Putnam
Capital
Opportunities
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam Capital Opportunities Fund reached the midpoint of its second
fiscal year on a positive note as a shift in portfolio emphasis began to
take hold. Getting a new fund up and running is challenging under the best
of circumstances; doing so in a market environment as volatile as it has
been in recent years takes an extra measure of fortitude.
While the results for the six months ended October 31, 1999, are
promising, given the fund's short history they should not be taken as a
definitive measure of its potential. In the following report, your fund's
managers provide a detailed account of the market environment during the
period, discuss some of the key portfolio shifts, and then offer their
thoughts on prospects for the fiscal year's second half.
I am pleased to announce the appointment of Sandeep Mehta as a manager of
your fund. Sandy is a member of the Global Core Equity Group. Before
joining Putnam in 1996, he was with Wellington Management Co. and Ariel
Capital Management. He has 11 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 15, 1999
Report from the Fund Managers
Joseph P. Joseph
Sandeep Mehta
Putnam Capital Opportunities Fund's performance continued to improve
during its second fiscal year, thanks to an emphasis on strong, growing
sectors and a shift out of weaker areas. The six months ended October 31,
1999, represented a volatile time for U.S. equity markets. Shortly after
the fund's fiscal year began, the Dow Jones Industrial Average surged past
the 11,000 barrier, a little more than a month after breaking 10,000 --
the fastest 1,000-point gain in its history. However, shortly before the
close of the period, the Dow had plummeted back below 10,000 and was 11.5%
below its all-time high, signaling an official market correction. Federal
Reserve Board interest-rate increases on June 30 and August 24 were
largely responsible for investor jitters and market volatility. In the
meantime, small-company stocks -- those in which your fund invests --
remained overshadowed by large-company stocks. At the end of the period,
the Russell 2000 Index, a measure of small-company stock performance and
your fund's benchmark, had increased only 0.20% for the calendar year.
Despite the lackluster returns from its target sector, your fund benefited
from its focus on several strong performing stocks in fast-growing
industries.
Total return for 6 months ended 10/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------
2.73% -3.16% 2.37% -2.63% 2.35% 1.35% 2.36% -1.20%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* TECHNOLOGY RALLY BOOSTS PERFORMANCE
In our last report, we discussed our shift in emphasis from defensive
sectors to a broader range of stocks that we believe offered stronger
growth potential. We began to see the benefits of this strategy during
this semiannual period, especially among the fund's technology holdings.
Three days after the close of the period, the Nasdaq Composite Index, a
common measure for technology stock performance, closed above 3,000 for
the first time in its history, followed by seven consecutive record closes
as tech stocks continued to hurtle past all other sectors.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 20.5%
Electronics and
electric equipment 14.6%
Telecommunications 10.5%
Computer services
and software 8.9%
Oil and gas 6.1%
Footnote reads:
*Based on net assets as of 10/31/99. Holdings will vary over time.
Among your fund's technology holdings, the stock of Rational Software is
worth noting. This company provides software and testing tools that help
companies adapt their businesses for e-commerce. Businesses using Rational
Software's products and services are able to develop software applications
quickly enough to keep pace with the growth of the Internet. The company's
growth potential is boosted further by its strategic alliances with IBM
and Microsoft. Microchip Technology Inc., another of the fund's strong
performers, produces semiconductors and specialty memory products for the
consumer, automotive, office automation, industrial, and communications
markets. The company recently launched e-commerce services on its Web
site, allowing customers to order Microchip devices and replacement parts
online. ARM Holdings, a semiconductor designer based in the United
Kingdom, was also an outstanding performer. The company licenses chips to
international electronics companies, sells software and development
systems, and provides consulting, support, maintenance, and training
services. While these holdings and others discussed in this report were
viewed favorably at the end of the fiscal period, all are subject to
review and adjustment in accordance with the fund's investment strategy
and may well vary in the future.
* SHIFT AWAY FROM WEAKER SECTORS BENEFICIAL
In positioning the fund's portfolio, we carefully monitor individual
stocks and industry sectors for potential problems. Among smaller, less
well-established companies in particular, there is greater risk that
stocks will experience price fluctuations and volatility. For this reason,
when choosing companies for the fund's portfolio, we look for those with
healthy business models, strong management teams, and a solid foothold in
profitable markets. We keep a cautious eye on companies that appear to be
over-acquisitive -- in other words, those that acquire other companies
simply to stimulate higher growth rates. Often such companies use their
own overvalued stock to purchase other companies and may have problems
dealing with integration issues and the expenses of the acquisitions.
