and
INROADS/Central New England, Inc., a job market internship program
for minority high school and college students. He is a Member of
the Board of Overseers of the Museum of Science, the Museum of Fine
Arts and the Isabella Stewart Gardner Museum in Boston. He is also
a Trustee of the Beth Israel Hospital and Buckingham, Browne and
Nichols School. Mr. Lasser is a graduate of Antioch College and
Harvard Business School.
Robert E. Patterson
[Insert Picture]
Mr. Patterson, age 51, is the Executive Vice President and Director
of Acquisitions of Cabot Partners Limited Partnership, a registered
investment adviser which manages real estate investments for
institutional investors. Prior to 1990, he was the Executive Vice
President of Cabot, Cabot & Forbes Realty Advisors, Inc., the
predecessor company of Cabot Partners. Prior to that, he was a
Senior Vice President of the Beal Companies, a real estate
management, investment and development company. He has also worked
as an attorney and held various positions in state government,
including the founding Executive Director of the Massachusetts
Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company. Mr.
Patterson is a graduate of Harvard College and Harvard Law School.
Donald S. Perkins*
[Insert Picture]
Mr. Perkins, age 69, is the retired Chairman of the Board of Jewel
Companies, Inc., a diversified retailer, where among other roles he
served as President, Chief Executive Officer and Chairman of the
Board from 1965 to 1980. He currently also serves as a Director of
various other public corporations, including AON Corp., an
insurance company, Cummins Engine Company, Inc., an engine and
power generator equipment manufacturer and assembler, Current
Assets L.L.C., a corporation providing financial staffing services,
Illinova and Illinois Power Co., Inland Steel Industries, Inc.,
LaSalle Street Fund, Inc., a real estate investment trust, Lucent
Technologies Inc., Springs Industries, Inc., a textile
manufacturer, and Time Warner, Inc., one of the nation's largest
media conglomerates. He previously served as a Director of
several other major public corporations, including Corning Glass
Works, Eastman Kodak Company, Firestone Tire & Rubber Company and
Kmart Corporation.
Mr. Perkins currently also serves as a Trustee and Vice Chairman of
Northwestern University and as a Trustee of the Hospital Research
and Education Trust. He is currently active in various civic and
business associations, including the Business Council and the Civic
Committee of the Commercial Club of Chicago, of which he is the
founding Chairman. Mr. Perkins is a graduate of Yale University
and Harvard Business School and holds an honorary doctorate from
Loyola University of Chicago.
William F. Pounds
[Insert Picture]
Dr. Pounds, age 68, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts Institute
of Technology since 1961 and served as Dean of that School from
1966 to 1980. He previously served as Senior Advisor to the
Rockefeller Family and Associates and was a past Chairman of
Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.
Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc., EG&G, Inc., Perseptive Biosystems, Inc.,
Management Sciences For Health, Inc. and Sun Company, Inc. He is
also a Trustee of the Museum of Fine Arts in Boston; an Overseer of
WGBH Educational Foundation, and a Fellow of The American Academy
of Arts and Sciences. He previously served as a Director of
Fisher-Price, Inc. and General Mills, Inc. Dr. Pounds is a
graduate of Carnegie-Mellon University.
George Putnam*
[Insert Picture]
Mr. Putnam, age 70, is the Chairman and President of your fund and
of the other Putnam funds. He is the Chairman and a Director of
Putnam Management and Putnam Mutual Funds Corp. and a Director of
Marsh & McLennan, their parent company. Mr. Putnam is the son of
the founder of the Putnam funds and Putnam Management and has been
employed in various capacities by Putnam Management since 1951,
including Chief Executive Officer from 1961 to 1973. He is a
former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee Emeritus
of Wellesley College and Bradford College.
Mr. Putnam currently also serves as a Director of The Boston
Company, Inc., Boston Safe Deposit and Trust Company, Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and Gas,
Inc., mining and natural resources companies, General Mills, Inc.,
Houghton Mifflin Company, a major publishing company, and
Rockefeller Group, Inc., a real estate manager. He is also a
Trustee of Massachusetts General Hospital, McLean Hospital, Vincent
Memorial Hospital, WGBH Educational Foundation and the Museum of
Fine Arts and the Museum of Science in Boston; the New England
Aquarium; an Overseer of Northeastern University; and a Fellow of
The American Academy of Arts and Sciences. Mr. Putnam is a
graduate of Harvard College and Harvard Business School and holds
honorary doctorates from Bates College and Harvard University.
George Putnam, III*
[Insert Picture]
Mr. Putnam, age 45, is the President of New Generation Research,
Inc., a publisher of financial advisory and other research services
relating to bankrupt and distressed companies, and New Generation
Advisers, Inc., a registered investment adviser which provides
advice to private funds specializing in investments in such
companies. Prior to founding New Generation in 1985, Mr. Putnam
was an attorney with the Philadelphia law firm Dechert Price &
Rhoads.
Mr. Putnam currently also serves as a Director of the Massachusetts
Audubon Society. He is also a Trustee of the Sea Education
Association and St. Mark's School and an Overseer of the New
England Medical Center. Mr. Putnam is a graduate of Harvard
College, Harvard Business School and Harvard Law School.
Eli Shapiro
[Insert Picture]
Dr. Shapiro, age 80, is the Alfred P. Sloan Professor of
Management, Emeritus at the Alfred P. Sloan School of Management at
the Massachusetts Institute of Technology, having served on the
faculty of the Sloan School for eighteen years. He previously was
also on the faculty of Harvard Business School, The University of
Chicago School of Business and Brooklyn College. During his
academic career, Dr. Shapiro authored numerous publications
concerning finance and related topics. He previously served as the
President and Chief Executive Officer of the National Bureau of
Economic Research and also provided economic and financial
consulting services to various clients.
Dr. Shapiro is a past Director of many companies, including Nomura
Dividend Income Fund, Inc., a privately held registered investment
company managed by Putnam Management, Reece Corporation, a sewing
machine manufacturer, Commonwealth Mortgage, Dexter Corporation, a
manufacturer of plastics and related products, Avis Corporation, a
car rental company, Connecticut Bank and Trust Company, Connecticut
National Gas Corporation, the Federal Home Loan Bank of Boston,
where he served as Chairman from 1977 to 1989, Travelers'
Corporation, an insurance company, and Norlin Corporation, a
musical instrument manufacturer; and a past Trustee of Mount
Holyoke College and the Putnam funds (from 1984 to 1989).
