Putnam
Capital
Appreciation
Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-04
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From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam has introduced a number of
reforms for the benefit of shareholders, including increasing the amount
of disclosure for our funds. For example, in the spring of 2004 we began
showing expense and risk comparisons in shareholder reports. We are now
including in this report portfolio turn over information for your fund,
which explains how the rate at which a fund buys and sells portfolio
securities might affect its return and its taxable distributions to
shareholders. We are also including additional disclosure about your
fund's manage ment team. Following the Outlook for Your Fund, we list
any changes in your fund's Portfolio Leader and Portfolio Members during
the prior year period, as well as the current Portfolio Leader's and
Portfolio Members' other fund management responsibilities at Putnam. In
addition, we show how much these individuals have invested in the fund
(in dollar ranges). Furthermore, fund ownership (in dollar ranges) is
now being shown for the members of Putnam's Executive Board. Finally,
equity fund reports now list the largest brokerage relationships of your
fund following the Notes to the Financial Statements.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the
investment management industry. Myra R. Drucker is a Vice Chair of the
Board of Trustees of Sarah Lawrence College and serves as Chair of the
New York Stock Exchange (NYSE) Pension Managers Advisory Committee and
as a Trustee of Commonfund, a not-for-profit asset management firm.
Richard B. Worley is Managing Partner of Permit Capital LLC, an
investment management firm. Both Ms. Drucker and Mr. Worley are
independent Trustees (i.e., Trustees who are not "interested persons" of
your fund or its investment advisor). Charles E. Haldeman, Jr., the
third new Trustee, is President and Chief Executive Officer of Putnam
Investments.
During the period covered by the following report, Putnam Capital
Appreciation Fund delivered respectable results. In the following pages,
the fund managers discuss fund performance, strategy, and their outlook
for fiscal 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
January 19, 2005
Report from Fund Management
Fund highlights
* For the six months ended November 30, 2004, Putnam Capital
Appreciation Fund's class A shares returned 8.76% without sales charges
and 3.03% with maximum sales charges reflected.
* The fund's benchmark, the Russell 3000 Index, returned 6.42%.
* The average return for the fund's Lipper category, Multi-Cap Core
Funds, was 6.07%.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
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TOTAL RETURN FOR
PERIODS ENDED 11/30/04
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Class A
(inception 8/5/93) NAV POP
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6 months 8.76% 3.03%
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1 year 13.78 7.78
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5 years -5.96 -10.88
Annual average -1.22 -2.28
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10 years 151.78 138.55
Annual average 9.67 9.08
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Annual average
(life of fund) 10.77 10.25
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Invest ment
return and principal value will fluctuate and you may have a gain or a
loss when you sell your shares. Performance assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 5.25%. For the most recent month-end
performance, visit www.putnaminvestments.com. For a portion of the
period, this fund was sold on a limited basis with limited assets and
expenses. Had expenses not been limited, returns would have been lower.
A 2% short-term trading fee may be applied to shares exchanged or sold
within 5 days of purchase.
Performance commentary
We are pleased to report that, for the six months ended November 30,
2004, your fund's return at NAV (net asset value, without sales charges)
was ahead of the average for funds in its Lipper peer group. The fund
also outperformed its benchmark, the Russell 3000 Index. Fund
performance benefited from gains in a number of holdings in the
technology, consumer staples, financial, and health-care sectors.
However, weakness in consumer cyclical, transportation, and utilities
holdings detracted from returns somewhat. Throughout the period, the
fund continued to benefit from its blend investment style, which enables
it to invest in a broad range of companies. Rather than trying to
forecast broad market trends, we select stocks based on each company's
valuation, fundamental strengths, and long-term prospects.
FUND PROFILE
Putnam Capital Appreciation Fund invests in stocks of companies at all
capitalization levels, and across a broad range of industries. While it
has no bias toward either growth or value stocks, it targets companies
believed to be worth more than their current stock prices indicate. It
may be suitable for investors who are seeking growth through a
well-diversified stock portfolio.
Market overview
During the first six months of your fund's fiscal year, the stock market
posted gains, although investors were distracted by a number of
concerns. On the one hand, the backdrop for stocks was generally
favorable: the economy continued to expand, job creation was uneven but
improving, and corporate profits were generally solid. However, these
positive trends were offset by worries over rising interest rates,
soaring energy prices, and uncertainty over the outcome of U.S.
elections.
After rallying in response to favorable economic data in the spring,
stocks fell sharply from July to mid August, responding to a series of
interest-rate increases by the Federal Reserve Board, the dramatic rise
in oil prices, and a series of destabilizing events in Iraq. The
semiannual period ended on a bright note, as stocks posted strong gains
in November and investors appeared to focus on reports of sustained
economic expansion and strong corporate earnings.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 11/30/04
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Equities
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Russell 3000 Index (broad stock market) 6.42%
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Russell 1000 Growth Index (large-company growth stocks) 0.81%
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Russell 1000 Value Index (large-company value stocks) 11.01%
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S&P 500 Index (broad stock market) 5.68%
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Bonds
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Lehman Aggregate Bond Index (broad bond market) 3.82%
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JP Morgan Global High Yield Index (global high-yield
corporate bonds) 9.02%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 3.11%
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These indexes provide an overview of performance in different market
sectors for the six months ended 11/30/04.
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Strategy overview
In managing your fund's portfolio, we continued to take a bottom-up
approach to stock selection. Regardless of how the economy or markets
are behaving, we look for companies that we believe are mispriced by the
market -- in other words, companies that we believe are worth more than
their current stock prices appear to indicate. The fund is managed in a
blend investment style, which means that instead of having a strong
growth or value orientation, it has the flexibility to invest in a wide
range of companies. It can invest in companies that are growing rapidly
and seem to have the potential to continue growing, as well as companies
whose stock prices are currently low relative to our assessment of the
company's earnings and growth potential.
We find that stocks become attractively valued when the market
underestimates the ability of good companies to maintain their returns
and growth rates, or when the market overreacts to near-term events. We
believe that if we focus on cash flows and valuations, maintain a
diversified portfolio, and remain willing to buy and hold controversial
stocks that we think are temporarily out of favor, the fund will be able
to consistently profit from mispricings in the market.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED
as of 5/31/04 as of 11/30/04
Insurance 3.7% 8.8%
Retail 11.4% 7.0%
Oil and gas 4.0% 6.9%
Consumer finance 2.6% 6.1%
Banking 6.0% 5.6%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
Strong earnings growth from a number of companies in the financial
sector contributed positively to your fund's performance during the
semiannual period. The stock of Commerce Bancorp gained ground thanks to
exceptionally strong deposit growth. We believe the company, one of the
fastest-growing banks in the United States, has a long-term competitive
advantage in its industry, due in large part to its intense focus on
customer service. Altria Group, formerly Philip Morris Companies, was
also a positive contributor to performance. Although litigation related
to the company's tobacco products may cause short-term declines in this
stock, we believe that concern over the legal risks has resulted in a
lower valuation than the company deserves. The stock remained in the
fund's portfolio at the close of the period because we believe this
fundamentally strong company is attractively valued.
