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Putnam
Capital
Growth and
Income Fund
Annual Report
May 31, 1994
(Putnam logo)
BOSTON*LONDON*TOKYO
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Performance highlights
For the period 7/19/93-5/31/94, the fund's return was 7.04% at
net asset value, while the average for the 306 funds in the
Lipper Growth and Income category was 5.58%.*
Performance should always be considered in light of a fund's
investment strategy. Putnam Capital Growth and Income Fund is
designed for investors seeking capital growth and current income
primarily from a portfolio of common stocks.
FISCAL 1994 RESULTS AT A GLANCE
Total return: NAV POP
(change in value during
period ended 5/31/94 plus
reinvested distributions)
Life of fund(1) 7.04% 0.92%
Share value: NAV POP
7/19/93(1) $8.52 $9.04
5/31/94 9.10 9.66
Distributions: Number Income Capital Total
gains
1 $0.085 - $0.085
PERIOD ENDED 6/30/94
(most recent calendar quarter)
Total return: NAV POP
(change in value during period
plus reinvested distributions)
Life of Fund(1) 4.22% -1.74%
Performance data represent past results and reflect an expense
limitation currently in effect. Without the limitation, total
return and yield would have been lower. Investment return and net
asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. For
comparative performance, see pages 8. POP assumes 5.75% maximum
sales charge.
(1) The fund began investment operations on 7/19/93.
* Lipper rankings vary over time and do not include the effects
of sales charges.
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From the Chairman
Dear Shareholder:
As we move into the second half of 1994, preliminary evidence
suggests that the Federal Reserve Board's less accommodating
monetary policy, coupled by the growth-retarding effects of last
year's tax increase, are being felt. Durable goods orders,
consumer spending, and disposable income have slowed
substantially and other leading indicators of economic activity
are beginning to flatten out. We expect this trend to continue.
If by year end economic growth is slowing substantially more than
many observers now expect, the stock market's attention would
shift toward the longevity of the business cycle and prospects
for corporate earnings. At that point, the market would be
susceptible to another adjustment as investors reassess prospects
for corporate earnings in general.
Although always an important element in Putnam's management
process, stock selection, sector analysis, and fundamental
research will play a more important role than usual in your
fund's performance in this environment. With access to Putnam's
considerable research capability, Fund Manager James Giblin is
well equipped to guide your fund through the unfolding events of
coming months.
Respectfully yours,
George Putnam
Chairman of the Trustees
July 20, 1994
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Report from the fund manager
James F. Gilbin
Putnam Capital Growth and Income Fund concluded its 10-month
initial fiscal period on May 31, 1994, on a positive note,
outperforming the overall stock market with a total return of
7.04% at net asset value. A fund's first annual period can be one
of the most challenging times of its entire operating history,
which makes these initial results particularly gratifying.
MARKET STABILITY: CONSIDER THE EVIDENCE
Despite headlines concerning the gyrations of the Dow Jones
Industrial Average in recent weeks and months, a longer-term
perspective shows that the stock market has actually remained
relatively stable throughout the past 12 months. In fact, during
1992 and 1993, the market exhibited some of its lowest volatility
in the post-World War II era. The Standard & Poor's 500(R) - a
market capitalization-weighted index of 500 stocks that we
consider a more accurate market barometer than the 30-stock,
dollar-weighted Dow average - registered a modest 9.9% price gain
over the past 24 months.
Of course, within this relatively calm environment, there were
strong and weak performers. With the U.S. economy on the upswing,
economically sensitive issues such as automobile stocks performed
exceptionally well for much of the year. Smaller-capitalization
stocks, particularly high-technology issues, also tallied strong
performance. Meanwhile, low interest rates continued to buoy
returns from utility stocks.
Late in the calendar year, however, the scenario changed.
Investors sensed that the economy was kicking into high gear as
automobile sales, housing starts, and other leading economic
indicators moved up. Then, the Federal Reserve Board raised
short-term interest rates in a preemptive strike against
anticipated inflation - but investors reacted as if inflation had
already emerged.
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Consequently, stocks that had been market leaders earlier, such
as utilities, capital goods, and smaller-capitalization growth
stocks, began to underperform. Eventually, even high-technology
stocks felt the shift. The market ended the period in a holding
pattern, waiting for signs that interest rates were stabilizing
and economic growth was slowing to a more moderate pace.