Dr. Shapiro is a Fellow of The American Academy of Arts and
Sciences and is active in various professional and civic
associations, including the American Economic Association, the
American Finance Association and the Council on Foreign Relations.
Dr. Shapiro is a graduate of Brooklyn College and Columbia
University.
A.J.C. Smith*
[Insert Picture]
Mr. Smith, age 62, is the Chairman and Chief Executive Officer of
Marsh & McLennan Companies, Inc. He has been employed by Marsh &
McLennan and related companies in various capacities since 1961.
Mr. Smith is a Director of the Trident Corp., and he also serves as
a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, The American Institute for Chartered Property
Underwriters, and is a Founder of the Museum of Scotland Society.
He was educated in Scotland and is a Fellow of the Faculty of
Actuaries in Edinburgh, a Fellow of the Canadian Institute of
Actuaries, a Fellow of the Conference of Actuaries in Public
Practice, an Associate of the Society of Actuaries, a Member of the
American Academy of Actuaries, the International Actuarial
Association and the International Association of Consulting
Actuaries.
W. Nicholas Thorndike**
[Insert Picture]
Mr. Thorndike, age 63, serves as a Director of various corporations
and charitable organizations, including Data General Corporation,
a computer and high technology company, Bradley Real Estate, Inc.,
a real estate investment firm, Providence Journal Co., a newspaper
publisher and owner of television stations, and Courier
Corporation, a book binding and printing company. He is also a
Trustee of Eastern Utilities Associates, Massachusetts General
Hospital, where he previously served as chairman and president, and
Northeastern University.
Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike, Doran,
Paine & Lewis, a registered investment adviser which manages mutual
funds and institutional assets. He also previously served as a
Trustee of the Wellington Group of Funds (now The Vanguard Group)
and was the Chairman and a Director of Ivest Fund, Inc. Mr.
Thorndike is a graduate of Harvard College.
- ----------------------------
* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management and Putnam Mutual Funds Corp. ("Putnam
Mutual Funds"), the principal underwriter for all the open-end
Putnam funds and an affiliate of Putnam Management. Messrs.
Putnam, Lasser, and Smith are deemed "interested persons" by
virtue of their positions as officers or shareholders of your
fund, or directors of Putnam Management, Putnam Mutual Funds
or Marsh & McLennan Companies, Inc., the parent company of
Putnam Management and Putnam Mutual Funds. Mr. George Putnam,
III, Mr. Putnam's son, is also an "interested person" of your
fund, Putnam Management and Putnam Mutual Funds. Mr. Perkins
may be deemed to be an "interested person" of your fund
because of his service as a director of a certain publicly
held company that includes registered broker-dealer firms
among its subsidiaries. Neither your fund nor any of the
other Putnam funds currently engages in any transactions with
such firms except that certain of such firms act as dealers in
the retail sale of shares of certain Putnam funds in the
ordinary course of their business. The balance of the
nominees are not "interested persons."
** In February 1994 Mr. Thorndike accepted appointment as a
successor trustee of certain private trusts in which he has no
beneficial interest. At that time he also became Chairman of
the Board of two privately owned corporations controlled by
such trusts, serving in that capacity until October 1994.
These corporations filed voluntary petitions for relief under
Chapter 11 of the U.S. Bankruptcy Code in August 1994.
Except as indicated above, the principal occupations and business
experience of the nominees for the last five years have been with
the employers indicated, although in some cases they have held
different positions with those employers. Except for Ms. Baxter,
Dr. Shapiro, and Mr. Jackson, all the nominees were elected by the
sole shareholder in May 1993. Ms. Baxter, Dr. Shapiro and Mr.
Jackson were elected by the other Trustees in January 1994, April
1995 and May 1996, respectively. As indicated above, Dr. Shapiro
also previously served as a Trustee of the Putnam funds from 1984
to 1989. The 14 nominees for election as Trustees at the
shareholder meeting of your fund who receive the greatest number of
votes will be elected Trustees of your fund. The Trustees serve
until their successors are elected and qualified. Each of the
nominees has agreed to serve as a Trustee if elected. If any of
the nominees is unavailable for election at the time of the
meeting, which is not anticipated, the Trustees may vote for other
nominees at their discretion, or the Trustees may fix the
number of Trustees at less than 14 for your fund.
What are the Trustees' responsibilities?
Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed in
the best interests of its shareholders. The Trustees periodically
review your fund's investment performance as well as the quality of
other services provided to your fund and its shareholders by Putnam
Management and its affiliates, including administration, custody,
distribution and investor servicing. At least annually, the
Trustees review the fees paid to Putnam Management and its
affiliates for these services and the overall level of your fund's
operating expenses. In carrying out these responsibilities, the
Trustees are assisted by an independent administrative staff and by
your fund's auditors and legal counsel, which are selected by the
Trustees and are independent of Putnam Management and its
affiliates.
Do the Trustees have a stake in your fund?
The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees allocate
their investments among the more than 99 Putnam funds based on
their own investment needs. The Trustees' aggregate investments in
the Putnam funds total over $47 million. The table below lists
each Trustee's current investments in the fund and in the Putnam
funds as a group.<PAGE>
Share Ownership by Trustees
Year first Number of shares
elected as Number of shares of all Putnam
Trustee of of the fund funds owned
the Putnam owned as of as of
Trustees funds June 28, 1996* June 28, 1996**
- ------------------------------------------------------------------------------
Jameson A. Baxter 1994 658 24,102
Hans H. Estin 1972 106 26,270
John A. Hill 1985 2,740 123,624
Ronald J. Jackson 1996 310 12,209
Elizabeth T. Kennan 1992 470 27,475
Lawrence J. Lasser 1992 100 451,608
Robert E. Patterson 1984 339 60,322
Donald S. Perkins 1982 3,183 160,110
William F. Pounds 1971 621 348,913
George Putnam 1957 2,377 1,516,577
George Putnam, III 1984 870 287,830
Eli Shapiro 1995*** -- 80,677
A.J.C. Smith 1986 200 35,339
W. Nicholas Thorndike 1992 105 79,113
- -------------------------------------------------------------------------------
*Except as noted below, each Trustee has sole investment power and sole voting
power with
respect to his or her shares of the fund.