Technology stocks were among the strongest performers in the fund's
portfolio during the period, with holdings such as data storage company
EMC, software giant Microsoft, and electronics company Intel
contributing positively to returns. Early in the period, fears of a
pronounced slowdown in technology spending caused investors to shy away
from many technology stocks, which led to attractive buying
opportunities for the fund. Your fund has the flexibility to invest in
companies of all sizes, and a number of smaller companies in the
portfolio performed well, including chemical company Georgia Gulf
Corporation and Terex Corporation, which manufactures construction
equipment.
Among the holdings that detracted from fund performance during the
period was health-care services company Cardinal Health. Investor
concerns about changes to the company's drug distribution model and an
SEC investigation into its accounting practices have caused declines in
the stock. However, we believe that the company, whose stock remained in
the portfolio at the close of the period, can overcome these short-term
issues and reward shareholders with improved profitability over the long
term.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
(Percent of fund's net assets as of 11/30/04)
1 Commerce Bancorp, Inc. (4.3%)
Banking
2 Tyco International, Ltd.
(Bermuda) (3.7%)
Conglomerates
3 Pfizer, Inc. (3.1%)
Pharmaceuticals
4 Altria Group, Inc. (3.0%)
Tobacco
5 Cardinal Heath, Inc. (3.0%)
Health-care services
6 Cisco Systems, Inc. (2.8%)
Communications equipment
7 Capital One Financial Corp. (2.8%)
Consumer finance
8 Apollo Group, Inc. (2.8%)
Schools
9 Microsoft Corp. (2.7%)
Software
10 American International
Group, Inc. (2.7%)
Insurance
Footnote reads:
The fund's holdings will change over time.
Retail stocks struggled during the six-month period as retail sales in
general weakened. Within the fund's portfolio, specialty automotive
retailers AutoZone and CSK Auto Corporation were among the stocks that
declined. As of the close of the period, these stocks were no longer in
the portfolio. Also detracting from returns was fund holding Fannie Mae.
The stock of this mortgage financing company declined partly as a result
of regulatory investigations of its accounting practices. We found the
stock's valuation to be very attractive, and we believe the company
continues to offer strong long-term growth potential, despite its
near-term setbacks.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary
in the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
teams' plans for responding to them.
As always, when we consider the outlook for your fund, we are more
concerned with the long-term potential of individual companies than with
short-term developments in the economy or the markets. While the market
as a whole is affected by world events and economic cycles, we believe
investors' long-term goals are best served by our bottom-up approach to
security selection, which relies heavily on fundamental research and
analysis. Of course, our beliefs about the general themes at work in the
market do influence our decisions.
As we enter the second half of your fund's fiscal year, we believe an
environment of modest economic growth coupled with low inflation is
likely to persist. In addition, stock returns may be modest. However, at
the close of the period, we were finding what we believe to be
attractive long-term opportunities in the financial, health-care, and
consumer discretionary sectors. Regardless of the direction the market
takes in the months ahead, our strategy and focus remain the same. We
will continue to conduct intensive research in order to identify a wide
array of companies with the potential to reward investors over time.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. The fund invests
some or all of its assets in small and/or midsize companies. Such
investments increase the risk of greater price fluctuations.
Your fund's management
Your fund is managed by the members of the Putnam U.S. Core and U.S.
Small- and Mid-Cap Core teams. Joshua Brooks is the Portfolio Leader,
and Richard Cervone, Joseph Joseph, James Wiess, and James Yu are
Portfolio Members. The Portfolio Leader and Portfolio Members coordinate
the teams' management of the fund.
For a complete listing of the members of the Putnam U.S. Core and U.S.
Small- and Mid-Cap Core teams, including those who are not Portfolio
Leaders or Portfolio Members of your fund, visit Putnam's Individual
Investor Web site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Members have invested in the fund (in dollar ranges).
Information shown is for the current and prior year ended November 30.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS
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$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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Joshua Brooks 2004 *
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Portfolio Leader N/A
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Richard Cervone 2004 *
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Portfolio Member N/A
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Joseph Joseph 2004 *
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Portfolio Member 2003 *
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James Wiess 2004 *
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Portfolio Member N/A
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James Yu 2004 *
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Portfolio Member 2003 *
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N/A indicates the individual was not a Portfolio Leader or Portfolio Member as of 11/30/03.
Other funds managed by the Portfolio Leader and Portfolio Members
Joshua Brooks is also a Portfolio Member of Putnam Global Equity Fund
and Putnam Investors Fund.
Richard Cervone is also a Portfolio Member of Putnam Investors Fund and
Putnam Tax Smart Equity Fund.
Joseph Joseph is also a Portfolio Leader of Putnam Capital Opportunities
Fund and Putnam International Capital Opportunities Fund.
James Wiess is also a Portfolio Leader of Putnam Investors Fund and
Putnam Tax Smart Equity Fund.
James Yu is also a Portfolio Member of Putnam Investors Fund and Putnam
Tax Smart Equity Fund.
Joshua Brooks, Richard Cervone, Joseph Joseph, James Wiess, and James Yu
may also manage other accounts advised by Putnam Management or an
affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended November 30, 2004, Portfolio Leader Michael Nance
left your fund's management team. In addition, Joshua Brooks joined the
team as Portfolio Leader and Richard Cervone and James Wiess became
Portfolio Members of your fund.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is for
the current and prior year ended December 31.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 $500,000
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Philippe Bibi 2004 *
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Chief Technology Officer 2003 *
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John Boneparth 2004 *
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Head of Global Institutional Mgmt 2003 *
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Kevin Cronin 2004 *
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Deputy Head of Investments N/A
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Charles Haldeman, Jr. 2004 *
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President and CEO 2003 *
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Amrit Kanwal 2004 *
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Chief Financial Officer N/A
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Steven Krichmar 2004 *
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Chief of Operations N/A
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Francis McNamara, III 2004 *
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General Counsel N/A
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Richard Monaghan 2004 *
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Head of Retail Management 2003 *
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Stephen Oristaglio 2004 *
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Head of Investments 2003 *
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Richard Robie, III 2004 *
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Chief Administrative Officer N/A
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N/A indicates the individual was not a member of Putnam's Executive Board as of 12/31/03.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended November 30, 2004. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Data represents past performance.
