PROSPECTUS
FEBRUARY 1, 1994,
AS REVISED JULY 1, 1994
PUTNAM CAPITAL GROWTH AND INCOME FUND
INVESTMENT STRATEGY: GROWTH AND INCOME
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for
future reference. You can find more detailed information about
the Fund in the February 1, 1994 Statement of Additional
Information, as amended from time to time. For a free copy of
the Statement, call Putnam Investor Services at 1-800-225-1581.
The Statement has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
BOSTON * LONDON * TOKYO
<PAGE>
Putnam Capital Growth and Income Fund seeks capital growth and
current income. For a description of the Fund's investment
policies, and related risks, see the section "How objective is
pursued."
ABOUT THE FUND
Expenses summary 2
............................................................
Financial highlights 4
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Objective 4
............................................................
How objective is pursued 4
............................................................
How performance is shown 9
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How the Fund is managed 9
............................................................
Organization and history 10
ABOUT YOUR INVESTMENT
How to buy shares 12
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Distribution Plan 16
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How to sell shares 16
............................................................
How to exchange shares 17
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How the Fund values its shares 18
............................................................
How distributions are made; tax information 18
ABOUT PUTNAM INVESTMENTS, INC. 19
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the Fund. The following table summarizes your maximum
transaction costs from investing in the Fund and expenses which
the Fund expects to incur in its first fiscal year. The Example
shows the estimated cumulative expenses attributable to a
hypothetical $1,000 investment in the Fund over specified
periods.<PAGE>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.75%
Deferred Sales Charge (as a percentage
of the lower of original purchase price
or redemption proceeds) NONE*
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees NONE
(after expense limitation)
Other Expenses
(after expense limitation) 1.10%
Total Fund Operating Expenses 1.10%
(after expense limitation
* A deferred sales charge of up to 1.00% is assessed on
certain redemptions of shares that were purchased without
an initial sales charge as part of an investment of $1
million or more. See "How to buy shares."
EXAMPLE
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3
year years
$68 $90
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund expects to incur during its first fiscal year.
The annual management fees shown in the table
reflect an expense limitation currently in effect. "Other
Expenses", which also reflect the expense limitation, are based
on estimated amounts for the Fund's first fiscal year. In the
absence of the expense limitation, estimated management fees,
"Other Expenses" and total Fund operating expenses would
be 0.65%, 1.61% and 2.26%, respectively. The Example does not
represent past or future expense levels. Actual Fund expenses
may be more or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual
annual return will vary.
<PAGE>
FINANCIAL HIGHLIGHTS
The table on the following page presents per share financial
information for the life of the Fund. This information has been
audited and reported on by the Fund's independent accountants.
The Report of Independent Accountants and financial statements
included in the Fund's Semiannual Report to shareholders for the
period ended November 30, 1993 are incorporated by reference into
this Prospectus. The Fund's Semiannual Report, which contains
additional unaudited performance information, will be made
available without charge upon request.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<PAGE>
(The table appears on page 4a)
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 1 TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-49597.)
<PAGE>
OBJECTIVE
PUTNAM CAPITAL GROWTH AND INCOME FUND SEEKS CAPITAL GROWTH AND
CURRENT INCOME. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its
objective.
HOW OBJECTIVE IS PURSUED
BASIC INVESTMENT STRATEGY
The Fund will under normal market conditions invest at least 65%
of its total assets in common stocks that offer potential for
capital growth, current income or both. Although common stocks
will normally be the Fund's principal investments, the Fund may
also purchase convertible bonds, convertible preferred stocks,
preferred stocks and debt securities if Putnam Investment
Management, Inc., the Fund's investment manager ("Putnam
Management"), believes they would help achieve the Fund's
objective. It is expected that when selecting equity securities
for the Fund's portfolio, Putnam Management will, under current
market conditions, generally emphasize growth stocks. The Fund
may also hold a portion of its assets in cash or money market
instruments.
The Fund will not limit its investments to any particular type of
company. It may invest in small and relatively less well-known
companies.
At times Putnam Management may judge that conditions in the
securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times, Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing
these "defensive" strategies, the Fund may invest primarily in
debt securities, preferred stocks, U.S. government and agency
obligations, cash or money market instruments, or other
securities Putnam Management considers consistent with such
defensive strategies. It is impossible to predict when, or for
how long, the Fund will use these alternative strategies.