FOUR-PART STRATEGY CONTINUES
Your fund's positive performance over this first annual period
reflects the overall success of our four-part investment
strategy. Basically, this strategy blends individual stock
selections with weightings across four distinct yield categories
encompassing a wide variety of industry sectors. These yield
categories are:
*High-yielding stocks with limited growth potential, generally
electric utility stocks
*Yield-oriented stocks with greater growth potential than we
would generally expect from utilities, often energy-related
stocks that may benefit from recent corporate restructuring and
cost containment programs
*Stocks whose dividend yield is relatively close to that of the
S&P 500 but whose growth potential we believe is substantially
higher; these may include undervalued "comeback" stocks or
classic growth-and-income holdings
*True growth stocks with little or no dividend earnings potential
GROWTH BIAS PAYS OFF
Within the universe of growth and income funds, this fund is
currently weighted in favor of growth. Our current strategy is to
seek greater upside potential from the growth sector of the
market, which we view as undervalued, while seeking to provide
some measure of the downside protection that leads so many
conservative investors to choose growth and income funds.
This growth bias produced rewarding returns in the past 12
months. In fact, it was the fund's true growth holdings which
drove performance, with high-tech and capital goods holdings
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such as Hewlett-Packard, Caterpillar, and Intel Corporation
contributing particularly strong gains. We believe these holdings
should have the potential to appreciate further in the months
ahead as they benefit from the growing economy, increased demand,
and internal corporate restructuring.
GOING FOR MORE GROWTH
In the last six weeks of the period, growth stocks began to
underperform the market. We took this opportunity to add more
growth holdings to the portfolio, capitalizing on attractive
valuations. In the high-technology sector, we picked up new
stocks in two telecommunications companies: DSC Communications
and Newbridge Network.
Going forward, the demand for high-tech products should be high,
particularly for semiconductors, software, and networking
equipment related to personal computers (PCs). With corporate
downsizing and restructuring, PCs have become integral
productivity enhancements in today's competitive business
environment. Many U.S. businesses have yet to embrace the
technology bandwagon, and foreign businesses are at least two
years behind the United States in this trend.
PUMPING UP INCOME
We have also been adding to our higher-yielding stocks in recent
months, making the fund's portfolio a bit more concentrated at
the growth and income ends. The year's interest rate changes
produced a 20% decline in electric utilities stock prices.
We took advantage of excellent values to bolster the fund's
income-producing potential by acquiring several new holdings
including Texas Utilities and FPL Group (Florida Power & Light).
The new holdings have a history of providing attractive,
consistent dividends, and, since utilities stock prices appear to
have bottomed, they may even provide some capital growth ahead.
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STOCK SELECTION STILL KEY
While popular sentiment warns of an overvalued stock market, we
do not necessarily agree. For, while companies have experienced
significant earnings growth over the last year or so, their stock
prices have not risen in step. Among growth stocks, this
situation has produced some excellent buying opportunities for
your fund and we continue to find good values.
Once investors gain comfort with the future direction of
inflation, interest rates, and the economy, we believe the
conditions will be right for continued stock market growth. In a
growing stock market, your fund's growth stock holdings should
once again become the driving force behind performance. In the
meantime, the fund is well positioned to build long-term total
return through healthy dividend earnings.
The views expressed here are exclusively those of Putnam
Management. They are not meant as investment advice. Although the
described holdings were viewed favorably as of May 31, 1994,
there is no guarantee the fund will continue to hold these
securities in the future.
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Performance summary
(line graph)
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 7/19/93
Fund shares at POP *****
Standard & Poor's 500 Index .....
Fund shares at NAV _____
Consumer Price Index =====
Plot points:
(date/year) (CPI) (S&P fund at fund at
500) NAV POP
7/19/93 10000 10000 10000 9425
7/31/93 10000 10047 10000 9425
8/31/93 10028 10393 10443 9846
9/30/93 10048 10361 10583 9978
10/31/93 10090 10562 10734 10121
11/30/93 10097 10426 10664 10055
12/31/93 10097 10600 10974 10347
1/31/94 10125 10945 11468 10813
2/28/94 10159 10616 11245 10602
3/31/94 10194 10202 10716 10103
4/30/94 10208 10320 10904 10281
5/31/94 10215 10447 10704 10092
* Performance data represent past results and reflect an expense
limitation currently in effect. Without the limitation, total
return and yield would have been lower. Investment return and net
asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not including any initial or contingent deferred sales
charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales
charge.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of
large-capitalization common stocks and assumes reinvestment of
all distributions. The index does not take into account brokerage
commissions or other costs. The fund's portfolio contains
securities that do not match those in the index.
