PUTNAM
CAPITAL
GROWTH AND
INCOME FUND
SEMIANNUAL REPORT
November 30, 1994
[scales logo]
BOSTON*LONDON*TOKYO
<PAGE>
FROM THE CHAIRMAN:
Dear Shareholder:
As we notified you by mail this month, your Trustees recently voted to
close the Putnam Capital Growth and Income Fund effective January 6,
1995. This report details market activity and fund strategy during
the semiannual period ended November 30, 1994.
The U.S. economy continued along its fast-paced growth track during
the past six months and while major stock market indices were up, they
did not tally any significant gains. The market was also fairly
volatile, as investors greeted each new interest rate hike and
government economic report with either elation or alarm. Health care
and technology stocks faired best, while utility issues and stocks
perceived to be interest-rate sensitive underperformed
significantly.
Size was another important differentiator between winners and
losers. Early interest rate hikes sent investors running for the
relatively safer haven of stocks in larger, well established
companies. Toward the end of the period, however,
smaller-capitalization stocks came around and began to outperform
the large-caps.
This environment was particularly challenging for Putnam Capital
Growth and Income Fund, which held large positions in growth,
utility, and interest-rate sensitive stocks. With broad averages
producing mediocre returns and no strong upward thrust in the market,
growth stocks had no real fuel for outperformance. The fund's high
technology growth stocks were a clear exception, however, and these
issues posted strong returns for the portfolio. In fact, the fund
management team took advantage of some attractive prices to add to
the portfolio's high tech position, particularly in the
telecommunications sector.
Although Putnam Capital Growth and Income Fund will not make the
transition into a nationally marketed vehicle, we are in the process
of adding several new incubated funds to our program - including two
new growth and income funds. By allowing Putnam to continually try
out innovative investment ideas, our incubated fund program makes a
very valuable contribution to our business, and I would like to thank
you for your participation.
Respectfully yours,
/s/ George Putnam
January 18, 1995<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions back into the fund. We show
total return in two ways: on a cumulative long-term basis and
on average how the fund might have grown each year over varying
periods. For comparative purposes, we show how the fund performed
relative to appropriate indexes
and benchmarks.
TOTAL RETURN FOR PERIODS ENDING 11/30/94
Standard Consumer
& Poor's(R) Price
NAV POP 500 Index Index
6 months -1.43% -7.14% 0.86% 1.49%
1 year -1.06 -6.77 1.07 2.68
Life of fund
(since 7/19/93) 6.25 0.14 4.88 3.67
Annual average 4.53 0.10 3.54 2.65
TOTAL RETURN FOR PERIODS ENDING 12/31/94
most recent calendar quarter
NAV POP
6 months 2.13% -3.74%
1 year -3.02 -8.60
Life of fund
(since 7/19/93) 7.18 1.02
Annual average 4.90 0.70
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. Performance data
represent past results; Investment returns and net asset value will
fluctuate so an investor's shares, when sold, may be worth more or
less than their original cost.
<PAGE>
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 common stocks that
is frequently used as a general measure of stock market performance.
The index assumes reinvestment of all distributions and does not take
into account brokerage commissions or other costs.
The fund's portfolio contains securities that do not match those in
the index.
Consumer Price Index is a commonly used measure of inflation;
it does not represent an investment return.<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
November 30, 1994 (unaudited)
Common Stocks (95.4%)(a)
Number of Shares Value
Utilities (17.8%)
1,400 Baltimore Gas & Electric Co.$31,675
1,100 Dominion Resources, Inc. 40,837
1,300 FPL Group, Inc. 45,984
700 GTE Corp. 21,437
900 Ipalco Enterprises, Inc. (b) 27,112
1,000 Ku Energy Corp. 27,125
1,100 LCI International, Inc. (b)24,475
1,000 Northeast Utilities 21,375
700 Pacific Telesis Group 20,300
1,000 Public Service Co.
of Colorado (b) 28,500
2,000 Southern Co. 41,500
800 Union Electric Co. (b) 28,700
1,100 Wisconsin Energy (b) 28,600
--------
387,620
Insurance and Finance (12.9%)
800 BankAmerica Corp. 32,800
500 CIGNA Corp. (b) 31,688
1,000 Chemical Banking Corp. 36,375
900 Citicorp 37,463
900 Dean Witter, Discover & Co. 31,500
600 First Fidelity Bancorp 27,000
1,400 MBNA Corp. (b) 33,075
800 NWNL Companies, Inc. 22,100
1,000 T. Rowe Price Associates 29,250
--------
281,251
Electronics and Electrical Equipment (10.6%)