FOREIGN INVESTMENTS
THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES
PRINCIPALLY TRADED IN FOREIGN MARKETS. The Fund may also
purchase Eurodollar certificates of deposit without regard to the
20% limit. Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's assets may
be affected favorably or unfavorably by currency exchange rates
and exchange control regulations. There may be less information
publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to
accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the Fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities.
The Fund may buy or sell foreign currencies and foreign currency
forward contracts for hedging purposes in connection with its
foreign investments.
A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS
AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED
IN THE STATEMENT OF ADDITIONAL INFORMATION.
<PAGE>
SHORT-TERM TRADING
UNDER CERTAIN MARKET CONDITIONS, THE FUND MAY SEEK PROFITS BY
SHORT-TERM TRADING. The length of time the Fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities owned by the
Fund is known as "portfolio turnover." To the extent short-term
trading strategies are used, the Fund's portfolio turnover rate
may be higher than that of other mutual funds. Portfolio
turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other
securities. Such transactions may result in realization of
taxable capital gains. While it is impossible to predict the
Fund's portfolio turnover rate, Putnam Management, based on its
experience, believes that such rate will not exceed 150%.
Portfolio turnover rates for the life of the Fund are shown in
the section "Financial highlights."
RISK FACTORS
INVESTMENTS IN FIXED-INCOME SECURITIES. The Fund may invest in
both higher-rated and lower-rated fixed-income securities,
regardless of credit rating. Like those of other fixed-income
securities, the values of lower-rated fixed-income securities
fluctuate in response to changes in interest rates. Thus, a
decrease in interest rates will generally result in an increase
in the value of the Fund's assets. Conversely, during periods of
rising interest rates, the value of the Fund's assets will
generally decline. The values of lower-rated securities
generally fluctuate more than those of higher-rated securities.
Securities in the lower rating categories may, depending on the
rating, have large uncertainties or major risk exposure to
adverse conditions. The rating services' descriptions of
securities in the various rating categories, including the
speculative characteristics of securities in the lower rating
categories, are set forth in the Statement of Additional
Information.
The lower ratings of the securities reflect a greater possibility
that adverse changes in the financial condition of their issuers,
or in general economic conditions, or both, or an unanticipated
rise in interest rates, may impair the ability of their issuers
to make payments of interest and principal. In addition, under
such circumstances the values of such securities may be more
volatile, and the markets for such securities may be less liquid,
than those for higher-rated securities, and the Fund may as a
result find it more difficult to determine the fair value of such
securities. When the Fund invests in securities in the lower
rating categories, the achievement of the Fund's goals is more
dependent on Putnam Management's ability than would be the case
if the Fund were investing in securities in the higher rating
categories.
STOCK INDEX FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS FOR
HEDGING PURPOSES. An "index future" is a contract to buy or sell
units of a particular stock index at an agreed price on a
specified future date. Depending on the change in value of the
index between the time when the Fund enters into and terminates
an index future or option transaction, the Fund realizes a gain
or loss. The Fund may buy and sell call and put options on index
futures or on stock indices in addition to or as an alternative
to purchasing or selling index futures or, to the extent
permitted by applicable law, to earn additional income.
THE USE OF INDEX FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL
RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY
RESULT IN LOSSES. Certain risks arise because of the possibility
of imperfect correlations between movements in the prices of
index futures and options and movements in the prices of the
underlying stock index or of the common stocks in the Fund's
portfolio that are the subject of a hedge. The successful use of
the strategies described above further depends on Putnam
Management's ability to forecast market movements correctly.
Other risks arise from the Fund's potential inability to close
out its index futures or options positions, and there can be no
assurance that a liquid secondary market will exist for any index
future or option at any particular time. Certain provisions of
the Internal Revenue Code and certain regulatory requirements may
limit the Fund's ability to engage in index futures and options
transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL
RISKS. THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE
DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS
DESIGNED TO REDUCE THESE RISKS.
OPTIONS. The Fund may seek to increase its current return by
writing covered call and put options on securities it owns or in
which it may invest. The Fund receives a premium from writing a
call or put option, which increases the Fund's return if the
option expires unexercised or is closed out at a net profit.