Consumer Price Index (CPI) is a commonly used measure of
inflation; it does not represent investment return.
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Report of independent accountants
For the period ended May 31, 1994
To the Trustees and Shareholders of Putnam Capital Growth
and Income Fund
We have audited the accompanying statement of assets and
liabilities of Putnam Capital Growth and Income Fund, including
the portfolio of investments owned, as of May 31, 1994, and the
related statements of operations, and changes in net assets, and
the "Financial Highlights" for the period July 19, 1993
(commencement of operations) to May 31, 1994. These financial
statements and "Financial Highlights" are the responsibility of
the fund's management. Our responsibility is to express an
opinion on these financial statements and "Financial Highlights"
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and "Financial Highlights" are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of May 31, 1994, by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and "Financial
Highlights" referred to above present fairly, in all material
respects, the financial position of Putnam Capital Growth and
Income Fund as of May 31, 1994, and the results of its
operations, the changes in its net assets, and the "Financial
Highlights" for the period July 19, 1993 (commencement of
operations) to May 31, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand
Boston, Massachusetts
July 20, 1994
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Portfolio of investments owned
May 31, 1994
Common Stocks (97.5%)(a)
Number of Shares Value
Insurance and Finance (16.3%)
1,000 Aetna Life & Casualty Co. $ 54,125
1,000 Beneficial Corp. 36,875
1,200 Chemical Banking Corporation 46,050
1,000 Citicorp 39,500
900 Dean Witter Discover & Co. 35,100
600 First Fidelity Bancorp 27,600
400 First Interstate Bancorp 32,000
700 Lincoln National Corp. 28,963
800 NWNL Companies, Inc. 25,700
1,000 T. Rowe Price Associates 30,187
356,100
Utilities (13.4%)
1,400 Baltimore Gas & Electric Co. 31,850
1,100 Dominion Resources, Inc. 43,450
1,300 FPLGroup, Inc. 41,275
700 GTECorp. 21,613
2,200 Northeast Utilities 50,050
700 Pacific Telesis Group 21,263
2,000 Southern Co. 37,000
1,400 Texas Utilities Co. 46,200
292,701
Electronics and Electrical Equipment (11.8%)
700 Analog Devices Inc. (b) 19,600
1,800 DSC Communications Corp. (b) 40,050
900 General Electric Co. 44,663
500 Hewlett-Packard Co. 39,250
700 Intel Corp. 43,750
800 Motorola, Inc. 37,400
400 Texas Instruments, Inc. 32,100
256,813
Oil and Gas (8.1%)
600 Apache Corp. 16,275
600 Chevron Corp. 52,200
600 Mobil Corp. 48,600
200 Royal Dutch Petroleum
Co. ADR (c) 21,375
600 Texaco Inc. 38,100
176,550
Health Care (7.3%)
1,300 Abbott Laboratories 38,837
900 American Home Products Corp. 52,200
400 Bristol-Myers Squibb Co. 21,850
400 Pfizer, Inc. 25,500
500 Value Health, Inc. (b) 21,687
160,074
Common Stocks (continued)
Number of Shares Value
Basic Industrial Products (6.6%)
700 Applied Materials, Inc. (b) 30,537
600 Caterpillar, Inc. 64,125
700 Deere (John) & Co. 48,825
143,487
Consumer Services (4.0%)
600 Block (H & R), Inc. 25,575
100 CBS Inc. 26,100
200 Caesars World Inc. (b) 7,825
1,400 Mirage Resorts, Inc. (b) 27,475
86,975
Retail(3.7%)
1,100 Penney (J.C.) Co., Inc. 56,237
600 Walgreen Co. 24,525
80,762
Conglomerates(3.0%)
1,000 United Technologies Corp. 66,375
Automotive(3.0%)
1,200 General Motors Corp. 64,500
Consumer Non Durables(2.9%)
700 Avon Products, Inc. 41,213
300 Premark International, Inc. 21,300
62,513
Business Equipment and Services(2.6%)
700 Newbridge Networks Corp. (b) 32,287
900 Wellfleet Communications, Inc. 24,075
56,362
Consumer Durable Goods(2.2%)
900 Whirlpool Corp. 48,263
Food and Beverages(2.0%)
900 CPC International Inc. 43,650
Real Estate(1.8%)
1,700 Avalon Properties, Inc. 39,525
Building and Construction(1.8%)
800 Armstrong World Industries, Inc. 39,000