While mergers and acquisitions remain a prominent global trend, we are
careful to target companies that we believe are participating in it for
solid business reasons.
In addition to scrutinizing individual companies, we also examine industry
sectors. Our decision to reduce the fund's holdings in the health-care
sector proved beneficial during the period. While the long-term prospects
remain extremely positive for health care, short-term setbacks in many
industries have resulted in lackluster 1999 performance for a number of
stocks. As the global economy strengthened, investors began to turn away
from U.S. drug stocks, seeking opportunities in other industries that
offered strong growth potential and more attractive prices. The downturn
in drug stocks impacted the entire health-care sector, as did uncertainty
about potential Medicare reform.
"We seek diversification, and through an intensive research and screening
process, we pursue growth from stocks that have not yet attracted too much
attention."
- -- Joe Joseph, portfolio manager
* CONTINUED FOCUS ON REGIONAL BANKS, OIL SERVICES, COMMODITIES
At the close of the period, our outlook was positive for stocks in the
financial, oil services, and paper industries. Your fund's substantial
position in regional banks, such as M&T Bank Corp., made a positive
contribution to performance in the latter months of the period. M&T is a
bank holding company headquartered in Buffalo, NY, with 255 branches
throughout New York and Pennsylvania and $19.5 billion in assets. The fund
also has a significant position in oil services, including fund holding
Marine Drilling Companies, which specializes in offshore contract drilling
of oil and gas wells. Nabors Industries, another oil services holding,
specializes in oil and gas land drilling in North, South, and Central
America and in the Middle East. In the paper sector, fund holding
Smurfit-Stone Container should benefit from increasing worldwide demand
for its products, which include corrugated containers and folding cartons.
* HOLDINGS REPRESENT WIDE ARRAY OF INDUSTRIES
One of the fund's largest holdings at the close of the period, True North
Communications, was also a strong performer. This advertising and
communications holding company owns several agencies, including a 50%
stake in an interactive marketing firm that has contributed significantly
to revenues. True North is also realigning its advertising agency
operations, which is expected to save nearly $25 million a year in
expenses.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Adelphia Communications Corp.
Telecommunications
ARM Holdings PLC (United Kingdom)
Electronics and electrical equipment
True North Communications, Inc.
Advertising
FactSet Research Systems, Inc.
Computer services and software
UnionBanCal Corp.
Insurance and finance
Korn/Ferry International
Business equipment and services
North Fork Bancorporation, Inc.
Insurance and finance
Cumulus Media, Inc.
Broadcasting
Valassis Communications, Inc.
Consumer services
Dallas Semiconductor Corp.
Electronics and electrical equipment
Footnote reads:
These holdings represent 33.0% of the fund's net assets as of 10/31/99.
Portfolio holdings will vary over time.
Another strong contributor was FactSet Research Systems, which provides
online database services to financial professionals. Founded in 1978,
FactSet integrates financial data from more than 100 databases to form a
data library that allows users to search, download, and manipulate data as
if from one database. Users include investment managers, bankers, and
other financial services professionals.
* FOCUS ON BOTTOM-UP STOCK SELECTION CONTINUES
With the second half of the fund's fiscal year comes the year 2000, along
with the potential for jittery investors and more market volatility. We
will continue to rely on our bottom-up process of stock selection, in
which we focus on the merits and potential of individual companies with
less emphasis on broad economic trends. This process should enable the
fund to provide strong long-term growth potential by investing in
innovative, flexible, and dynamic small and midsize companies.