Past performance does not guarantee future results. More recent returns
may be less or more than those shown. Investment return and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 11/30/04
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Class A Class B Class C Class M Class R
(inception dates) (8/5/93) (11/2/94) (7/14/00) (1/22/96) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 8.76% 3.03% 8.31% 3.31% 8.33% 7.33% 8.51% 4.71% 8.58%
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1 year 13.78 7.78 12.97 7.97 12.96 11.96 13.26 9.26 13.53
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5 years -5.96 -10.88 -9.38 -10.82 -9.26 -9.26 -8.24 -11.44 -7.11
Annual average -1.22 -2.28 -1.95 -2.26 -1.92 -1.92 -1.70 -2.40 -1.47
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10 years 151.78 138.55 134.05 134.05 137.80 137.80 139.45 131.02 145.60
Annual average 9.67 9.08 8.88 8.88 9.05 9.05 9.12 8.73 9.40
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Annual average
(life of fund) 10.77 10.25 9.97 9.97 10.21 10.21 10.21 9.87 10.50
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Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A and M shares
reflect a sales charge of 5.25% and 3.50%, respectively. Class B share
returns reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declining to 1% in the sixth year, and is
eliminated thereafter. Class C shares reflect a 1% CDSC the first year that
is eliminated thereafter. Class R share returns have no initial sales
charge or CDSC. Performance for class B, C, M, and R shares before their
inception is derived from the historical performance of class A shares,
adjusted for the applicable sales charge (or CDSC) and higher operating
expenses for such shares.
A 2% short-term trading fee may be applied to shares exchanged or sold
within 5 days of purchase.
For a portion of the period, this fund was sold on a limited basis with
limited assets and expenses. Had expenses not been limited, returns would
have been lower.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/04
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Russell Lipper Multi-Cap
3000 Core Funds
Index category average*
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6 months 6.42% 6.07%
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1 year 13.04 11.53
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5 years -3.12 8.34
Annual average -0.63 1.01
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10 years 204.87 190.32
Annual average 11.79 10.78
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Annual average
(life of fund) 10.73 10.01
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 11/30/04, there
were 778, 698, 337, and 114 funds, respectively, in this Lipper
category.
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PRICE AND DISTRIBUTION* INFORMATION 6 MONTHS ENDED 11/30/04
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Class A Class B Class C Class M Class R
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Share value: NAV POP NAV NAV NAV POP NAV
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5/31/04 $16.55 $17.47 $15.76 $16.09 $15.98 $16.56 $16.54
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11/30/04 18.00 19.00 17.07 17.43 17.34 17.97 17.96
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* The fund made no distributions during the period.
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TOTAL RETURN FOR PERIODS ENDED 12/31/04 (MOST RECENT CALENDER QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (8/5/93) (11/2/94) (7/14/00) (1/22/96) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 10.23% 4.45% 9.77% 4.77% 9.81% 8.81% 10.00% 6.18% 10.06%
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1 year 15.10 9.07 14.22 9.22 14.24 13.24 14.54 10.54 14.79
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5 years -11.76 -16.40 -15.01 -16.38 -14.58 -14.58 -13.94 -16.96 -12.86
Annual average -2.47 -3.52 -3.20 -3.51 -3.10 -3.10 -2.96 -3.65 -2.72
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10 years 156.70 143.29 138.48 138.48 142.38 142.38 143.95 135.42 150.31
Annual average 9.89 9.30 9.08 9.08 9.26 9.26 9.33 8.94 9.61
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Annual average
(life of fund) 11.08 10.55 10.27 10.27 10.51 10.51 10.51 10.17 10.80
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Understanding your
fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. Using the
information below, you can estimate how these expenses affect your
investment and compare them with the expenses of other funds. You may also
pay one-time transaction expenses, including sales charges (loads) and
redemption fees, which are not shown in this section and would have
resulted in higher total expenses. For more information, see your fund's
prospectus or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam Capital Appreciation Fund from June 1, 2004, to
November 30, 2004. It also shows how much a $1,000 investment would be
worth at the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 11/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per $1,000* $6.75 $10.65 $10.65 $9.36 $8.05
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Ending value (after expenses) $1,087.60 $1,083.10 $1,083.30 $1,085.10 $1,085.80
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* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended
11/30/04. The expense ratio may differ for each share class (see the
table at the bottom of the next page). Expenses are calculated by
multiplying the expense ratio by the average account value for the
period; then multiplying the result by the number of days in the period;
and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended November
30, 2004, use the calculation method below. To find the value of your
investment on June 1, 2004, go to www.putnaminvestments.com and log on to
your account. Click on the "Transaction History" tab in your Daily
Statement and enter 06/01/2004 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 6/1/04 [DIV] $1,000 X per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $6.75 (see table above) = $67.50
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to
help investors assess fund expenses. Per these guidelines, the table below
shows your fund's expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return. You can use this information to compare
the ongoing expenses (but not transaction expenses or total costs) of
investing in the fund with those of other funds. All mutual fund
shareholder reports will provide this information to help you make this
comparison. Please note that you cannot use this information to estimate
your actual ending account balance and expenses paid during the period.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 11/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per $1,000* $6.53 $10.30 $10.30 $9.05 $7.79
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Ending value (after expenses) $1,018.60 $1,014.84 $1,014.84 $1,016.09 $1,017.35
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* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended
11/30/04. The expense ratio may differ for each share class (see the
table at the bottom of this page). Expenses are calculated by
multiplying the expense ratio by the average account value for the
period; then multiplying the result by the number of days in the period;
and then dividing that result by the number of days in the year.
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined by Lipper, an independent fund-rating agency that ranks funds
relative to others that Lipper considers to have similar investment styles
or objectives. The expense ratio for each share class shown below indicates
how much of your fund's net assets have been used to pay ongoing expenses
during the period.
EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class C Class M Class R
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Your fund's annualized
expense ratio 1.29% 2.04% 2.04% 1.79% 1.54%
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Average annualized expense
ratio for Lipper peer group+ 1.48% 2.23% 2.23% 1.98% 1.73%
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+ Average of the expenses of front-end load funds viewed by Lipper as having
the same investment classification or objective as the fund, as of 9/30/04,
calculated in accordance with Lipper's standard reporting methodology for
comparing expenses within a given universe (excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements that
may reduce fund expenses). To facilitate comparison, Putnam has adjusted
this average to reflect the 12b-1 fees carried by each class of shares. The
peer group may include funds that are significantly larger or smaller than
the fund, which may limit the comparability of the fund's expenses to the
Lipper average.
Understanding your fund's
portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries, economies,
and markets. Portfolio turnover is a measure of how often a fund's managers
buy and sell securities for your fund. A portfolio turnover of 100%, for
example, means that the managers sold and replaced securities valued at
100% of a fund's assets within a one-year period. Funds with high turnover
may be more likely to generate capital gains and dividends that must be
distributed to shareholders as taxable income. High turnover may also cause
a fund to pay more brokerage and other transaction costs, which may detract
from performance.
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TURNOVER COMPARISONS
percentage of holdings that change every year
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2004 2003 2002 2001 2000
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Putnam Capital
Appreciation Fund 111% 107% 134% 264% 188%
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Lipper Multi-Cap Core
Funds category
average 82% 83% 95% 104% 117%
- -----------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on May 31. Turnover data for the fund's Lipper category
is calculated based on the average of the turnover of each fund in the
category for its fiscal year ended during the indicated year. Fiscal years
vary across funds in the Lipper category, which may limit the comparability
of the fund's portfolio turnover rate to the Lipper average. Comparative
data for 2004 is based on information available as of 9/30/04.