Transportation(1.8%)
700 Conrail Inc. 38,413
Chemicals(1.7%)
600 Rohm & Haas Co. 36,525
Broadcasting(1.5%)
1,850 Comcast Corp. Special Class A 32,259
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Common Stocks (continued)
Number of Shares Value
Environmental Control(1.2%)
900 Browning-Ferris Industries, Inc. 26,100
Telecommunications(0.8%)
700 Airtouch Communications (b) 17,063
Total Common Stocks
(cost $2,147,082) $2,124,010
Short-Term Investments (4.1%)(a)(cost $89,010)
Principal Amount Value
$ 89,000 Interest in $489,000,000
repurchase agreement dated
May 31, 1994 with Kidder
Peabody & Co.,Inc., due
June 1, 1994 with respect to
various U.S. Treasury obligations-
maturity value of $89,010
for an effective yield
of 4.24% $ 89,010
Total Investments
(cost $2,236,092)(d) $ 2,213,020
Notes
(a) Percentages indicated are based on total net assets of
$2,180,492,which correspond to a net asset value per share of
$9.10.
(b) Non-income-producing security.
(c) Securities whose value is determined or significantly
influenced by trading or exchanges not in the Unitied States or
Canada. ADR after the name of foreign holding stands for American
Depository Receipt, representing ownership of foreign securities
on deposit with a domestic custodian bank.
(d) The aggregate identified cost on a federal income tax basis
is $2,236,222, resulting in gross unrealized appreciation and
depreciation of $111,757 and $134,959, respectively, or net
unrealized depreciation of $23,202.
The accompanying notes are an integral part of
these financial statements.
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Statement of assets and liabilities
May 31, 1994
Assets
Investments in securities at value (identified
cost $2,236,092) (Note 1) $2,213,020
Cash 930
Dividends receivable 9,105
Receivable for fund shares sold 52
Receivable from Manager (Note 3) 14,853
Unamortized organization expenses (Note 1) 14,096
Total assets 2,252,056
Liabilities
Payable for securities purchased $32,665
Payable for administrative service (Note 3) 5
Payable for compensation of Manager (Note 3) 12,326
Payable for investor servicing and custodian fees (Note 3)3,012
Payable for organization expense (Note 1) 17,091
Other accrued expenses 6,465
Total liabilities 71,564
Net assets $2,180,492
Represented by
Paid-in capital (Note 5) $2,041,881
Undistributed net investment income 17,460
Accumulated net realized gain on investment 144,223
Net unrealized depreciation of investments (23,072)
Total - Representing net assets applicable to
capital shares outstanding $2,180,492
Computation of net asset value and offering price
Net asset value and redemption price per share
($2,180,492 divided by 239,716 shares) $9.10
Offering price per share (100/94.25 of $9.10)* $9.66
* On single retail sales of less than $50,000. On sales of
$50,000 or more and on group sales the offering price is reduced.
The accompanying notes are an integral part of these financial
statements.
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Statement of operations
For the period July 19, 1993 (commencement of operations) to May
31, 1994 *
Investment income
Dividends (net of foreign tax of $154) $49,773
Interest 2,983
Total investment income 52,756
Expenses:
Compensation of Manager (Note 3) $12,326
Investor servicing and custodian fees (Note 3) 5,356
Compensation of Trustees (Note 3) 559
Reports to shareholders 130
Auditing 12,688
Legal 10,404
Postage94
Administrative services (Note 3) 35
Amortization of organization expenses (Note 1) 2,995
Registration fee 823
Other expenses 25
Fees waived and other expenses absorbed
by Manager (Note 3) (27,471)
Total expenses 17,964
Net investment income 34,792
Net realized gain on investments (Notes 1 and 4) 144,150
Net unrealized depreciation of investments (23,072)
Net gain on investment 121,078
Net increase in net assets resulting from operations $155,870
*See Note 2
The accompanying notes are an integral part of these financial
statements.