When the Fund writes a call option, it gives up the opportunity
to profit from any increase in the price of a security above the
exercise price of the option; when it writes a put option, the
Fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The Fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written. The Fund may also
buy and sell put and call options for hedging purposes. The Fund
may also from time to time buy and sell combinations of put and
call options on the same underlying security to earn additional
income. The aggregate value of the securities underlying the
options may not exceed 25% of the Fund's assets. The Fund's use
of these strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The Fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The Fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party
should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the
transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM: acquiring more than 10% of the voting securities of any
one issuer* and investing more than: (a) (with respect to 75% of
its total assets) 5% of its total assets in securities of any one
issuer (other than the U.S. government);* (b) 15% of its net
assets in securities restricted as to resale (excluding
securities determined by the Fund's Trustees (or the person
designated by the Fund's Trustees to make such determinations) to
be readily marketable);* (c) 25% of its total assets in any one
industry (other than U.S. government securities);* (d) 5% of its
net assets in warrants or more than 2% of its net assets in
warrants not listed on the New York or American Stock Exchanges;
or (e) 15% of its net assets in any combination of securities
that are not readily marketable, in securities restricted as to
resale (excluding securities determined by the Fund's Trustees
(or the person designated by the Fund's Trustees to make such
determinations) to be readily marketable), and in repurchase
agreements maturing in more than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental policies. See the Statement of Additional
Information for the full text of these policies and the Fund's
other fundamental policies. Except for investment policies
designated as fundamental in this Prospectus or the Statement,
the investment policies described in this Prospectus and in the
Statement are not fundamental policies. The Trustees may change
any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without
shareholder approval.
HOW PERFORMANCE IS SHOWN
TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT THE FUND. "Total return" for the life of
the Fund through the most recent calendar quarter represents the
rate of return on an investment of $1,000 in the Fund at the
maximum public offering price. Total return may also be
presented for other periods or based on investment at reduced
sales charge levels. Any quotation of total return not
reflecting the maximum initial sales charge would be reduced if
such sales charges were used. Quotations of total return for any
period when an expense limitation was in effect will be greater
than if the limitation had not been in effect. The Fund's
performance may be compared to various indices. See the
Statement of Additional Information.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio and the Fund's operating
expenses. Investment performance also often reflects the risks
associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other
investment vehicles.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the Fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the Fund's other affairs and
business. James F. Giblin, Senior Vice President of Putnam
Management and Senior Portfolio Manager of the Fund, has had
primary responsibility for the day-to-day management of the
Fund's portfolio since its commencement of operations. Prior to
joining Putnam Management, Mr. Giblin was employed by Cigna
Investment, Inc. for more than five years as Managing Director.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plan. The Fund also reimburses Putnam
Management for the compensation and related expenses of certain
officers of the Fund and their staff who provide administrative
services to the Fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
MANAGEMENT FEES. Under a Management Contract dated May 7, 1993,
the Fund pays a quarterly fee to Putnam Management based on the
average net assets of the Fund, as determined at the close of
each business day during the quarter, at an annual rate of 0.65%
of the first $500 million of average net assets, 0.55% of the
next $500 million, 0.50% of the next $500 million and 0.45% of
any amount over 1.5 billion.
EXPENSE LIMITATION. In order to limit the Fund's expenses during
its start-up period, Putnam Management has agreed to reduce its
compensation (and, to the extent necessary, absorb other expenses
of the Fund) until December 31, 1994, to the extent that
the Fund's expenses (exclusive of brokerage, interest, taxes,
deferred organizational and extraordinary expenses, and any
payments under the Fund's Distribution Plan) exceed an annual
rate of 1.00% of the Fund's average net assets. For the purpose
of any such reduction in Putnam Management's compensation,
expenses of the Fund shall not reflect the application of
commissions or cash management credits that may reduce designated
Fund expenses. With Trustee approval, this expense limitation
may be terminated earlier, in which event shareholders would be
notified and this Prospectus would be revised.
ORGANIZATION AND HISTORY
Putnam Capital Growth and Income Fund is a Massachusetts business
trust organized on May 5, 1993. A copy of the Agreement and
Declaration of Trust, which is governed by Massachusetts law, is
on file with the Secretary of State of The Commonwealth of
Massachusetts. As of May 31, 1994, Putnam
Investments, Inc. owned 98.8% of the shares of the Fund
and therefore may be deemed to "control" the Fund.
The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Fund may, without shareholder
approval, be divided into two or more series of shares
representing separate investment portfolios. Any such series of
shares may be further divided without shareholder approval into
two or more classes of shares having such preferences and special
or relative rights and privileges as the Trustees determine. The
Fund's shares are not currently divided into series or classes.
Each share has one vote, with fractional shares voting
proportionally. Shares are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the Fund were
liquidated, would receive the net assets of the Fund. The Fund
may suspend the sale of shares at any time and may refuse any
order to purchase shares. Although the Fund is not required to
hold annual meetings of its shareholders, shareholders holding at
least 10% of the outstanding shares entitled to vote have the
right to call a meeting to elect or remove Trustees, or to take
other actions as provided in the Declaration of Trust.