Risk comparison
As part of new initiatives to enhance disclosure, we are including a
risk comparison to help you understand how your fund compares with other
funds. The comparison utilizes a risk measure developed by Morningstar,
an independent fund-rating agency. This risk measure is referred to as
the fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 3.14
U.S. stock
fund average 3.36
0% INCREASING RISK 100%
Your fund's Overall Morningstar Risk is shown alongside that of the
average fund in its broad asset class, as determined by Morningstar. The
risk bar broadens the comparison by translating the fund's Overall
Morningstar Risk into a percentile, which is based on the fund's ranking
among all funds rated by Morningstar as of December 31, 2004. A higher
Overall Morningstar Risk generally indicates that a fund's monthly
returns have varied more widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class A
shares only; information for other classes may vary. Overall Morningstar
Risk is based on historical data and does not indicate future results.
Morningstar does not purport to measure the risk associated with a current
investment in a fund, either on an absolute basis or on a relative basis.
Low Overall Morningstar Risk does not mean that you cannot lose money on an
investment in a fund. Copyright 2004 Morningstar, Inc. All Rights Reserved.
The information contained herein (1) is proprietary to Morningstar and/or
its content providers; (2) may not be copied or distributed; and (3) is not
warranted to be accurate, complete, or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from
any use of this information.
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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 5.25% 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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index used to mirror
the investable universe of the U.S. dollar global high-yield corporate
debt market of both developed and emerging markets.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Russell 1000 Growth Index is an unmanaged index of those companies in
the Russell 1000 Index chosen for their growth orientation.
Russell 1000 Value Index is an unmanaged index of those companies in
the Russell 1000 Index chosen for their value orientation.
Russell 3000 Index is an unmanaged index of the 3,000 largest U.S.
companies in the Russell universe.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, 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.
The fund's portfolio
November 30, 2004 (Unaudited)
Common stocks (97.4%) (a)
Number of shares Value
Advertising and Marketing Services (0.7%)
- -------------------------------------------------------------------------------
65,700 Omnicom Group, Inc. $5,321,700
Aerospace and Defense (0.2%)
- -------------------------------------------------------------------------------
34,498 United Defense Industries, Inc.
(NON) 1,562,759
Airlines (0.1%)
- -------------------------------------------------------------------------------
62,500 ExpressJet Holdings, Inc. (NON) (S) 728,750
24,593 Mesa Air Group, Inc. (NON) (S) 172,643
--------------
901,393
Automotive (1.3%)
- -------------------------------------------------------------------------------
54,094 American Axle & Manufacturing
Holdings, Inc. (S) 1,577,381
117,251 Autoliv, Inc. 5,480,312
69,900 Monaco Coach Corp. 1,391,010
117,700 Tenneco Automotive, Inc. (NON) 1,824,350
--------------
10,273,053
Banking (5.6%)
- -------------------------------------------------------------------------------
530,300 Commerce Bancorp, Inc. (S) 33,127,841
62,073 Compass Bancshares, Inc. (S) 2,890,119
43,200 Doral Financial Corp. 2,004,480
38,800 FirstFed Financial Corp. (NON) (S) 2,041,656
49,700 Flagstar Bancorp, Inc. (S) 1,082,963
59,200 R&G Financial Corp. Class B 2,296,960
--------------
43,444,019
Biotechnology (0.2%)
- -------------------------------------------------------------------------------
13,300 Connetics Corp. (NON) 278,103
10,225 Neurocrine Biosciences, Inc. (NON) 470,350
22,100 Telik, Inc. (NON) (S) 422,331
--------------
1,170,784
Chemicals (1.4%)
- -------------------------------------------------------------------------------
150,646 Georgia Gulf Corp. 8,674,197
58,300 MacDermid, Inc. 2,146,606
--------------
10,820,803
Commercial and Consumer Services (1.3%)
- -------------------------------------------------------------------------------
135,300 Administaff, Inc. (NON) (S) 2,015,970
84,400 Brink's Co. (The) 3,258,684
37,667 Maximus, Inc. (NON) 1,180,107
58,800 Sabre Holdings Corp. 1,357,104
54,465 West Corp. (NON) (S) 1,886,668
--------------
9,698,533
Communications Equipment (4.5%)
- -------------------------------------------------------------------------------
259,400 Aspect Communications Corp. (NON) 2,814,490
45,075 Belden CDT, Inc. (S) 1,045,289
1,170,600 Cisco Systems, Inc. (NON) 21,901,926
103,400 Coinstar, Inc. (NON) (S) 2,690,468
78,057 Inter-Tel, Inc. (S) 2,210,574
288,564 PTEK Holdings, Inc. (NON) (S) 3,038,579
37,900 SeaChange International, Inc. (NON) (S) 647,332
--------------
34,348,658
Computers (1.3%)
- -------------------------------------------------------------------------------
112,500 Checkpoint Systems, Inc. (NON) 2,076,750
585,100 EMC Corp. (NON) 7,852,042
--------------
9,928,792
Conglomerates (3.7%)
- -------------------------------------------------------------------------------
828,200 Tyco International, Ltd. (Bermuda) (S) 28,133,954
Consumer Finance (6.1%)
- -------------------------------------------------------------------------------
278,633 Capital One Financial Corp. 21,894,981
48,500 CompuCredit Corp. (NON) 1,162,545
582,200 Countrywide Financial Corp. 19,334,862
276,004 Providian Financial Corp. (NON) 4,429,864
--------------
46,822,252
Consumer Goods (1.1%)
- -------------------------------------------------------------------------------
218,600 Hasbro, Inc. 4,159,958
135,575 Yankee Candle Co., Inc. (The) (NON) 4,129,615
--------------
8,289,573
Electric Utilities (0.6%)
- -------------------------------------------------------------------------------
1,300 Alliant Energy Corp. 35,464
13,100 Avista Corp. (S) 233,180
116,128 OGE Energy Corp. 3,001,909
57,912 Puget Energy, Inc. 1,360,932
--------------
4,631,485
Electronics (3.9%)
- -------------------------------------------------------------------------------
1,126,287 Agere Systems, Inc. Class A (NON) 1,543,013
172,700 Integrated Device Technology, Inc.