** These holdings do not include shares of Putnam money market funds.
*** Dr. Shapiro previously served as a Trustee of the Putnam funds from 1984
to 1989.
As of June 28, 1996, the Trustees and officers of the fund owned a total of
16,820 shares of
the fund, comprising less than 1% of its outstanding shares on that date.
A total of 3,580
of these shares are held by certain "interested" Trustees and officers of
your fund and Putnam
Management in their Putnam Investments, Inc. Profit Sharing Retirement Plan
accounts. Each
individual accountholder has sole investment power and shared voting power
with respect to
his/her account.
What are some of the ways in which the Trustees represent
shareholder interests?
The Trustees believe that, as substantial investors in the Putnam
funds, their interests are closely aligned with those of individual
shareholders. Among other ways, the Trustees seek to represent
shareholder interests:
by carefully reviewing your fund's investment performance
on an individual basis with your fund's managers;
by also carefully reviewing the quality of the various
other services provided to the funds and their
shareholders by Putnam Management and its affiliates;
by discussing with senior management of Putnam Management
steps being taken to address any performance
deficiencies;
by reviewing the fees paid to Putnam Management to ensure
that such fees remain reasonable and competitive with
those of other mutual funds, while at the same time
providing Putnam Management sufficient resources to
continue to provide high quality services in the future;
by monitoring potential conflicts between the funds and
Putnam Management and its affiliates to ensure that the
funds continue to be managed in the best interests of
their shareholders;
by also monitoring potential conflicts among funds to
ensure that shareholders continue to realize the benefits
of participation in a large and diverse family of funds.
How often do the Trustees meet?
The Trustees meet each month (except August) over a two-day period
to review the operations of your fund and of the other Putnam funds.
A portion of these meetings is devoted to meetings of various
Committees of the board which focus on particular matters. These
include: the Contract Committee, which reviews all contractual
arrangements with Putnam Management and its affiliates; the
Communication and Service Committee, which reviews the quality of
services provided by your fund's investor servicing agent, custodian
and distributor; the Pricing, Brokerage and Special Investments
Committee, which reviews matters relating to valuation of
securities, best execution, brokerage costs and allocations and new
investment techniques; the Audit Committee, which reviews accounting
policies and the adequacy of internal controls and supervises the
engagement of the funds' auditors; the Compensation, Administration
and Legal Affairs Committee, which reviews the compensation of the
Trustees and their administrative staff and supervises the
engagement of the funds' independent counsel; and the Nominating
Committee, which is responsible for selecting nominees for election
as Trustees.
Each Trustee generally attends at least two formal committee
meetings during such monthly meeting of the Trustees. During 1995,
the average Trustee participated in approximately 40 committee and
board meetings. In addition, the Trustees meet in small groups with
Chief Investment Officers and Portfolio Managers to review recent
performance and the current investment climate for selected funds.
These meetings ensure that each fund's performance is reviewed in
detail at least twice a year. The Contract Committee typically
meets on several additional occasions during the year to carry out
its responsibilities. Other Committees, including an Executive
Committee, may also meet on special occasions as the need arises.
What are the Trustees paid for their services?
Your fund pays each Trustee a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other
Putnam funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees of
other mutual fund complexes. The fees paid to each Trustee by your
fund and by all of the Putnam funds are shown below:
Compensation Table+
Total
Aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- --------------------------------------------------------------
Jameson A. Baxter $855 $150,854
Hans H. Estin 849 150,854
John A. Hill 844 149,854
Elizabeth T. Kennan 849 148,854
Lawrence J. Lasser 842 150,854
Robert E. Patterson 894 152,854
Donald S. Perkins 844 150,854
William F. Pounds 880 *** 149,854
George Putnam 849 150,854
George Putnam, III 849 150,854
Eli Shapiro**** 898 95,372
A.J.C. Smith 841 149,854
W. Nicholas Thorndike 894 152,854
+ Ronald J. Jackson became a Trustee of the fund effective May 3,
1996 and received no compensation from the fund or the other
Putnam funds in 1995.
* Includes an annual retainer and an attendance fee for each
meeting attended.
** Reflects total payments received from all Putnam funds in the
most recent calendar year. As of December 31, 1995, there were
99 funds in the Putnam family.
*** Includes additional compensation for services as Vice Chairman of
the Putnam funds.
**** Elected as a Trustee in April 1995.
Your fund's Trustees have approved Retirement Guidelines for Trustees
of the Putnam funds. These guidelines provide generally that a Trustee
who retires after reaching age 72 and who has at least 10 years of
continuous service will be eligible to receive a retirement benefit
from each Putnam fund for which he or she served as a Trustee. The
amount and form of such benefit is subject to determination annually
by the Trustees and, unless otherwise determined by the Trustees, will
be an annual cash benefit payable for life equal to one-half of the
Trustee retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits pursuant to
the Guidelines and it is anticipated that the current Trustees will
receive similar benefits upon their retirement. A Trustee who retired
in calendar 1995 and was eligible to receive benefits under these
Guidelines would have received an annual benefit of $66,749, based upon
the aggregate retainer fees paid by the Putnam funds for such year.
The Trustees reserve the right to amend or terminate such Guidelines
and the related payments at any time, and may modify or waive the
foregoing eligibility requirements when deemed appropriate.
For additional information about your fund, including further
information about its Trustees and officers, please see "Further
Information About Your Fund," on page 43 .
Putnam Investments
Putnam Investment Management, Inc. and its affiliates, Putnam Mutual
Funds, the principal underwriter for shares of your fund and Putnam
Fiduciary Trust Company, your fund's investor servicing agent and
custodian, are wholly owned by Putnam Investments, Inc., One Post
Office Square, Boston, Massachusetts 02109, a holding company that is
in turn wholly owned by Marsh & McLennan Companies, Inc., which has
executive offices at 1166 Avenue of the Americas, New York, New York
10036. Marsh & McLennan Companies, Inc. and its operating subsidiaries
are professional services firms with insurance and reinsurance
brokering, consulting and investment management businesses.
2. SELECTION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as the auditor of your fund for the current fiscal year.