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Statement of changes of net assets
For the period
July 19, 1993
(commencement of operations)
to May 31,
1994*
Increase in net assets
Operations:
Net investment income $34,792
Net realized gain on investments 144,150
Net unrealized depreciation of investments (23,072)
Net increase in net assets resulting from operations 155,870
Distributions to shareholders from:
Net investment income (20,207)
Net realized gain on investments -
Increase from capital share transactions (Note 5) 44,607
Total increase in net assets 180,270
Net Assets:
Beginning of period 2,000,222
End of period (including undistributed net
investment income of $17,460) $2,180,492
*See Note 2
The accompanying notes are an integral part of these financial
statements.
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Financial Highlights
(For a share outstanding throughout the period)
For the period
July 19, 1993
(commencement
of operations) to
May 31, 1994
Net Asset Value, Beginning of Period $8.52
Investment Operations
Net Investment Income .15(d)
Net Realized and Unrealized Gain (Loss) on Investments .52
Total from Investment Activities .67
Distributions to Shareholders:
From Net Investment Income (.09)
From Net Realized Gain on Investments -
Total Distributions (.09)
Net Asset Value, End of Period $9.10
Total Investment Return at Net Asset Value(%) (a)(b) 8.09%(b)
Net Assets, End of period (in thousands) $2,180
Ratio of Expenses to Average Net Assets (%) .95(b)(d)
Ratio of Net Investment Income to Average
Net Assets (%) 1.84(b)(d)
Portfolio Turnover (%) 76.75(c)
* See Note 2
(a) Total Investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(b) Annualized
(c) Not annualized
(d) Reflects a waiver of the management fee for the period July
19, 1993 to May 31, 1994. As a result of such waiver, expenses of
the fund for the period ended May 31, 1994 reflected a reduction
of approximately $0.11 per share. See Note 3.
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Notes to financial statements
May 31, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940,
as amended, as a diversified open-end management investment
company. The fund seeks capital growth and current income by
investing primarily in common stocks that offer potential for
capital growth, current income or both.
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
A Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported-
as in the case of some securities traded over the counter - the
last reported bid price, except that certain U.S. government
obligations are stated at the mean between the bid and asked
prices. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates
market value, and other investments are stated at fair value
following procedures approved by the Trustees.
B Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the fund may transfer
uninvested cash balances into a joint trading account, along with
the cash and certain other accounts of other registered
investment companies managed by Putnam Investment Management Inc.
(Putnam Management), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc. These balances may be
invested in one or more repurchase agreements and/or short-term
money market instruments.
C Repurchase agreements The fund, through its custodian,
receives delivery of the underlying securities, the market value
of which at the time of purchase is required to be in an amount
at least equal to the resale price, including accrued interest.
The fund's Manager is responsible for determining that the value
of these underlying securities is at all times at least equal to
the resale price, including accrued interest.
D Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are
recorded as soon as the fund is informed of the ex-dividend date.
E Federal income taxes It is the policy of the fund to
distribute all of its income within the prescribed time and
otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. It is also the
intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986. Therefore, no provision has been made for
federal taxes on income, capital gains or unrealized appreciation
of securities held and excise tax on income and capital gains.
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F Distributions to shareholders Distributions to shareholders
are recorded by the fund on the ex-dividend date. Permanent book
and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital.
G Unamortized organization expenses Expenses incurred by the
fund in connection with its organization, its registration with
the Securities and Exchange Commission and with various state and
the initial public offering of its shares aggregated $17,091.
These expenses are being amortized by the fund on a straight-line
basis over a five-year period.
Note 2
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust under
the laws of Massachusetts on May 5, 1993.
During the period May 5, 1993, to July 16, 1993, the fund had no
operations other than those related to organizational matters,
including the initial capital contribution of $100,000 and the
issuance of 11,765 shares to Putnam Investments, a wholly-owned
subsidiary of Putnam Investments, Inc. on June 10, 1993. On July
15, 1993 Putnam Investments made a subsequent capital
contribution of $1,900,000 and was issued 223,005 shares. During
the period June 10, 1993 to July 16, 1993, invested initial
capital resulted in interest income of $222. Regular investment
operations commenced on July 19, 1993.