(NON) 1,960,145
404,400 Intel Corp. 9,038,340
587,800 SanDisk Corp. (NON) (S) 13,272,524
137,399 Storage Technology Corp. (NON) 4,003,807
--------------
29,817,829
Engineering & Construction (0.4%)
- -------------------------------------------------------------------------------
41,600 Eagle Materials, Inc. (S) 3,260,192
Financial (3.2%)
- -------------------------------------------------------------------------------
297,700 Fannie Mae 20,451,990
77,445 PMI Group, Inc. (The) (S) 3,189,185
6,344 Student Loan Corp. 1,119,145
--------------
24,760,320
Forest Products and Packaging (0.4%)
- -------------------------------------------------------------------------------
51,523 Albany International Corp. 1,723,444
55,400 Louisiana-Pacific Corp. 1,355,638
--------------
3,079,082
Health Care Services (5.6%)
- -------------------------------------------------------------------------------
434,900 Cardinal Health, Inc. 22,736,572
16,600 Cerner Corp. (NON) (S) 875,152
115,200 Express Scripts, Inc. Class A (NON) 8,289,792
141,997 Health Net, Inc. (NON) 3,865,158
42,100 Lincare Holdings, Inc. (NON) 1,624,639
150,121 Manor Care, Inc. 5,171,668
11,100 WellChoice, Inc. (NON) 543,789
--------------
43,106,770
Homebuilding (3.1%)
- -------------------------------------------------------------------------------
329,100 Lennar Corp. 14,786,463
10,789 NVR, Inc. (NON) (S) 7,454,120
14,091 Ryland Group, Inc. (The) 1,428,123
--------------
23,668,706
Household Furniture and Appliances (0.4%)
- -------------------------------------------------------------------------------
46,700 Whirlpool Corp. 3,014,485
Insurance (8.8%)
- -------------------------------------------------------------------------------
392,700 ACE, Ltd. (Cayman Islands) 15,872,934
326,100 American International Group, Inc. 20,658,435
17,050 Delphi Financial Group Class A 792,143
165,600 Everest Re Group, Ltd. (Bermuda) 13,955,112
49,428 IPC Holdings, Ltd. (Bermuda) 2,104,150
62,383 Radian Group, Inc. 3,197,129
105,196 RenaissanceRe Holdings, Ltd.
(Bermuda) 5,296,619
11,000 Stancorp Financial Group 869,550
59,847 Stewart Information Services 2,612,322
60,750 W.R. Berkley Corp. 2,755,013
--------------
68,113,407
Investment Banking/Brokerage (3.0%)
- -------------------------------------------------------------------------------
28,150 Affiliated Managers Group (NON) (S) 1,784,147
77,900 American Capital Strategies, Ltd. (S) 2,488,126
30,500 Eaton Vance Corp. (S) 1,462,475
23,200 IndyMac Bancorp, Inc. 753,768
184,400 Lehman Brothers Holdings, Inc. 15,449,032
48,383 Waddell & Reed Financial, Inc. 1,098,294
--------------
23,035,842
Leisure (0.2%)
- -------------------------------------------------------------------------------
43,200 Winnebago Industries, Inc. (S) 1,638,576
Machinery (1.2%)
- -------------------------------------------------------------------------------
38,900 Manitowoc Co., Inc. (The) 1,452,915
170,295 Terex Corp. (NON) 7,806,323
--------------
9,259,238
Manufacturing (0.5%)
- -------------------------------------------------------------------------------
5,358 Acuity Brands, Inc. 157,686
134,100 Flowserve Corp. (NON) (S) 3,382,002
--------------
3,539,688
Media (0.8%)
- -------------------------------------------------------------------------------
259,800 IAC/InterActiveCorp. Class B (NON) (S) 6,414,462
Medical Technology (1.1%)
- -------------------------------------------------------------------------------
44,100 American Medical Systems Holdings,
Inc. (NON) 1,682,856
27,100 Charles River Laboratories
International, Inc. (NON) (S) 1,266,925
26,100 Epix Pharmaceuticals, Inc. (NON) (S) 459,360
37,800 Respironics, Inc. (NON) (S) 2,093,364
49,100 Sybron Dental Specialties, Inc.
(NON) 1,681,184
18,300 Ventana Medical Systems, Inc. (NON) (S) 1,093,425
--------------
8,277,114
Metal Fabricators (--%)
- -------------------------------------------------------------------------------
6,900 Mueller Industries, Inc. 212,037
Metals (0.4%)
- -------------------------------------------------------------------------------
47,101 Carpenter Technology Corp. 2,753,053
Natural Gas Utilities (0.6%)
- -------------------------------------------------------------------------------
54,800 Atmos Energy Corp. 1,479,052
56,939 Energen Corp. (S) 3,294,491
--------------
4,773,543
Oil & Gas (6.9%)
- -------------------------------------------------------------------------------
180,900 Amerada Hess Corp. 16,072,965
85,500 Cabot Oil & Gas Corp. Class A 4,136,490
189,848 Denbury Resources, Inc. (NON) (S) 5,496,100
359,400 ExxonMobil Corp. 18,419,250
54,700 Giant Industries, Inc. (NON) (S) 1,531,600
206,900 Meridian Resource Corp. (NON) 1,413,127
50,174 Noble Energy, Inc. 3,200,599
106,300 Vintage Petroleum, Inc. 2,577,775
--------------
52,847,906
Pharmaceuticals (5.5%)
- -------------------------------------------------------------------------------
108,300 Andrx Group (NON) (S) 1,927,740
282,212 Johnson & Johnson 17,023,028
853,084 Pfizer, Inc. (SEG) 23,690,143
--------------
42,640,911
Real Estate (1.3%)
- -------------------------------------------------------------------------------
20,400 CBL & Associates Properties (R) (S) 1,495,116
31,400 IMPAC Mortgage Holdings, Inc. (R) 735,702
66,842 National Health Investors, Inc. (R) 1,935,076
23,400 New Century Financial Corp. (R) (S) 1,480,284
14,000 RAIT Investment Trust (R) 392,000
32,831 Redwood Trust, Inc. (R) 1,911,749
118,900 Senior Housing Properties Trust (R) (S) 2,339,952
--------------
10,289,879
Restaurants (1.3%)
- -------------------------------------------------------------------------------
335,900 McDonald's Corp. 10,325,566
Retail (7.0%)
- -------------------------------------------------------------------------------
70,900 Abercrombie & Fitch Co. Class A 3,229,495
355,800 Family Dollar Stores, Inc. 10,424,940
253,200 Lowe's Cos., Inc. 14,009,556
166,800 Michaels Stores, Inc. 4,558,644
138,400 Movie Gallery, Inc. 2,412,312
474,800 Office Depot, Inc. (NON) 7,786,720
153,452 Rent-A-Center, Inc. (NON) (S) 3,911,491
26,100 ShopKo Stores, Inc. (NON) 466,668
224,382 Supervalu, Inc. 7,088,227
--------------
53,888,053
Schools (2.8%)
- -------------------------------------------------------------------------------
270,800 Apollo Group, Inc. Class A (NON) (S) 21,582,760
Software (4.8%)
- -------------------------------------------------------------------------------
404,971 BMC Software, Inc. (NON) 7,524,361
316,255 Citrix Systems, Inc. (NON) 7,466,781
780,200 Microsoft Corp. 20,917,162
65,800 THQ, Inc. (NON) (S) 1,412,068
--------------
37,320,372
Technology Services (0.9%)
- -------------------------------------------------------------------------------
109,200 Acxiom Corp. 2,761,667
30,800 Transaction Systems Architects, Inc.