Among the country's preeminent accounting firms, this firm also serves
as the auditor for approximately half of the other funds in the Putnam
family. It was selected primarily on the basis of its expertise as
auditors of investment companies, the quality of its audit services,
and the competitiveness of the fees charged for these services.
A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent auditors
is expected to be present at the meeting to make statements and to
respond to appropriate questions.
PROPOSALS 3 AND 4
As described in the following proposals, the Trustees are recommending
that shareholders approve a number of changes to
your
fund's
fundamental investment restrictions, including the elimination of
certain of these restrictions. The purpose of these changes is to
standardize the investment restrictions of the Putnam funds, including
your
fund where appropriate,
and in certain cases to increase the
fund's investment flexibility. By having standard investment
restrictions for all Putnam funds, Putnam Management will be able to
more easily monitor each fund's compliance with its investment
policies. Some of these changes will have little practical
effect on the way the fund is managed given the fund's current
investment objective and
policies.
Several
of the proposals request that certain fundamental restrictions
be made non-fundamental, so that the fund would have the ability to
modify or eliminate these
restrictions at a later date
without
shareholder approval. The U.S. Congress recently approved a bill
that would end all state-imposed investment limitations on
investment companies like the fund. It is expected that the bill
will be enacted into law in early October 1996 and will go into effect
immediately thereafter. Since many of the fund's non-fundamental
restrictions are the result of state securities law
requirements which would no longer apply to the fund after the law
goes into effect, the law would most likely lead to the removal of
some or all of these non-fundamental restrictions.
The adoption of any of these proposals is not contingent on the
adoption of any other proposal.
3.A. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN THE VOTING SECURITIES OF A SINGLE
ISSUER
The Trustees are recommending that the fund's fundamental investment
restriction with respect to investments in the voting securities of a
single issuer be revised to reflect the standard restriction expected
to be used by other Putnam funds and to grant the fund the maximum
flexibility permitted under the Investment Company Act of 1940, as
amended (the "1940 Act"). The 1940 Act prohibits a diversified fund
such as the fund from investing, with respect to 75% of its total
assets, in the voting securities of an issuer if as a result it would
own more than 10% of the outstanding voting securities of that issuer.
The fund's current investment restriction, which is more restrictive
than the 1940 Act, states that the fund may not:
"Acquire more than 10% of the voting securities of any issuer."
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not ...
With respect to 75% of its total assets, acquire more than
10% of the outstanding voting securities of any issuer."
Putnam Management believes that limiting this restriction to 75% of the
fund's total assets will enhance the fund's investment flexibility.
Putnam Management has advised the Trustees that the current restriction
could prevent the fund from investing in certain opportunities to the
fullest extent that Putnam Management believes would best serve the
fund's investment objective.
The amendment enables the fund to purchase more than 10% of the voting
securities of an issuer with respect to 25% of the fund's total assets.
To
the extent the fund individually or with other funds and accounts
managed by Putnam Management or its affiliates were to own all or a
major portion of the outstanding voting securities of a particular
issuer, under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer the fund could
find it more difficult to sell these voting securities when Putnam
Management believes it advisable to do so, or may be able to sell the
securities only at prices significantly lower than if they were more
widely held. In addition, certain of the companies in which the fund
may invest a greater portion of its assets following the amendment
could have relatively small equity market capitalizations (e.g., under
$1 billion). Such companies often have limited product lines, markets
or financial resources. The securities of these companies may trade
less frequently and in limited volume, and only in the over-the-counter
market or on a regional securities exchange. As a result, these
securities may fluctuate in value more than those of larger, more
established companies. Under such circumstances, it may also be more
difficult to determine the fair value of such securities for purposes
of computing the fund's net asset value.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
3.B. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MAKING LOANS
The Trustees are recommending that the fund's fundamental investment
restriction with respect to making loans be revised to reflect the
standard restriction expected to be used by other Putnam funds and to
remove any asset limitations on the fund's ability to enter into
repurchase agreements and securities loans. The current restriction
states that the fund may not:
"Make loans, except by purchase of debt obligations in which the
fund may invest consistent with its investment policies, or by
entering into repurchase agreements with respect to not more than
25% of its total assets (taken at current value) or through the
lending of its portfolio securities with respect to not more than
25% of its assets."
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not ...
Make loans, except by purchase of debt obligations in which
the fund may invest consistent with its investment policies,
by
entering into repurchase agreements,
or by lending its
portfolio securities
."
Following the amendment, the fund may, consistent with its investment
objective and policies and applicable law, enter into repurchase
agreements and securities loans without limit. Putnam Management
believes that this increased investment flexibility could assist
the fund in achieving its investment objective.
When the fund enters into a repurchase agreement, it typically
purchases a security for a relatively short period (usually not more
than one week), which the seller agrees to repurchase at a fixed time
and price, representing the fund's cost plus interest. When the fund
enters into a securities loan, it lends certain of its portfolio
securities to broker-dealers or other parties and typically receives
an interest payment in return. These transactions must be fully
collateralized at all times, but involve some risk to the fund if the
other party should default on its obligation. If the other party in
these transactions should become involved in bankruptcy or insolvency
proceedings, it is possible that the fund may be treated as an
unsecured creditor and be required to return the underlying collateral
to the other party's estate.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
3.C. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO SENIOR SECURITIES
The Trustees are recommending that the fund's fundamental investment
restriction with respect to the issuance of senior securities be
revised to reflect the standard restriction expected to be used by
other Putnam funds and to make it clear that the fund is not restricted
from borrowing money consistent with its investment policies.
Generally, a "senior security" is a security which has priority over
any other security as to distribution of assets or dividends, and
technically includes all indebtedness over 5% of a fund's assets. The
current restriction states that the fund may not:
"Issue any class of securities which is senior to the fund's
shares of beneficial interest."
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not...
Issue any class of securities which is senior to the fund's
shares of beneficial interest, except for permitted borrowings."
Although Putnam Management believes that the fund may currently borrow
money to the maximum extent permitted by its existing policies (up to
10% of its total assets) without violating its current restriction, it
believes that amending the restriction will avoid any possible
ambiguity.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
3.D. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN COMMODITIES
The Trustees are recommending that the fund's fundamental investment
restriction with respect to investments in commodities be revised to
reflect the standard restriction expected to be used by other Putnam
funds. The current restriction states that the fund may not:
"Purchase or sell commodities or commodity contracts, except that
the fund may purchase and sell financial futures contracts and
options."