400 AMP Inc. 28,900
700 Analog Devices Inc. (b) 23,188
700 Applied Materials, Inc. (b) 33,513
300 General Instrument Corp.
New (b) 9,000
300 Hewlett-Packard Co. 29,400
500 Lsi Logic Corp. (b) 21,375
800 Motorola, Inc. 45,100
500 Scientific Atlanta, Inc. 9,875
400 Texas Instruments, Inc. 30,200
--------
230,551
Health Care (6.9%)
1,300 Abbott Laboratories 41,438
1,000 Humana, Inc. (b) 22,375
1,200 Mid Atlantic
Medical Services, Inc. (b) 27,750
400 Pfizer, Inc. 30,950
600 United Healthcare Corp. (b) 28,500
--------
151,013
Common Stocks (continued)
Number of Shares Value
Basic Industrial Products (6.4%)
1,400 Black & Decker
Manufacturing Co. (b) 33,600
800 Caterpillar Inc. 43,200
700 Deere (John) & Co. 44,975
500 York International (b) 17,813
--------
139,588
Chemicals (5.7%)
500 Dow Chemical Co. 32,000
600 Olin Corp. 30,525
900 Praxair, Inc. (b) 18,225
800 Rohm & Haas Co. 44,600
--------
125,350
Oil and Gas (5.5%)
500 Mobil Corp. 42,625
1,000 Phillips Petroleum Co. 33,000
400 Royal Dutch Petroleum Co.
ADR (c) 43,450
--------
119,075
Consumer Non Durables (5.2%)
800 Philip Morris Cos., Inc. 47,800
700 Premark International, Inc. 31,850
500 Scott Paper Co. (b) 32,625
--------
112,275
Consumer Services (4.5%)
800 Block (H & R), Inc. 27,700
500 CBS Inc. 27,750
1,450 Comcast Corp. Special Class A 23,019
800 Marriott International, Inc. (b) 21,000
-------
99,469
Conglomerates (3.6%)
500 TRW, Inc. 31,750
800 United Technologies Corp. 46,800
78,550
Food and Beverages (3.2%)
1,100 ConAgra, Inc. 33,963
1,100 IBP., Inc. (b) 36,988
-------
70,951
Business Equipment and Services (3.2%)
1,300 DSC Communications Corp. (b) 40,625
900 HBO & Co. 28,463
69,088
Common Stocks (continued)
Number of Shares Value
Retail (2.8%)
900 Penney (J.C.) Co., Inc. 41,400
600 Pep Boys - Manny Moe & Jack 19,425
-------
60,825
Transportation (1.7%)
700 Conrail Inc. 36,400
Building and Construction (1.5%)
800 Armstrong World Industries, Inc. 32,000
Environmental Control (1.4%)
1,100 Browning-Ferris Industries, Inc. 29,700
Telecommunications (0.9%)
700 Airtouch Communications, Inc. (b) 18,988
Real Estate (0.8%)
1,000 Avalon Properties, Inc. 18,250
Forest Products (0.8%)
400 Consolidated Papers, Inc. 17,800
Total Common Stocks
(cost $2,119,237) $ 2,078,744
Short-Term Investments (4.7%)(a)
(cost $102,016)
Principal Amount Value
$102,016 Interest in $500,000,000 joint
repurchase agreement dated
November 30, 1994 with Bankers
Trust due December 1, 1994
with respect to various U.S. Treasury
Obligation - maturity value of
$102,016 for an effective yield
of 5.75%. $ 102,016
Total Investments
(cost $2,221,253) (e) $ 2,180,760
Notes
(a) Percentages indicated are based on total net assets of
$2,178,183,which correspond to a net asset value per share of $8.97.
(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 tax basis is $2,221,604,
resulting in gross unrealized appreciation and depreciation of
$101,554 and $142,398, respectively, or net unrealized depreciation
of $40,844.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1994 (Unaudited)
ASSETS
Investments in securities at value (identified cost $2,221,253)
(Note 1) $2,180,760
Cash 578
Dividends receivable 7,555
Receivable from Manager 2,761
Unamortized organization expenses (Note 1) 12,383
TOTAL ASSETS 2,204,037
LIABILITIES
Payable for administrative services (Note 2) 17
Payable for investor servicing and custodian fees (Note 2) 2,144
Payable for organization expense (Note 1) 17,091
Other accrued expenses 6,602
TOTAL LIABILITIES 25,854
NET ASSETS 2,178,183
REPRESENTED BY
Paid-in capital (Note 4) $2,071,148
Undistributed net investment income 38,408
Accumulated net realized gain on investment 109,120
Net unrealized depreciation of investments (40,493)
TOTAL - REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $2,178,183
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per share
($2,178,183 divided by 242,874 shares) $8.97
Offering price per share (100/94.25 of $8.97)* $9.52
* 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.<PAGE>
STATEMENT OF OPERATIONS
For the six months ended November 30, 1994 (Unaudited)
INVESTMENT INCOME
Dividends (net of foreign tax of $131) $31,274
Interest 27
TOTAL INVESTMENT INCOME 31,301
EXPENSES:
Compensation of Manager (Note 2) 7,423
Investor servicing and custodian fees (Note 2) 3,702
Compensation of Trustees (Note 2) 744
Reports to shareholders 10
Auditing 4,125
Legal 8,383
Administrative services (Note 2) 22
Amortization of organization expenses (Note 1) 1,713
Fees waived and other expenses absorbed by Manager (Note 2) (15,769)
TOTAL EXPENSES 10,353
NET INVESTMENT INCOME 20,948
Net realized loss on investments (Notes 1 and 3) (35,103)
Net unrealized depreciation of investments (17,421)
NET LOSS ON INVESTMENTS (52,524)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(31,576)
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period
July 19, 1993
Six months (commencement
ended of operations) to
November 30 May 31
1994** 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $20,948 $34,792
Net realized gain (loss) on investments (35,103) 144,150
Net unrealized depreciation of investments (17,421) (23,072)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (31,576) 155,870
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (20,207)
Net realized gain on investments - -