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. You will receive at least 30 days' written
notice before the Fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Fund
may also redeem shares if you own shares above a maximum amount
set by the Trustees. There is presently no maximum, but the
Trustees may establish one at any time, which could apply to both
present and future shareholders.
THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE
CHAIRMAN. Professor of Management, Alfred P. Sloan School of
Management, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management; JOHN A. HILL, Principal and Managing Director, First
Reserve Corporation; ELIZABETH T. KENNAN, President, Mount
Holyoke College; LAWRENCE J. LASSER,* Vice President of the
Putnam funds. President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Management. Director, Marsh
& McLennan Companies.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S. PERKINS,
Director of various corporations, including AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,* President,
New Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief
Executive Officer and Director, Marsh & McLennan Companies, Inc.
and W. NICHOLAS THORNDIKE, Director of various corporations and
charitable organizations, including Providence Journal Co. Also,
Trustee and President, Massachusetts General Hospital and Trustee
of Eastern Utilities Associates. The Fund's Trustees are also
Trustees of the other Putnam funds. Those marked with an
asterisk (*) are "interested persons" of the Fund, Putnam
Management or Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
HOW TO BUY SHARES
You can open a Fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy Fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to the Fund to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
<PAGE>
<TABLE>
<CAPTION>
The public offering price is the net asset value plus a sales charge. The Fund receives
the net asset value. The sales charge varies depending on the size of your purchase and
is allocated between your investment dealer and Putnam Mutual Funds. The current sales
charges are:
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
---------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than $ 50,000 6.10% 5.75% 5.00%
$ 50,000 but less than 100,000 4.71 4.50 3.75
100,000 but less than 250,000 3.63 3.50 2.75
250,000 but less than 500,000 2.56 2.50 2.00
500,000 but less than 1,000,000 2.04 2.00 1.75
- ------------------------------------------------------------------------------------------
* At the discretion of Putnam Mutual Funds, however, the entire sales charge may at
times be reallowed to dealers. The Staff of the Securities and Exchange Commission
has indicated that dealers who receive more than 90% of the sales charge may be
considered underwriters.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
There is no initial sales charge on purchases of $1,000,000 or more. However, Putnam
Mutual Funds pays investment dealers of record commissions on such sales at the rates
shown in the table below. If you redeem such shares within a certain period of time after
purchase, a contingent deferred sales charge ("CDSC") will be imposed as follows:
COMMISSIONS PAID
TO INVESTMENT
DEALERS OF RECORD
AMOUNT OF TRANSACTION AND PERIOD AFTER PURCHASE
AT OFFERING PRICE APPLICABLE CDSC DURING WHICH CDSC APPLIES
------------------------- --------------- -------------------------
<C> <C> <C> <C> <C>
$1,000,000 but less than $2,500,000 1.00% 2 years
2,500,000 but less than 5,000,000 0.50% 1 year
5,000,000 and over 0.25% 1 year
The CDSC is imposed on the lower of the cost or the current net asset value of the shares
redeemed. Putnam Mutual Funds receives the entire amount of any CDSC you pay. Shares
owned by certain tax-qualified retirement plans may be redeemed without charge to pay
benefits. In addition, any shares acquired by reinvestment of distributions will be
redeemed without a CDSC. In determining whether a CDSC is payable, the Fund will first
redeem shares not subject to any charge. See the Statement of Additional Information for
more information about the CDSC.
/TABLE
<PAGE>
YOU MAY BE ELIGIBLE TO BUY FUND SHARES AT REDUCED SALES CHARGES.
Consult your investment dealer or Putnam Mutual Funds for details
about Putnam's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Group Sales Plan, Employee
Benefit Plans and other plans. Descriptions are also included in
the order form and in the Statement of Additional Information.
The Fund may sell shares at net asset value without an initial
sales charge or a CDSC to the Fund's current and retired Trustees
(and their families), current and retired employees (and their
families) of Putnam Management and affiliates, registered
representatives and other employees (and their families) of
broker-dealers having sales agreements with Putnam Mutual Funds,
employees (and their families) of financial institutions having
sales agreements with Putnam Mutual Funds (or otherwise having an
arrangement with a broker-dealer or financial institution with
respect to sales of Fund shares), financial institution trust
departments investing an aggregate of $1 million or more in
Putnam funds, clients of certain administrators of tax-qualified
plans, employee benefit plans of companies with more than 750
employees, tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in Putnam
funds, "wrap accounts" for the benefit of clients of broker-
dealers, financial institutions or financial planners adhering to
certain standards established by Putnam Mutual Funds, and
investors meeting certain requirements who sold shares of certain
Putnam closed-end funds pursuant to a tender offer by the closed-
end fund. In addition, the Fund may sell shares at net asset
value without an initial sales charge or a CDSC in connection
with the acquisition by the Fund of assets of an investment
company or a personal holding company. See the Statement of
Additional Information.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the Fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the Fund
may delay payment until the purchase price of those shares has
been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date.