The proposed amended fundamental investment restriction is set
forth below.
"The fund may not ...
Purchase or sell commodities or commodity contracts, except
that the fund may purchase and sell financial futures
contracts and options and may enter into foreign exchange
contracts and other financial transactions not involving
physical commodities."
Under the revised restriction, the fund will continue to be able to
engage in a variety of transactions involving the use of financial
futures and options and foreign currencies, as well as various other
financial transactions to the extent consistent with its investment
objective and policies. Although the fund may already engage in many
of these activities, Putnam Management believes that the revised
language more clearly sets forth the fund's policy. The addition of
financial transactions not involving physical commodities is
intended to give the fund maximum flexibility to invest in a variety
of financial instruments that could technically be considered
commodities, but which do not involve the direct purchase or sale of
physical commodities, which is the intended focus of the restriction.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.A. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN SECURITIES OF ISSUERS IN WHICH
MANAGEMENT OF THE FUND OR PUTNAM INVESTMENT MANAGEMENT OWNS
SECURITIES
The Trustees are recommending eliminating the fund's fundamental
investment restriction which prevents the fund from investing in the
securities of issuers in which management of the fund or Putnam
Management owns a certain percentage of securities and replacing it
with a standard non-fundamental restriction expected to be used by
other Putnam funds. The current restriction states that the fund may
not:
"Invest in securities of any issuer if, to the knowledge of the
fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the shares or securities of that issuer together own
more than 5%."
The fund originally adopted this restriction to comply with certain
state securities law requirements, and while the restriction is
currently required by one state, it is not required to be a fundamental
policy. If this proposal is approved, the Trustees intend to replace
this fundamental restriction with the following substantially identical
non-fundamental investment restriction to comply with the remaining
state requirement:
"The fund may not. . .
Invest in the securities of any issuer, if, to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the securities of that issuer together own more than 5%
of such securities."
By making this policy non-fundamental, the fund will have the ability
to modify or eliminate the restriction to increase investment
flexibility without the need for shareholder approval.
If the restriction were to be eliminated, the fund would be able to
invest in the securities of any issuer without regard to ownership in
such issuer by management of the fund or Putnam Management, except to
the extent prohibited by the fund's investment policies or the 1940
Act.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if
more
than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.B. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MARGIN TRANSACTIONS
The Trustees are recommending that the fund's fundamental investment
restriction with respect to margin transactions be eliminated and
replaced by a standard non-fundamental investment restriction expected
to be used by the other Putnam funds. "Margin transactions" involve
the purchase of securities with money borrowed from a broker, with cash
or eligible securities being used as collateral against the loan. The
current restriction states that the fund may not:
"Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of
securities, and except that it may make margin payments in
connection with futures contracts and options."
The fund originally adopted this restriction to comply with certain
state securities law requirements, and while the restriction is
currently required by one state, it is not required to be a fundamental
policy. If the proposal is approved, the Trustees intend to replace
this fundamental restriction with the following substantially identical
non-fundamental investment restriction to comply with the remaining
state requirement:
"The fund may not. . .
Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of
securities, and except that it may make margin payments in
connection with financial futures contracts or options."
By making this policy non-fundamental, the fund will have the ability
to modify or eliminate the restriction to increase investment
flexibility without the need for shareholder approval.
The fund's potential use of margin transactions beyond transactions in
financial futures and options and for the clearance of purchases and
sales of securities, including the use of margin in ordinary securities
transactions, is currently limited by SEC guidelines which prohibit
margin transactions because they create senior securities. The fund's
ability to engage in margin transactions is also limited by its
investment policies, which generally permit the fund to borrow money
only in limited circumstances.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.C. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO SHORT SALES
The Trustees are recommending that the fund's fundamental investment
restriction with respect to short sales be eliminated and replaced by
a standard non-fundamental investment restriction expected to be used
by other Putnam funds. The current restriction states that the fund
may not:
"Make short sales of securities or maintain a short sale position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short."
The fund originally adopted this restriction to comply with certain
state securities law requirements, and while the restriction is
currently required by one state, it is not required to be a fundamental
policy. If this proposal is approved, the Trustees intend to replace
this fundamental restriction with the following substantially identical
non-fundamental restriction to comply with the remaining state
requirement:
"The fund may not ...
Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities
or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and in equal amount to, the
securities sold short."
By making this policy non-fundamental, the fund will have the ability
to modify or eliminate the restriction to increase investment
flexibility without the need for shareholder approval.
In
a typical short
sale,
the fund borrows securities from a broker that
it anticipates will decline in value in order to sell to a third party.
The fund becomes obligated to return securities of the same issue and
quantity at some future date, and it realizes a loss to the extent the
securities increase in value and a profit to the extent the securities
decline in value (after including any associated costs). Since the
value of a particular security can increase without limit, the fund
could potentially realize losses with respect to short sales in which
the fund does not own or have the right to acquire at no added cost
securities identical to those sold short that are significantly greater
than the value of the securities at the time they are sold short.
Required vote. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.D. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO PLEDGING ASSETS
The Trustees are recommending that the fund's fundamental investment
restriction which limits the fund's ability to pledge its assets be
eliminated and replaced by a standard non-fundamental investment
restriction expected to be used by other Putnam funds. The current
restriction states that the fund may not:
"Pledge, hypothecate, mortgage or otherwise encumber its assets
in excess of 15% of its total assets (taken at current value) and
then only to secure borrowings permitted by restriction 1 above.
(The deposit of underlying securities and other assets in escrow
and collateral arrangements with respect to margin for futures
contracts and options is not deemed to be a pledge or other
encumbrance.)" [Restriction 1 referred to in this restriction
permits the fund to borrow money in an amount equal to up to 10%
of its total assets for certain limited purposes.]
Certain state securities laws impose restrictions on the fund's ability
to pledge its assets, but these limitations are less restrictive than
the fund's current restriction and are not required to be contained in
a fundamental policy. For these reasons, Putnam Management believes
that the current restriction is unnecessarily restrictive and should
be eliminated. If the proposal is approved, the Trustees intend to
replace this restriction with the following non-fundamental investment
restriction to comply with current state requirements:
"The fund may not ...
Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 33 1/3% of its total assets (taken at
cost) in connection with permitted borrowings."
This proposal would enable the fund to pledge up to one-third of its
total assets in connection with fund borrowings; other activities which
could be deemed to be pledges or other encumbrances, such as collateral
arrangements with respect to certain forward commitments, futures
contracts and options transactions, will not be restricted.
Putnam Management believes that this enhanced flexibility could assist
the fund in achieving its investment objective. Further, Putnam
Management believes that the fund's current limits on pledging may
conflict with the fund's ability to borrow money to meet redemption
requests or for extraordinary or emergency purposes. This conflict
arises because banks may require borrowers such as the fund to pledge
assets in order to collateralize the amount borrowed. These collateral
requirements are typically for amounts at least equal to, and often
larger than, the principal amount of the loan. If the fund needed to
borrow the maximum amount permitted by its policies (currently 10% of
its total assets), it might be possible that a bank would require
collateral in excess of 15% of the fund's total assets. Thus, the
current restriction could have the effect of reducing the amount that
the fund may borrow in these situations.
By making this policy non-fundamental, the fund will have the ability
to modify or eliminate the restriction to increase investment
flexibility without the need for shareholder approval.
Pledging assets does entail certain risks. To the extent that the fund
pledges its assets, the fund may have less flexibility in liquidating
its assets. If a large portion of the fund's assets were involved, the
fund's ability to meet redemption requests or other obligations could
be delayed.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.E.
ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN RESTRICTED SECURITIES
The Trustees are recommending that the fund's fundamental investment
restriction which limits the fund's investments in securities subject
to restrictions on resale, which are known as "restricted securities,"
be eliminated. The current fundamental investment restriction states
that the fund may not:
"Purchase securities restricted as to resale, if, as a result,
such investments would exceed 15% of the value of the fund's
net assets, excluding restricted securities that have been
determined by the Trustees of the fund (or the person
designated by them to make such determinations) to be readily
marketable."
Putnam Management believes the restriction is unnecessary in light of
current regulatory requirements, which prohibit the fund from investing
more than 15% of its net assets in any combination of (a) securities
which are not readily marketable, (b) securities restricted as to
resale (excluding securities determined by the Trustees of the fund (or
the person designated by the Trustees of the fund to make such
determinations) to be readily marketable), and (c) repurchase
agreements maturing in more than seven days.
These requirements are currently reflected in the fund's non-
fundamental policy with respect to illiquid investments , which may
be changed without shareholder approval . Eliminating the
fundamental restriction would, therefore, provide the fund with maximum
flexibility to respond quickly to legal, regulatory and market
developments regarding illiquid investments , without the need
for shareholder approval.
To the extent the fund invests in illiquid investments, the fund may
encounter difficulty in determining the fair value of such securities
for purposes of computing net asset value. In addition, the fund could
encounter difficulty satisfying redemption requests within seven days
if it could not readily dispose of its illiquid investments.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.F. ELIMINATING
THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN CERTAIN OIL, GAS AND MINERAL
INTERESTS
The Trustees are recommending that the fund's fundamental investment
restriction
with respect
to investments in oil, gas and mineral
leases, rights or royalty contracts be eliminated and replaced by a
standard non-fundamental investment restriction expected to be used
by other Putnam funds. The current restriction states that the fund
may not:
"Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, although it may purchase securities of issuers which
deal in, represent interests in, or are secured by interests in
such leases, rights, or contracts, and it may acquire or dispose
of such leases, rights, or contracts acquired through the
exercise of its rights as a holder of debt obligations secured
thereby."
The fund originally adopted the restriction to comply with certain
state securities law requirements, and while the restriction is
currently required by one state, it is not required to be a fundamental
policy. If this proposal is approved, the Trustees intend to adopt the
following substantially identical non-fundamental restriction to comply
with the remaining state requirement:
"The
fund may not . . .
"Buy
or sell oil, gas or other mineral leases, rights or royalty
contracts, although it may purchase securities which represent
interests in, are secured by interests in, or which are issued by
issuers which deal in, such leases, rights or contracts, and it
may acquire and dispose of such leases, rights or contracts
acquired through the exercise of its rights as a holder of debt
obligations secured thereby."
By making this policy non-fundamental, the fund will be able to modify
or eliminate the restriction to increase investment flexibility without
the need for shareholder approval.
Investments in oil, gas and other mineral leases, rights or royalty
contracts and in securities which derive their value in part from such
instruments, entail certain risks. The prices of these investments are
subject to substantial fluctuations, and may be affected by
unpredictable economic and political circumstances such as social,
political or military disturbances, the taxation and regulatory
policies of various governments, the activities and policies of OPEC
(an organization of major oil producing countries), the existence of
cartels in such industries, the discovery of new reserves and the
development of new techniques for producing, refining and transporting
such materials and related products, the development of new technology,
energy conservation practices, and the development of alternative
energy sources and alternative uses for such materials and related
products. In addition, in order to enforce its rights in the event of
a default of an issuer of these securities, the fund may be required
to participate in various legal proceedings or take possession of and
manage assets securing the issuer's obligations. This could increase
the fund's operating expenses and adversely affect the fund's net asset
value.
Required
vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
4.G. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTING TO GAIN CONTROL OF A COMPANY'S MANAGEMENT
The Trustees are recommending that the fund's fundamental investment
restriction which states that the fund may not "make investments for
the purpose of gaining control of a company's management" be
eliminated. Eliminating the restriction would make it clear that the
fund can freely exercise its rights as a shareholder of the various
companies in which it may invest which activities could
at times fall under the technical definition of control under the
securities laws . These rights may include the right to actively
oppose or support the management of such companies. Putnam Management
believes it would be in the best interest of the fund to eliminate the
restriction.
Putnam Management believes that eliminating this restriction will allow
the fund maximum flexibility to protect the value of its investments
through influencing management of companies in which it may invest.