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 10/31/99, there is no guarantee the fund will
continue to hold these securities in the future. The fund invests in small
and midsize companies. Such investments increase the risk of greater price
fluctuations.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Capital
Opportunities Fund is designed for investors seeking long-term growth of
capital by investing primarily in stocks of U.S. companies that Putnam
believes offer above-average growth potential.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 10/31/99
Class A Class B Class C Class M
(inception dates) (6/1/98) (6/29/98) (7/26/99) (6/29/98)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 2.73% -3.16% 2.37% -2.63% 2.35% 1.35% 2.36% -1.20%
- ------------------------------------------------------------------------------------------
1 year 16.67 10.03 15.78 10.78 15.74 14.74 15.96 11.87
- ------------------------------------------------------------------------------------------
Life of fund -2.13 -7.78 -6.14 -2.23 -3.17 -3.17 -2.87 -6.29
Annual average -1.51 -5.54 -4.36 -1.58 -2.24 -2.24 -2.03 -4.47
- ------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/99
Russell Consumer
2000 Index price index
- --------------------------------------------------------------------------
6 months -0.25% 1.20%
- --------------------------------------------------------------------------
1 year 14.88 2.69
- --------------------------------------------------------------------------
Life of fund -4.33 3.32
Annual average -3.07 2.33
- --------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50% respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares the
higher operating expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost. Performance data reflect an expense limitation
currently or previously in effect. Without the limitation, total returns
would have been lower.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION FOR 6 MONTHS ENDED 10/31/99
Class A Class B Class C Class M
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Distributions (number)* -- -- -- --
- --------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
4/30/99 $8.07 $8.56 $8.03 -- $8.05 $8.34
- --------------------------------------------------------------------------------------
7/26/99+ -- -- -- $8.22 -- --
- --------------------------------------------------------------------------------------
10/31/99 8.29 8.80 8.22 8.27 8.24 8.54
- --------------------------------------------------------------------------------------
*The fund did not make any distributions during the period.
+Inception date for class C shares.
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (6/1/98) (6/29/98) (7/26/99) (6/29/98)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 4.50% -1.50% 4.26% -0.74% 4.10% 3.10% 4.38% 0.77%
- ------------------------------------------------------------------------------------------
1 year 12.78 6.27 12.00 7.00 12.00 11.00 12.35 8.48
- ------------------------------------------------------------------------------------------
Life of fund -6.86 -12.23 -10.48 -6.75 -7.74 -7.74 -7.35 -10.61
Annual average -5.16 -9.27 -7.98 -5.12 -5.83 -5.83 -5.53 -8.03
- ------------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns may be more or
less than those shown. They do not take into account any adjustment for taxes payable on
reinvested distributions. Investment returns and principal value will fluctuate so that an
investor's shares when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
</TABLE>
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Russell 2000 Index is an unmanaged list of common stocks that is
frequently used as a performance measure for small and midsize company
stocks. The index assumes reinvestment of all distributions and interest
payments and does not take in account brokerage fees or taxes. Securities
in the fund do not match those in the index and performance of the fund
will differ. It is not possible to invest directly in an index.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
October 31, 1999 (Unaudited)
COMMON STOCKS (90.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
15,200 Modem Media . Poppe Tyson, Inc. (NON) $ 1,048,800
153,000 True North Communications Inc. 6,167,813
--------------
7,216,613
Basic Industrial Products (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
27,700 American Standard Companies, Inc. (NON) 1,057,794
40,300 Kaydon Corp. 999,944
25,700 SPX Corp. (NON) 2,178,075
--------------
4,235,813
Broadcasting (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
111,600 Cumulus Media Inc. Class A (NON) 4,003,650
Building and Construction (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
48,400 Texas Industries, Inc. 1,733,325
Business Equipment and Services (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
188,400 Korn/Ferry Intl. (NON) 4,191,900