To eliminate the need for safekeeping, the Fund will not issue
certificates for your shares. Putnam Mutual Funds may, at its
expense, provide additional promotional incentives or payments to
dealers that sell shares of the Putnam funds. In some instances,
these incentives or payments may be offered only to certain
dealers who have sold or may sell significant amounts of shares.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, although the Fund is
not currently making any payments pursuant to the Plan. The
purpose of the Plan is to permit the Fund to compensate Putnam
Mutual Funds for services provided and expenses incurred by it in
promoting the sale of shares of the Fund, reducing redemptions,
or maintaining or improving services provided to shareholders by
Putnam Mutual Funds or dealers. The Plan provides for payments
by the Fund to Putnam Mutual Funds at the annual rate of up to
0.35% of the Fund's average net assets, subject to the authority
of the Fund's Trustees to reduce the amount of payments or to
suspend the Plan for such periods as they may determine. Subject
to these limitations, the amount of such payments and the
specific purposes for which they are made shall be determined by
the Trustees of the Fund. Should the Trustees decide in the
future to approve payments under the Plan, shareholders will be
notified and this Prospectus will be revised.
HOW TO SELL SHARES
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your
investment dealer. The Fund will only repurchase shares for
which it has received payment.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the Fund receives your request in proper form,
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. See the Statement of
Additional Information for additional information about where to
obtain a signature guarantee. Stock power forms are available
from your investment dealer, Putnam Investor Services and many
commercial banks. If you want your redemption proceeds sent to
an address other than your address as it appears on Putnam's
records, a signature guarantee is required. Putnam Investor
Services usually requires additional documentation for the sale
of shares by a corporation, partnership, agent or fiduciary, or a
surviving joint owner. Contact Putnam Investor Services for
details.
THE FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS
DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances,
the Fund may suspend repurchases, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
Account Application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records. Putnam Investor
Services will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, Putnam Investor
Services may be liable for any losses due to unauthorized or
fraudulent instructions. For information, consult Putnam
Investor Services. During periods of unusual market changes and
shareholder activity, you may experience delays in contacting
Putnam Investor Services by telephone in which case you may wish
to submit a written redemption request, as described above, or
contact your investment dealer, as described below. The
Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset
value. Your dealer will be responsible for furnishing all
necessary documentation to Putnam Investor Services, and may
charge for its services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of certain other Putnam
funds at net asset value beginning 15 days after purchase. To
exchange your shares, simply complete an Exchange Authorization
Form and send it to Putnam Investor Services. Exchange
Authorization Forms are available by calling or writing Putnam
Investor Services. For federal income tax purposes, an exchange
is treated as a sale of shares and generally results in a capital
gain or loss. A Telephone Exchange Privilege is currently
available for amounts up to $500,000. Putnam Investor Services'
procedures for telephonic transactions are described above under
"How to sell shares." Ask your investment dealer or Putnam
Investor Services for prospectuses of other Putnam funds. Shares
of certain Putnam funds are not available to residents of all
states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where the Trustees or Putnam Management
believes doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders will be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE BY DIVIDING
THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF
ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF
REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE
EXCHANGE IS OPEN. Portfolio securities for which market
quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly
and any net realized capital gains at least annually.
Distributions from net capital gains are made after applying any
available capital loss carryovers.
YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all
distributions in additional Fund shares without a sales charge;
(2) receive distributions from net investment income and short-
term capital gains in cash while reinvesting long-term capital
gains distributions in additional shares without a sales charge;
or (3) receive all distributions in cash. You can change your
distribution option by notifying Putnam Investor Services in
writing. If you do not select an option when you open your
account, all distributions will be reinvested. You will receive
a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividend Plus accounts) promptly following the quarter in which
reinvestment occurs.
If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or Putnam Investor Services is
returned as "undeliverable," Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. The
Fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
All Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxed as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding
year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your
tax adviser to determine the precise effect of an investment in
the Fund on your particular tax situation (including possible
liability for state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
PUTNAM CAPITAL GROWTH AND INCOME FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA. 02109
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