(NON) 632,016
321,100 United Online, Inc. (NON) 3,426,137
--------------
6,819,820
Telecommunications (1.2%)
- -------------------------------------------------------------------------------
10,632 Commonwealth Telephone Enterprises,
Inc. (NON) (S) 517,353
297,200 Nextel Communications, Inc. Class A
(NON) 8,458,312
--------------
8,975,665
Textiles (0.4%)
- -------------------------------------------------------------------------------
97,521 Wolverine World Wide, Inc. 2,920,754
Tire & Rubber (0.6%)
- -------------------------------------------------------------------------------
215,000 Cooper Tire & Rubber (S) 4,390,300
Tobacco (3.0%)
- -------------------------------------------------------------------------------
407,000 Altria Group, Inc. 23,398,430
--------------
Total Common stocks
(cost $685,813,788) $749,472,518
Short-term investments (9.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$54,441,689 Short-term investments held as collateral for
loaned securities with yields ranging from
1.94% to 2.21% and due dates ranging from
December 1, 2004 to January 7, 2005 (d) $54,421,326
16,639,000 Interest in $350,000,000 joint tri-party
repurchase agreement dated November 30,2004
with Goldman Sachs & Co. due December 1, 2004
with respect to various U.S. government
obligations -- maturity value of $16,639,961
for an effective yield of 2.08% (collateralized
by a variety of Fannie Maes, Freddie Macs and
FHLBs, with a range of coupon rates from 2.00%
to 7.50% due from December 15, 2005 through
November 1, 2034 valued at $357,004,695.) 16,639,000
1,465,836 Putnam Prime Money Market Fund (e) 1,465,836
--------------
Total Short-term investments
(cost $72,526,162) $72,526,162
- -------------------------------------------------------------------------------
Total Investments
(cost $758,339,950) $821,998,680
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $769,725,363.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at November
30, 2004.
(R) Real Estate Investment Trust.
(S) Securities on loan, in part or in entirety, at November 30, 2004.
(d) See Note 1 to the financial statements.
(e) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
ADR after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with a
custodian bank.
Futures contracts outstanding at November 30, 2004 (Unaudited)
Unrealized
Aggregate Expiration appreciation/
Value face value date (depreciation)
- -------------------------------------------------------------------------------------------
S&P 500 Index (Long) $13,208,625 $13,266,550 Dec. 04 $(57,925)
Russell Mini Index (Long) 6,151,740 6,117,408 Dec. 04 34,332
- -------------------------------------------------------------------------------------------
$(23,593)
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
November 30, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value, including $52,569,532
securities on loan (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $756,874,114) $820,532,844
- -------------------------------------------------------------------------------
Affiliated issuers (identified cost $1,465,836 (Note 5) 1,465,836
- -------------------------------------------------------------------------------
Cash 221
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 3,387,620
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 226,922
- -------------------------------------------------------------------------------
Receivable for securities sold 2,240,917
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 39,995
- -------------------------------------------------------------------------------
Total assets 827,894,355
Liabilities
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,327,736
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 1,140,172
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 294,522
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 168,738
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,679
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 452,433
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 54,421,326
- -------------------------------------------------------------------------------
Other accrued expenses 361,386
- -------------------------------------------------------------------------------
Total liabilities 58,168,992
- -------------------------------------------------------------------------------
Net assets $769,725,363
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (unlimited shares authorized) (Notes 1 and 4) $874,623,951
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,098,917
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (170,632,642)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 63,635,137
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $769,725,363
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($416,443,712 divided by 23,134,136 shares) $18.00
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.75 of $18.00)* $19.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($331,224,347 divided by 19,405,432 shares)** $17.07
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($3,501,181 divided by 200,890 shares)** $17.43
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($18,544,636 divided by 1,069,700 shares) $17.34
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.34)* $17.97
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($11,487 divided by 640 shares) $17.96
- -------------------------------------------------------------------------------
* 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.
Statement of operations
Six months ended November 30, 2004 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $3,518) (Note 1) $7,850,435
- -------------------------------------------------------------------------------
Interest (including interest income of $39,173 from
investments in affiliated issuers) (Note 5) 43,196
- -------------------------------------------------------------------------------
Securities lending 93,239
- -------------------------------------------------------------------------------
Total investment income 7,986,870
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,317,567
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 1,052,682
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 121,858
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 14,166
- -------------------------------------------------------------------------------
Administrative services (Note 2) 8,014
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 497,944
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,650,522
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 17,270
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 68,015
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 20
- -------------------------------------------------------------------------------
Other 396,916
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 27,714
- -------------------------------------------------------------------------------
Cost assumed by Manager (Notes 2 and 6) (27,714)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (4,337)
- -------------------------------------------------------------------------------
Total expenses 6,140,637
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (252,684)
- -------------------------------------------------------------------------------
Net expenses 5,887,953
- -------------------------------------------------------------------------------
Net investment income 2,098,917
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 51,415,641
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 298,715
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments futures contracts
during the period 7,001,150
- -------------------------------------------------------------------------------
Net gain on investments 58,715,506
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $60,814,423
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
Decrease in net assets 2004* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income (loss) $2,098,917 $(3,614,897)
- -------------------------------------------------------------------------------
Net realized gain on investments 51,714,356 156,330,205
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 7,001,150 (20,149,222)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 60,814,423 132,566,086
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (78,385,709) (259,289,670)
- -------------------------------------------------------------------------------
Total decrease in net assets (17,571,286) (126,723,584)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 787,296,649 914,020,233
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $2,098,917 and $--,
respectively) $769,725,363 $787,296,649
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Nov. 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.55 $14.24 $15.89 $18.32 $23.75 $21.93
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .08 (d) (.01)(d) -- (e) -- (e) -- (e) (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.37 2.32 (1.65) (2.43) (.75) 2.39
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.45 2.31 (1.65) (2.43) (.75) 2.37
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- -- (.10)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (4.61) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (.07) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (4.68) (.55)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.00 $16.55 $14.24 $15.89 $18.32 $23.75
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.76* 16.22 (10.38) (13.26) (5.06) 10.65
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $416,444 $416,249 $495,165 $697,394 $911,299 $999,789
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .65*(d) 1.23 (d) 1.22 1.08 1.00 .96
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .46*(d) (.07)(d) .01 .02 -- (f) (.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.09* 111.20 107.08 133.78 263.98 188.16
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income (loss) 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 and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the period ended
November 30, 2004 reflect a reduction of less than 0.01% of average net
assets for class A shares. (Note 5).
(e) Per share net investment income amounted to less than $0.01 per
share.