At May 31, 1994, Putnam Investments owned 236,934 shares
outstanding of the fund, valued at $2,156,099.
Note 3
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net
assets of the fund for the quarter. Such fee is based on the
following annual rates: 0.65% of the first $500 million of
average net assets, 0.55% of the next $500 million, 0.5% of the
next $500 million, 0.45% of any amount over $1.5 billion, subject
to reduction in any year to the extent that expenses (exclusive
of distribution fees, brokerage, interest and taxes) of the fund
exceed 2.5% of the first $30 million of average net assets, 2.0%
of the next $70 million and 1.5% of any amount over $100 million
and by the amount of certain brokerage commissions and fees (less
expenses) received by affiliates of the Manager on the fund's
portfolio transactions.
Until December 31, 1994 the Manager voluntarily agreed to reduce
its compensation and absorb expenses of the fund to the extent
that expenses of the fund exceed 1.0% of the fund's average net
assets. The fund's expenses subject to this limitation are
exclusive of brokerage, interest, taxes, insurance, amortization
of deferred organization expenses and extraordinary expenses, if
any, and expenses incurred under the fund's distribution plan
described below. This limitation was accomplished by a reduction
of the compensation payable under the management contract to the
Manager. As a result of the voluntary limitation, expenses for
the period ended May 31, 1994 were reduced by $27,471
The fund also reimburses the Manager for the compensation and
related expenses of certain officers of the fund and their staff
who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For the period ended May 31, 1994, the fund paid $35
for these services.
Trustees of the fund receive an annual Trustee's fee of $100 and
an additional fee for
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each Trustees' meeting attended. Trustees who are not interested
persons of the Manager and who serve on committees of the
Trustees receive additional fees for attendance at certain
committee meetings.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions were
provided by Putnam Investor Services, a division of PFTC. Fees
paid for these investor servicing and custodial functions for the
period ended May 31, 1994 amounted to $5,356.
Investor servicing and custodian fees reported in the Statement
of Operations for the period ended May 31, 1994 have been reduced
by credits allowed by PFTC.
Although a distrbution plan has been adopted under Rule 12b-1 of
the Investment Company Act of 1940, the fund is not currently
making any payments pursuant to the plan. For the period ended
May 31, 1994, the fund paid no monies in distribution fees.
During the period ended May 31, 1994, Putnam Mutual Funds Corp.,
acting as an underwriter, received no net commissions from the
sale of shares of the fund.
A deferred sales charge of up to 1.00% is assessed on certain
redemptions of shares purchased as part of an investment of $1
million or more. For the period ended May 31, 1994, Putnam Mutual
Funds, acting as underwriter, received no monies on redemptions.
Note 4
Purchases and sales of securities
During the period ended May 31, 1994, purchases and sales of
investment securities other than short-term investments
aggregated $3,535,319 and $1,532,388, respectively. In
determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
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Note 5
Capital shares
At May 31, 1994, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
For the period
July 19, 1993
(commencement of
operations) to
May 31, 1994
Shares Amount
Shares sold 6,598 $59,644
Shares issued in connection
with reinvestment of distributions - -
6,598 59,644
Shares repurchased (1,652) (15,037)
Net increase 4,946 $44,607
Federal tax information
For federal income tax purposes, distributions from net
investment income of $.09 constitute "dividend income." The fund
has designated 26.89% of the distributions as qualifying for the
dividends-received deductions for corporations.
The Form 1099 you receive in January 1995 will show the tax
status of all distributions paid to your account in calendar
1994.
If you are a shareholder in an IRA or other tax-sheltered
retirement plan, this statement is for information only and will
serve as a record of distributions reinvested in your account
during the fiscal year. Money invested in these plans generally
is not subject to federal income tax until you withdraw it.
As required by law, your fund reports to the Internal Revenue
Service on a calendar year basis the amount of distributions paid
to each shareholder.
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Fund information
INVESTMENT
MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
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OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Gary N. Coburn
Vice President
James F. Giblin
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information
of shareholders of Putnam Capital
Growth and Income Fund. It may
also be used as sales literature when
preceded or accompanied by the
current prospectus, which gives
details of sales charges, investment
objectives, operating policies of the
fund and the most recent Putnam
Quarterly Performance Summary.
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APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers) are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.