Putnam Management believes that the fund should be allowed to freely
communicate its views as a shareholder on matters of policy to
management, the board of directors, and other shareholders when a
policy may affect the value of the fund's investment. Activities in
which the fund may engage might include the fund, either individually
or with others, seeking changes in a company's goals, management, or
board of directors, seeking the sale of some or all of a company's
assets, or voting to participate in or oppose a takeover effort with
respect to a company. Although Putnam Management believes that the
fund currently may engage in such activities without necessarily
violating this restriction, it believes that eliminating the
restriction will eliminate any potential obstacle to the fund in
protecting its interests as a shareholder.
This area of corporate activity is highly prone to litigation, and
whether or not the restriction is eliminated, the fund could be drawn
into lawsuits related to these activities. The fund will direct its
efforts toward those instances where Putnam Management believes the
potential for benefit to the fund outweighs potential litigation risks.
Required vote. Approval of this proposal requires the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the
fund, or (2) 67% or more of the shares of the fund present at the
meeting if more than 50% of the outstanding shares of the fund are
present at the meeting in person or by proxy.
Further Information About Voting and the Shareholder Meeting
Quorum and Methods of Tabulation. Thirty percent of the shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect to
any proposal at the meeting (unless otherwise noted in the proxy
statement). Shares represented by proxies that reflect abstentions and
"broker non-votes" (i.e., shares held by brokers or nominees as to
which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter)
will be counted as shares that are present and entitled to vote on the
matter for purposes of determining the presence of a quorum. Votes
cast by proxy or in person at the meeting will be counted by persons
appointed by your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for" approval
of the proposals for purposes of determining whether sufficient
affirmative votes have been cast. With respect to the election of
Trustees and selection of auditors, neither abstentions nor broker non-
votes have any effect on the outcome of the proposal. With respect to
any other proposals, abstentions and broker non-votes have the effect
of a negative vote on the proposal.
Other business. The Trustees know of no other business to be brought
before the meeting. However, if any other matters properly come before
the meeting, it is their intention that proxies that do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named as proxies in the
enclosed form of proxy.
Simultaneous meetings. The meeting of shareholders of your fund is
called to be held at the same time as the meetings of shareholders of
certain of the other Putnam funds. It is anticipated that all meetings
will be held simultaneously. If any shareholder at the meeting objects
to the holding of a simultaneous meeting and moves for an adjournment
of the meeting to a time promptly after the simultaneous meetings, the
persons named as proxies will vote in favor of such adjournment.
Solicitation of proxies. In addition to soliciting proxies by mail,
Trustees of your fund and employees of Putnam Management, Putnam
Fiduciary Trust Company and Putnam Mutual Funds may solicit proxies in
person or by telephone. Your fund may also arrange to have votes
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been properly
recorded. Your fund has been advised by counsel that these procedures
are consistent with the requirements of applicable law. If these
procedures were subject to a successful legal challenge, such votes
would not be counted at the meeting. Your fund is unaware of any such
challenge at this time. Shareholders would be called at the phone
number Putnam Investments has in its records for their accounts, and
would be asked for their Social Security number or other identifying
information. The shareholders would then be given an opportunity to
authorize proxies to vote their shares at the meeting in accordance
with their instructions. To ensure that the shareholders' instructions
have been recorded correctly, they will also receive a confirmation of
their instructions in the mail. A special toll-free number will be
available in case the information contained in the confirmation is
incorrect.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this policy,
your fund may solicit proxies from shareholders who have not voted
their shares or who have abstained from voting.
Persons holding shares as nominees will upon request be reimbursed for
their reasonable expenses in soliciting instructions from their
principals. Your fund has retained at its expense D.F. King & Co.,
Inc., 77 Water Street, New York, New York 10005, to aid in the
solicitation of instructions for registered and nominee
accounts, for a fee not to exceed $7,500 plus reasonable out-of-pocket
expenses for mailing and phone costs.
Revocation of proxies. Proxies, including proxies given by telephone,
may be revoked at any time before they are voted by a written
revocation received by the Clerk of your fund, by properly executing
a later-dated proxy or by attending the meeting and voting in person.
Date for receipt of shareholders' proposals for subsequent meetings of
shareholders. Your fund's Agreement and Declaration of Trust does not
provide for annual meetings of shareholders, and your fund does not
currently intend to hold such a meeting in 1997. Shareholder proposals
for inclusion in the proxy statement for any subsequent meeting must
be received by your fund within a reasonable period of time prior to
any such meeting.
Adjournment. If sufficient votes in favor of any of the proposals set
forth in the Notice of the Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose
adjournments of the meeting for a period or periods of not more than
60 days in the aggregate to permit further solicitation of proxies with
respect to any of such proposals. Any adjournment will require the
affirmative vote of a majority of the votes cast on the question in
person or by proxy at the session of the meeting to be adjourned. The
persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of such proposals.
They will vote against such adjournment those proxies required to be
voted against such proposals. Your fund pays the costs of any
additional solicitation and of any adjourned session. Any proposals
for which sufficient favorable votes have been received by the time of
the meeting may be acted upon and considered final regardless of
whether the meeting is adjourned to permit additional solicitation with
respect to any other proposal.
Financial information. Your fund will furnish, without charge, to you
upon request a copy of the fund's annual report for its most recent
fiscal year, and a copy of its semiannual report for any subsequent
semiannual period. Such requests may be directed to Putnam Investor
Services, P.O. Box 41203, Providence, RI 02940-1203 or 1-800-225-1581.
Further Information About Your Fund
Limitation of Trustee liability. The Agreement and Declaration of
Trust of your fund provides that the fund will indemnify its Trustees
and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices
with the fund, except if it is determined in the manner specified in
the Agreement and Declaration of Trust that they have not acted in good
faith in the reasonable belief that their actions were in the best
interests of the fund or that such indemnification would relieve any
officer or Trustee of any liability to the fund or its shareholders
arising by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of his or her duties. Your fund, at its expense,
provides liability insurance for the benefit of its Trustees and
officers.
Audit and Nominating Committees. The voting members of the Audit
Committee of your fund include only Trustees who are not "interested
persons" of the fund by reason of any affiliation with Putnam
Investments and its affiliates. The Audit Committee currently consists
of Messrs. Estin (Chairman), Perkins (without vote), Putnam, III
(without vote), Shapiro, Smith (without vote), and Ms. Kennan. The
Nominating Committee consists only of Trustees who are not "interested
persons" of your fund or Putnam Management. The Nominating Committee
currently consists of Dr. Pounds and Ms. Kennan (Co-chairpersons), Ms.