(f) Ratio of net investment income to average net assets is less than
0.01%.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Nov. 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $15.76 $13.66 $15.35 $17.84 $23.39 $21.66
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .01 (d) (.12)(d) (.09) (.12) (.15) (.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.30 2.22 (1.60) (2.37) (.72) 2.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.31 2.10 (1.69) (2.49) (.87) 2.18
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (4.61) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (.07) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (4.68) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.07 $15.76 $13.66 $15.35 $17.84 $23.39
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.31* 15.37 (11.01) (13.96) (5.70) 9.90
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $331,224 $348,212 $391,161 $554,719 $796,227 $1,047,040
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.02*(d) 1.98 (d) 1.97 1.83 1.70 1.63
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) .07*(d) (.82)(d) (.74) (.73) (.70) (.79)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.09* 111.20 107.08 133.78 263.98 188.16
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Per share net investment income (loss) 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 and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the period ended
November 30, 2004 reflect a reduction of less than 0.01% of average net
assets for class B shares. (Note 5).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- -----------------------------------------------------------------------------------------------------------------
For the
Six months period
ended July 14,
Nov. 30 2000+ to
Per-share (Unaudited) Year ended May 31 May 31
operating performance 2004 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.09 $13.94 $15.67 $18.21 $27.15
- -----------------------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .01 (d) (.12)(d) (.10) (.12) (.11)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.33 2.27 (1.63) (2.42) (4.15)
- -----------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.34 2.15 (1.73) (2.54) (4.26)
- -----------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (4.61)
- -----------------------------------------------------------------------------------------------------------------
Return of capital -- (.07)
- -----------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (4.68)
- -----------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.43 $16.09 $13.94 $15.67 $18.21
- -----------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.33* 15.42 (11.04) (13.95) (17.40)*
- -----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,501 $3,547 $2,993 $3,405 $2,175
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.02*(d) 1.98 (d) 1.97 1.83 1.54*
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) .07*(d) (.83)(d) (.74) (.71) (.44)*
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.09* 111.20 107.08 133.78 263.98
- -----------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) 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 and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the period ended
November 30, 2004 reflect a reduction of less than 0.01% of average net
assets for class C shares. (Note 5).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Nov. 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $15.98 $13.82 $15.49 $17.96 $23.47 $21.70
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .03 (d) (.09)(d) (.06) (.08) (.11) (.14)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.33 2.25 (1.61) (2.39) (.72) 2.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.36 2.16 (1.67) (2.47) (.83) 2.22
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (4.61) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (.07) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (4.68) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.34 $15.98 $13.82 $15.49 $17.96 $23.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.51* 15.63 (10.78) (13.75) (5.49) 10.07
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,545 $19,280 $24,702 $38,646 $55,231 $70,129
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .90*(d) 1.73 (d) 1.72 1.58 1.50 1.46
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) .20*(d) (.57)(d) (.49) (.48) (.50) (.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.09* 111.20 107.08 133.78 263.98 188.16
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income (loss) 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 and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the period ended
November 30, 2004 reflect a reduction of less than 0.01% of average net
assets for class M shares. (Note 5).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- --------------------------------------------------------------------------
For the
Six months period
ended Dec. 1,
Nov. 30 2003+ to
Per-share (Unaudited) May 31
operating performance 2004 2004
- --------------------------------------------------------------------------
Net asset value,
beginning of period $16.54 $15.82
- --------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------
Net investment income (loss) (a) .05 (d) (.02)(d)
- --------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.37 .74
- ----------------------------------------------------------------------
Total from
investment operations 1.42 .72
- --------------------------------------------------------------------------
Net asset value,
end of period $17.96 $16.54
- --------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.58* 4.55*
- --------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------
Net assets, end of period
(in thousands) $12 $8
- --------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .77*(d) .74*(d)
- --------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) .33*(d) (.19)*(d)
- --------------------------------------------------------------------------
Portfolio turnover (%) 66.09* 111.20
- --------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) 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 (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the period ended
November 30, 2004 reflect a reduction of less than 0.01% of average net
assets for class R shares. (Note 5).
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
November 30, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam Capital Appreciation Fund (the "fund"), a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company. The
fund seeks capital appreciation by investing primarily in common stocks
that offer potential for capital appreciation. Current income is only an
incidental consideration in selecting investments for the fund.
The fund offers class A, class B, class C, class M and class R shares.
Class A shares are sold with a maximum front-end sales charge of 5.25%.
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, class M and class R 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 on going distribution fee that is
higher than class A and class R shares but lower than class B and class
C shares. Class R shares are sold without a front-end sales charge and
pay an ongoing distri bution fee that is higher than class A shares,
but lower than class B, class C and class M shares. Class R shares are
offered to qualified employee-benefit plans.
Effective April 19, 2004 (May 3, 2004 for defined contribution plans
administered by Putnam), a 2.00% redemption fee may apply to any shares
that are redeemed (either by selling or exchanging into another fund)
within 5 days of purchase. The redemption fee is accounted for as an
addition to paid-in-capital.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees
applicable to such classes). 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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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 valued at the last reported sales price on their
principal exchange, or official closing price for certain markets. If no
sales are reported -- as in the case of some securities traded
over-the-counter -- a security is valued at its last reported bid price.
Many securities markets and exchanges outside the U.S. close prior to
the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect events that occur after such close but before the close of the
New York Stock Exchange. Accordingly, on certain days, the fund will
fair value foreign securities taking into account multiple factors,
including movements in the U.S. securities markets. The number of days
on which fair value prices will be used will depend on market activity
and it is possible that fair value prices will be used by the fund to a
significant extent.
Short-term investments having remaining maturities of 60 days or less
are valued at amortized cost, which approximates fair value. Other
investments, including restricted securities, are valued at fair value
following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Joint trading account Pursuant to an Exemptive Order from the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances, including cash collateral received under security lending
arrangements, into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, LLC ("Putnam Management"), the fund's
manager, an indirect wholly-owned subsidiary of Putnam, LLC. These
balances may be invested in issuers of high-grade short-term investments
having maturities of up to 397 days for collateral received under
security lending arrangements and up to 90 days for other cash
investments.
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) Security transactions and related investment income Security
transactions are recorded 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, net of applicable withholding taxes, is
recognized on the ex-dividend date. Non-cash dividends, if any, are
recorded at the fair market value of the securities received.
The fund earned certain fees in connection with its senior loan
purchasing activities. These fees are treated as market discount and are
recorded as income in the statement of operations.
E) 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. Risks may exceed amounts recognized on the statement
of assets and liabilities. 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. If a written call
option is exercised, the premium originally received is recorded as an
addition to sales proceeds. If a written put option is exercised, the
premium originally received is recorded as an addition to the cost of
investments.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." 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.
Futures and written option contracts outstanding at period end, if any,
are listed after the fund's portfolio.
F) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the statement of operations. At November 30, 2004, the value
of securities loaned amounted to $52,569,532. The fund received cash
collateral of $54,421,326 which is pooled with collateral of other
Putnam funds into 20 issuers of high grade short-term investments.