91,400 Specialty Equipment Companies, Inc. (NON) 1,907,975
--------------
6,099,875
Cable Television (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
76,500 Insight Communications Company, Inc. (NON) 1,807,313
Computer Services and Software (8.9%)
- --------------------------------------------------------------------------------------------------------------------------
31,000 Clarify, Inc. (NON) 2,394,750
71,500 FactSet Research Systems, Inc. 4,750,281
70,800 Rational Software Corp. (NON) 3,026,700
71,200 Remedy Corp. (NON) 3,061,600
--------------
13,233,331
Consumer Services (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
117,500 Coinstar, Inc. (NON) 895,938
91,300 Valassis Communications, Inc. (NON) 3,925,900
--------------
4,821,838
Electronics and Electrical Equipment (14.6%)
- --------------------------------------------------------------------------------------------------------------------------
73,200 ARM Holdings PLC (United Kingdom) (NON) 6,203,700
63,200 ATMI, Inc. (NON) 1,702,450
66,000 Dallas Semiconductor Corp. 3,885,750
29,500 DII Group Inc., (The) (NON) 1,062,000
42,767 Flextronics International Ltd. (NON) 3,036,457
47,800 Microchip Technology, Inc. (NON) 3,184,675
108,200 Vishay Intertechnology, Inc. (NON) 2,644,138
--------------
21,719,170
Insurance and Finance (20.5%)
- --------------------------------------------------------------------------------------------------------------------------
39,800 Duff & Phelps Credit Rating Co. 2,985,000
36,000 Finova Group, Inc. 1,586,250
66,400 Hartford Life, Inc., Class A 3,469,400
40,600 Legg Mason, Inc. 1,476,825
7,500 M & T Bank Corp. 3,716,250
84,500 National Commerce Bancorporation 2,112,500
195,900 North Fork Bancorporation, Inc. 4,052,681
171,400 Peoples Heritage Financial Group, Inc. 3,256,600
67,600 Radian Group, Inc. 3,570,125
97,000 UnionBanCal Corp. 4,213,438
--------------
30,439,069
Medical Supplies and Devices (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
8,200 Gliatech, Inc. (NON) 67,138
Metals and Mining (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
94,300 Timken Co. (The) 1,691,506
Oil and Gas (6.1%)
- --------------------------------------------------------------------------------------------------------------------------
51,600 Devon Energy Corp. 2,005,950
140,900 Marine Drilling Co., Inc. (NON) 2,280,819
123,900 Nabors Industries, Inc. (NON) 2,810,981
84,300 Precision Drilling Corp. (Canada) (NON) 1,954,706
--------------
9,052,456
Packaging and Containers (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
112,700 Smurfit-Stone Container Corp. (NON) 2,437,138
Pharmaceuticals (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
35,100 Watson Pharmaceuticals, Inc. (NON) 1,114,425
Recreation (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
52,500 Royal Caribbean Cruises Ltd. 2,785,781
Retail (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
111,300 Duane Reade, Inc. (NON) 2,991,188
Telecommunications (10.5%)
- --------------------------------------------------------------------------------------------------------------------------
137,720 Adelphia Communications Corp., Class A (NON) 7,522,947
152,700 GST Telecommunications, Inc. (Canada) 1,030,725
51,700 IPC Communications, Inc. (NON) 2,778,875
101,900 Telesp Celular Participacoes S.A. ADR (Brazil) 2,509,288
106,300 Telesp Participacoes S.A. ADR (Brazil) 1,720,731
--------------
15,562,566
Transportation (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
93,700 Northwest Airlines Corp. Class A (NON) 2,371,778
92,000 Southwest Airlines Co. (NON) 1,546,750
--------------
3,918,528
--------------
Total Common Stocks (cost $119,711,181) $ 134,930,723
SHORT-TERM INVESTMENTS (7.6%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 6,543,000 Interest in $545,691,000 joint repurchase agreement
dated October 29, 1999 with Morgan (J.P.) & Co.,
Inc. due November 1, 1999 with respect to various
U.S. Treasury obligations -- maturity value of $6,545,835
for an effective yield of 5.20% $ 6,543,000
4,766,000 Interest in $462,305,000 joint repurchase agreement
dated October 29, 1999 with S.B.C. Warburg Inc.
due November 1, 1999 with respect to various
U.S. Treasury obligations -- maturity value of
$4,768,073 for an effective yield of 5.22% 4,766,000
--------------
Total Short-Term Investments (cost $11,309,000) $ 11,309,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $131,020,181) (b) $ 146,239,723
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $148,412,246.
(b) The aggregate identified cost on a tax basis is $131,948,323, resulting in gross unrealized appreciation and
depreciation of $20,862,902 and $6,571,502, respectively, or net unrealized appreciation of $14,291,400.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depositary Receipts representing ownership of foreign
securities on deposit with a domestic custodian bank.