Baxter, and Messrs. Estin, Hill, Jackson, Patterson, Shapiro, and
Thorndike.
Officers and other information. In addition to George Putnam and
Lawrence J. Lasser, the officers of your fund are as follows:
Year first
elected to
Name (age) Office office
- -----------------------------------------------------------------
Charles E. Porter (58) Executive Vice President 1993
Patricia C. Flaherty (49) Senior Vice President 1993
John D. Hughes (61) Senior Vice President
& Treasurer 1993
Gordon H. Silver (49) Vice President 1993
Peter Carman (55) Vice President 1994
John J. Morgan, Jr. (56) Vice President 1993
Carol McMullen (41) Vice President 1995
Gerald S. Zukowski* (61) Vice President 1993
Anthony C. Santosus* (38) Vice President 1996
Brett C. Browchuk (33) Vice President 1994
William N. Shiebler** (54) Vice President 1993
John R. Verani (57) Vice President 1993
Paul M. O'Neil (43) Vice President 1993
Beverly Marcus (52) Clerk 1993
- -----------------------------------------------------------------
* One of the fund's portfolio managers
** President of Putnam Mutual Funds
All of the officers of your fund are employees of Putnam Management or
its affiliates. Because of their positions with Putnam Management or
its affiliates or their ownership of stock of Marsh & McLennan
Companies, Inc., the parent corporation of Putnam Management and Putnam
Mutual Funds, Messrs. Putnam, George Putnam, III, Lasser and Smith
(nominees for Trustees of your fund), as well as the officers of your
fund, will benefit from the management fees, distribution fees,
underwriting commissions, custodian fees, and investor servicing fees
paid or allowed by the fund.
Assets and shares outstanding of your fund
as of September 6, 1996
Net assets $367,606,841
Class A shares outstanding
and authorized to vote 12,082,050 shares
Class B shares outstanding
and authorized to vote 10,863,544 shares
Class M shares outstanding
and authorized to vote 286,719 shares
5% beneficial ownership of your
fund as of September 10 , 1996
Persons beneficially owning more than 5% None
of the fund's class A shares
Persons beneficially owning more than 5%
of the fund's class B shares None
Persons beneficially owning more than 5%
of the fund's class M shares
(1) Merrill Lynch Pierce Fenner & 14,368 shares or 5.2%
Smith, Inc.
Mutual Fund Operations
Third Floor
4800 Deer Lake Drive East
Jacksonville, FL 32246
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAMINVESTMENTS
This is your PROXY CARD.
Please vote this proxy, sign it below, and return it promptly in the
envelope provided. Your vote is important.
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or telephone
number or to provide us with your comments. Detach this form from the
proxy ballot and return it with your signed proxy in the enclosed
envelope.
Street
- -------------------------------------------------------------------
City
State
Zip
- -------------------------------------------------------------------
Telephone
- -------------------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
- -------------------------------------------------------------------
- --------------------------------------------------------
- ----------
-- -------------------------------------------------------
- ----------
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense of
follow-up mailings by signing and returning this proxy as soon as
possible. A postage-paid envelope is enclosed for your convenience.
THANK YOU!
- -------------------------------------------------------------------
Please fold at perforation before detaching.
<PAGE>
Proxy for a meeting of shareholders to be held on December 5, 1996
for Putnam Capital Appreciation Fund.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints George Putnam, Hans H.
Estin, and Robert E. Patterson, and each of them separately, Proxies,
with power of substitution, and hereby authorizes them to represent and
to vote, as designated below, at the meeting of shareholders of Putnam
Capital Appreciation Fund on December 5, 1996 at 2:00 p.m., Boston
time, and at any adjournments thereof, all of the shares of the fund
that the undersigned shareholder would be entitled to vote if
personally present.
If you complete and sign the proxy, we'll vote it exactly as you tell
us. If you simply sign the proxy, it will be voted FOR electing
Trustees as set forth in Proposal 1 and FOR each of the other
proposals listed below . In their discretion, the Proxies will also
be authorized to vote upon such other matters that may properly come
before the meeting.
Note: If you have questions on any of the proposals, please call
1-800-225-1581.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you are
a joint owner, each owner should sign. When signing as executor,
administrator, attorney, trustee, or guardian, or as custodian for a
minor, please give your full title as such. If you are signing for a
corporation, please sign the full corporate name and indicate the
signer's office. If you are a partner, sign in the partnership name.
- -------------------------------------------------------------------
Shareholder sign here Date
- -------------------------------------------------------------------
Co-owner sign here Date
<PAGE>
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES FOR
TRUSTEES AND FOR THE OTHER PROPOSALS LISTED BELOW.
Please mark your choices / X / in blue or black ink.
1. Proposal to elect Trustees
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, R.J. Jackson, E.T. Kennan, L.J. Lasser, R.E. Patterson,
D.S. Perkins, W.F. Pounds, G. Putnam, G. Putnam, III, E. Shapiro,
A.J.C. Smith and W.N. Thorndike.
/ / FOR electing all the nominees
(except as indicated to the contrary below)
/ / WITHHOLD authority to vote for all nominees
To withhold authority to vote for one or more of the nominees, write
those nominees' names below:
- -------------------------------------------------------------
PROPOSAL TO:
2. Ratify the selection FOR AGAINST ABSTAIN
of Coopers & Lybrand
L.L.P. as the independent / / / / / /
auditors of your fund.
3. Amend the fund's
fundamental investment
restriction with respect to:
A. Investments in the / / / / / /
voting securities of a
single issuer.
B. Making loans. / / / / / /
C. Senior securities. / / / / / /
D. Investments in / / / / / /
commodities.
4. Eliminate the fund's fundamental
investment restriction
with respect to:
A. Investments in securities / / / / / /
of issuers in which
management of the fund or
Putnam Investment Management
owns securities.
B. Margin transactions. / / / / / /
C. Short sales. / / / / / /
D. Pledging assets. / / / / / /
E. Investments in / / / / / /
restricted securities.
F. Investments in certain / / / / / /
oil, gas and mineral
interests.
G. Investing to gain / / / / / /
control of a company's
management.
<PAGE>
lipsett/106290.111/proxys/capapp4.wpf