Increase from capital share transactions (Note 4) 29,267
44,607
Total increase (decrease) in net assets (2,309) 180,270
NET ASSETS:
Beginning of period 2,180,492 2,000,222
End of period (including undistributed
net investment income of $38,408 and
$17,460, respectively.) $2,178,183 $2,180,492
<FN>
** Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
<TABLE><CAPTION>
For the period
Six months July 19, 1993
ended (commencement
November 30 of operations) to
1994** May 31, 1994*
<S> <C> <C>
Net asset value, beginning of period $9.10 $8.52
INVESTMENT OPERATIONS
Net investment income .09 .15(c)
Net realized and unrealized
gain (loss) on investments (.22) .52
TOTAL FROM INVESTMENT ACTIVITIES (.13) .67
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (.09)
Net realized gain on investments - -
TOTAL DISTRIBUTIONS - (.09)
NET ASSETS VALUE, END OF PERIOD $8.97 $9.10
Total investment return at
net asset value (%)(a) -1.43 7.79(b)
NET ASSETS, END OF PERIOD (IN THOUSANDS) $2,178 $2,180
Ratio of expenses to average net assets (%) .47(b)(c) .94(b)(c)
Ratio of net investment income
to average net assets (%) .95(b)(c) 1.84(b)(c)
Portfolio turnover (%) 45.60(b) 76.75(b)
<FN>
* See Note 2
** Unaudited.
(a) Total investment return assumes dividend reinvestment and does not
reflect
the effects of sales charges.
(b) Not annualized.
(c) Reflects a waiver of the management fee for the period July 19, 1993
to
May 31, 1994 and for the period June 1, 1994 to November 30, 1994. As a result
of such waiver, expenses
of the fund for the period ended May 31, 1994 and November 30, 1994 reflect a
reduction
of approximately $0.11 and $0.07 per share, respectively. See Note 3.
/TABLE
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1994 (Unaudited)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company.
The fund seeks capital 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. <PAGE>
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.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
G Unamortized organization expenses Expenses incurred by the fund
in connection with its organization, its registration with the
Securities and Exchange Commission and with various state and the
initial public offering of its shares aggregated $17,091. These
expenses are being amortized by the fund on a straight-line basis
over a five-year period.
NOTE 2
MANAGEMENT FEE,
ADMINISTRATIVE
SERVICES, AND
OTHER TRANSACTIONS
Compensation of 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 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 and by a reimbursement to the fund by the Manager. As a result
of the expense limitation, expenses for the period ended
November 30, 1994 were reduced by $15,769.
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.
Trustees of the fund receive an annual Trustee's fee of $100 and an
additional fee for each Trustees' meeting attended. Trustees who are
not interested persons of the Manager and who serve on committees of
the Trustees receive additional fees for attendance at certain
committee meetings.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc. Investor servicing agent functions were provided by Putnam
Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of
Operations for the period ended November 30, 1994 have been reduced
by credits allowed by PFTC. For the period ended November 30, 1994,
these credits amounted to $2,377.<PAGE>
Although a distribution 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.
During the period ended November 30, 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 November 30, 1994, Putnam Mutual Funds
Corp., acting as underwriter, received no monies on
redemptions.
NOTE 3
PURCHASES AND
SALES OF SECURITIES
During the period ended November 30, 1994, purchases and sales of
investment securities other than short-term investments
aggregated $969,227 and $961,969, respectively. In determining the net
gain or loss on securities sold, the cost of securities
has been determined on the identified cost basis.
NOTE 4
CAPITAL SHARE
At November 30, 1994, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares
were as follows:
<TABLE> <CAPTION>
For the period
July 19, 1993
Year ended (commencement of
November 30 operations) to
1994 May 31, 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,529 32,651 6,598 $59,644
Shares issued in connection with
reinvestment of distributions - - - -
3,529 32,651 6,598 59,644
Shares repurchased (371) (3,384) (1,652) (15,037)
Net increase (decrease) 3,158 $29,267 4,946 $44,607
</TABLE>
<PAGE>
NOTE 5
SUBSEQUENT EVENT
In January the Trustees of the Putnam Capital Growth and Income Fund
voted to close the Fund effective January 6, 1995. The Fund's assets
are expected to be converted to cash and cash equivalents and
distributed on February 6, 1995.<PAGE>
FUND INFORMATION
INVESTMENT
MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust
Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John R. Verani
Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuck
Vice President
John J. Morgan, Jr.
Vice President
James F. Giblin
Vice President
and Fund Manager
David J. Santos
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, and operating
policies of the fund, and the most recent copy of Putnam's Quarterly
Performance Summary.