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at October 31, 1999
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
- -------------------------------------------------------------------------------
S & P 500 Index (long) $9,633,400 $9,620,085 Dec-99 $13,315
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $131,020,181) (Note 1) $146,239,723
- -----------------------------------------------------------------------------------------------
Cash 619
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 29,385
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 657,417
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 6,294,001
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 13,315
- -----------------------------------------------------------------------------------------------
Total assets 153,234,460
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 4,085,246
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 354,247
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 239,842
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 33,386
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,536
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 556
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 79,625
- -----------------------------------------------------------------------------------------------
Other accrued expenses 27,776
- -----------------------------------------------------------------------------------------------
Total liabilities 4,822,214
- -----------------------------------------------------------------------------------------------
Net assets $148,412,246
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $138,616,379
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (743,081)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,693,909)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 15,232,857
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $148,412,246
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($66,010,618 divided by 7,966,923 shares) $8.29
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $8.29)* $8.80
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($76,464,237 divided by 9,306,002 shares)** $8.22
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($194,305 divided by 23,501 shares)** $8.27
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($5,743,086 divided by 696,756 shares) $8.24
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $8.24)* $8.54
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended October 31, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 276,352
- -----------------------------------------------------------------------------------------------
Interest 144,832
- -----------------------------------------------------------------------------------------------
Total investment income 421,184
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 503,426
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 143,927
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,208
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,454
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 82,351
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 420,785
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 221
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 18,583
- -----------------------------------------------------------------------------------------------
Reports to shareholders 11,266
- -----------------------------------------------------------------------------------------------
Auditing 15,661
- -----------------------------------------------------------------------------------------------
Legal 2,009
- -----------------------------------------------------------------------------------------------
Postage 13,184
- -----------------------------------------------------------------------------------------------
Other 8,543
- -----------------------------------------------------------------------------------------------
Total expenses 1,229,618
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (65,353)
- -----------------------------------------------------------------------------------------------
Net expenses 1,164,265
- -----------------------------------------------------------------------------------------------
Net investment loss (743,081)
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (2,040,962)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 5,940,753
- -----------------------------------------------------------------------------------------------
Net gain on investments 3,899,791
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,156,710
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
June 1, 1998
Six months ended (commencement
October 31 of operations)
1999* to April 30, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ----------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------
Net investment loss $ (743,081) $ (94,357)
- ----------------------------------------------------------------------------------------------------------------
Net realized loss on investments (2,040,962) (2,712,512)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,940,753 9,292,104
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,156,710 6,485,235
- ----------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (158,202)
- ----------------------------------------------------------------------------------------------------------------
Class B -- (87,810)
- ----------------------------------------------------------------------------------------------------------------
Class M -- (7,773)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (6,829,093) 143,853,179
- ----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,672,383) 150,084,629
Net assets
- ----------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 152,084,629 2,000,000
- ----------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $743,081 and $--, respectively) $148,412,246 $152,084,629
- ----------------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share October 31 June 1, 1998+
operating performance (Unaudited) to April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $8.07 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.02) .03(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments .24 (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .22 (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From return
of capital -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.29 $8.07
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 2.73* (4.73)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $66,011 $62,900
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .59* 1.15*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.27)* .30*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 127.11* 272.40*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period end April 30, 1999. As a result of such limitation, expenses for
the fund reflect a reduction of less than $0.01 per share for class A, class B, and class M for the period ended
April 30, 1999. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share October 31 June 29, 1998+
operating performance (Unaudited) to April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $8.03 $8.40
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.05) (.02)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments .24 (.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .19 (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From return
of capital -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.22 $8.03
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 2.37* (4.27)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $76,464 $84,777
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .96* 1.69*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.64)* (.34)*(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 127.11* 272.40*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period end April 30, 1999. As a result of such limitation, expenses for
the fund reflect a reduction of less than $0.01 per share for class A, class B, and class M for the period ended
April 30, 1999. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to September 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .07
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .05
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From return
of capital --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 0.61*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $194
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .51*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.34)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 127.11*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period end April 30, 1999. As a result of such limitation, expenses for
the fund reflect a reduction of less than $0.01 per share for class A, class B, and class M for the period ended
April 30, 1999. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share October 31 June 29, 1998+
operating performance (Unaudited) to April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $8.05 $8.40
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.04) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments .23 (.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .19 (.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From return
of capital -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.24 $8.05
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 2.36* (3.98)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,743 $4,408
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .84* 1.48* (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.52)* (.13)* (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 127.11* 272.40*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Reflects an expense limitation in effect during the period end April 30, 1999. As a result of such limitation, expenses for
the fund reflect a reduction of less than $0.01 per share for class A, class B, and class M for the period ended
April 30, 1999. (Note 2).
</TABLE>
Notes to financial statements
October 31, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Capital Opportunities Fund ("the fund") is one of a series of
Putnam Investment Funds ("the trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund invests primarily in equity
securities of U.S. companies that Putnam Investment Management, Inc.,
("Putnam Management"), the fund's manager, a wholly-owned subsidiary of
Putnam Investments, Inc., believes offer above-average growth prospects or
are undervalued in relation to underlying asset values or earnings
potential and have the potential for long-term appreciation.
The fund offers class A, class B, class C and class M shares. The fund
began offering class C shares on July 26, 1999. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that
is lower than class B and class C shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
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.
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 market 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 of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
E) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended October 31, 1999, the fund had no borrowings against the line of
credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At April 30, 1999, the fund had a capital loss carryover of approximately
$1,725,000 available to offset future net capital gain, if any, which will
expire on April 30, 2007.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
I) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
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.
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, 0.50% of
the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion, and
0.38% thereafter.
The fund reimburses Putnam Management an allocated amount 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.
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 are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended October 31,1999, fund expenses were reduced by
$65,353 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $609 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and meeting
fees for the three years preceding retirement. Pension expense for the
fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund to an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares respectively.
For the six months ended October 31, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $40,333 and $3,360 from
the sale of class A and class M shares, respectively and $97,831 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended October 31, 1999, Putnam Mutual
Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchase and sales of securities
During the six months ended October 31, 1999, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $189,330,114 and $205,026,102, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
October 31,1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,055,453 $ 16,640,061
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
2,055,453 16,640,061
Shares
repurchased (1,886,990) (15,200,062)
- -----------------------------------------------------------------------------
Net increase 168,463 $ 1,439,999
- -----------------------------------------------------------------------------
For the period June 1, 1998
(commencement of operations)
to April 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 9,759,414 $ 74,972,006
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 20,372 153,603
- -----------------------------------------------------------------------------
9,779,786 75,125,609
Shares
repurchased (2,216,620) (16,686,789)
- -----------------------------------------------------------------------------
Net increase 7,563,166 $ 58,438,820
- -----------------------------------------------------------------------------
Six months ended
October 31,1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,613,650 $ 12,972,195
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,613,650 12,972,195
Shares
repurchased (2,859,121) (22,639,434)
- -----------------------------------------------------------------------------
Net decrease (1,245,471) $ (9,667,239)
- -----------------------------------------------------------------------------
For the period June 29, 1998
(commencement of operations)
to April 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,199,941 $100,903,304
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 11,355 85,613
- -----------------------------------------------------------------------------
13,211,296 100,988,917
Shares
repurchased (2,659,823) (19,916,740)
- -----------------------------------------------------------------------------
Net increase 10,551,473 $ 81,072,177
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to October 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 23,501 $186,882
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
23,501 186,882
Shares repurchased -- --
- -----------------------------------------------------------------------------
Net increase 23,501 $186,882
- -----------------------------------------------------------------------------
Six months ended
October 31,1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,370,881 $11,109,224
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,370,881 11,109,224
Shares
repurchased (1,221,814) (9,897,959)
- -----------------------------------------------------------------------------
Net increase 149,067 $ 1,211,265
- -----------------------------------------------------------------------------
For the period June 29, 1998
(commencement of operations)
to April 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,167,036 $ 9,038,230
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,006 7,586
- -----------------------------------------------------------------------------
1,168,042 9,045,816
Shares
repurchased (620,353) (4,703,634)
- -----------------------------------------------------------------------------
Net increase 547,689 $ 4,342,182
- -----------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The Trust was established as a Massachusetts business trust on October 31,
1994. During the period October 31, 1994 to June 1, 1998 the fund had no
operations other than those related to organizational matters, including
the initial capital contribution of $2,000,000 and the issuance if 235,194
shares of class A to Putnam Mutual Funds Corp., a wholly-owned subsidiary
of Putnam Investments, Inc. on May 29, 1998.
Fund information
WEB SITE
www.putnaminv.com
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Justin Scott
Vice President
Joseph P. Joseph
Vice President and Fund Manager
Sandeep Mehta
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Capital
Opportunities Fund. It may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA068-56825 21I 12/99