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 of 1986 (the "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 Code, 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 May 31, 2004, the fund had a capital loss carryover of $216,075,875
available to the extent allowed by the Code to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- --------------------------------
$60,346,067 May 31, 2010
155,729,808 May 31, 2011
The aggregate identified cost on a tax basis is $763,735,859, resulting
in gross unrealized appreciation and depreciation of $86,973,166 and
$28,710,345, respectively, or net unrealized appreciation of
$58,262,821.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, 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
Putnam Management is paid for management and investment advisory
services 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.
Effective January 28, 2004, Putnam Management has agreed to waive fees
and reimburse expenses of the fund through May 31, 2005 to the extent
necessary to ensure that the fund's expenses do not exceed the average
expenses of the front-end load funds viewed by Lipper Inc. as having the
same investment classification or objective as the fund. The expense
reimbursement is based on a comparison of the fund's expenses with the
average annualized operating expenses of the funds in its Lipper peer
group for each calendar quarter during the fund's last fiscal year,
excluding12b-1 fees and without giving effect to any expense offset and
brokerage service arrangements that may reduce fund expenses. For the
period ended November 30, 2004, Putnam Management did not waive any of
its management fee to the fund.
For the period ended November 30, 2004, Putnam Management has assumed
$27,714 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 6).
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, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended November 30, 2004,
the fund paid PFTC $1,125,051 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the six months ended November 30,
2004, the fund's expenses were reduced by $252,684 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,374, as a quarterly retainer, has been allocated to the fund,
and an additional fee for each Trustees 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 Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the statement of assets
and liabilities. The Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C, class M and class R shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose of the
Plans is to compensate Putnam Retail Management, a wholly-owned
subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for
services provided and expenses incurred in distributing shares of the
fund. The Plans provide for payments by the fund to Putnam Retail
Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and
1.00% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and
0.50% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively.
For the six months ended November 30, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $11,853 and $599 from
the sale of class A and class M shares, respectively, and received
$102,568 and $167 in contingent deferred sales charges from redemptions
of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain
redemptions of class A and class M shares, respectively. For six months
ended November 30, 2004, Putnam Retail Management, acting as underwriter,
received $333 and no monies on class A and class M redemptions,
respectively.
Note 3
Purchases and sales of securities
During the six months ended November 30, 2004, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $495,083,392, and $588,110,161, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At November 30, 2004, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 1,543,691 $25,806,737
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
1,543,691 25,806,737
Shares repurchased (3,554,561) (59,125,212)
- ----------------------------------------------------------------
Net decrease (2,010,870) $(33,318,475)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 3,543,043 $55,256,831
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
3,543,043 55,256,831
Shares repurchased (13,169,296) (206,905,636)
- ----------------------------------------------------------------
Net decrease (9,626,253) $(151,648,805)
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 551,118 $8,710,938
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
551,118 8,710,938
Shares repurchased (3,247,109) (51,290,337)
- ----------------------------------------------------------------
Net decrease (2,695,991) $(42,579,399)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 1,927,979 $28,844,587
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
1,927,979 28,844,587
Shares repurchased (8,470,405) (127,609,791)
- ----------------------------------------------------------------
Net decrease (6,542,426) $(98,765,204)
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 30,514 $491,141
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
30,514 491,141
Shares repurchased (50,136) (803,939)
- ----------------------------------------------------------------
Net decrease (19,622) $(312,798)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 255,781 $3,941,343
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
255,781 3,941,343
Shares repurchased (249,923) (3,884,872)
- ----------------------------------------------------------------
Net increase 5,858 $56,471
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 55,340 $888,646
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
55,340 888,646
Shares repurchased (192,002) (3,065,923)
- ----------------------------------------------------------------
Net decrease (136,662) $(2,177,277)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 180,057 $2,684,985
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
180,057 2,684,985
Shares repurchased (761,321) (11,625,052)
- ----------------------------------------------------------------
Net decrease (581,264) $(8,940,067)
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 347 $5,680
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
347 5,680
Shares repurchased (206) (3,440)
- ----------------------------------------------------------------
Net increase 141 $2,240
- ----------------------------------------------------------------
For the period December 1, 2003
(commencement of operations)
to May 31, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 499 $7,935
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
499 7,935
Shares repurchased -- --
- ----------------------------------------------------------------
Net increase 499 $7,935
- ----------------------------------------------------------------
At November 30, 2004, Putnam , LLC owned 63 class R shares of
the fund (9.8% of class R shares outstanding), valued at $1,131.
Note 5
Investment in Putnam Prime Money Market Fund
Pursuant to an Exemptive Order from the Securities and Exchange Commission
("SEC"), the fund invests in Putnam Prime Money Market Fund, an open end
management investment company managed by Putnam Management. Management fees
paid by the fund are reduced by an amount equal to the management fees paid
by Putnam Prime Money Market Fund with respect to assets invested by the
fund in Putnam Prime Money Market Fund. For the year ended November 30,
2004, management fees paid were reduced by $4,337 relating to the fund's
investments to Putnam Prime Money Market Fund. Income distributions earned
by the fund are recorded as income in the statement of operations and
totaled $39,173 for the period ended November 30, 2004.
Note 6
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities Division
representing a final settlement of all charges brought against Putnam
Management by those agencies on October 28, 2003 in connection with
excessive short-term trading by Putnam employees and, in the case of the
charges brought by the Massachusetts Securities Division, by participants in
some Putnam-administered 401(k) plans. The settlement with the SEC requires
Putnam Management to pay $5 million in disgorgement plus a civil monetary
penalty of $50 million, and the settlement with the Massachusetts Securities
Division requires Putnam Management to pay $5 million in restitution and an
administrative fine of $50 million. The settlements also leave intact the
process established under an earlier partial settlement with the SEC under
which Putnam Management agreed to pay the amount of restitution determined
by an independent consultant, which may exceed the disgorgement and
restitution amounts specified above, pursuant to a plan to be developed by
the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear all
costs, including restitution, civil penalties and associated legal fees
stemming from both of these proceedings. The SEC's and Massachusetts
Securities Division's allegations and related matters also serve as the
general basis for numerous lawsuits, including purported class action
lawsuits filed against Putnam Management and certain related parties,
including certain Putnam funds. Putnam Management has agreed to bear any
costs incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, Putnam Management believes that the
likelihood that the pending private lawsuits and purported class action
lawsuits will have a material adverse financial impact on the fund is
remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients, including
the Putnam funds.
The fund may experience increased redemptions as a result of these
matters, which could re sult in increased transaction costs and operating
expenses.
Putnam Management has negotiated an offer of settlement with the staff of
the SEC, which the staff has agreed to recommend to the Commissioners of the
SEC. The offer of settlement would resolve matters arising out of the SEC's
investigation of Putnam Management's brokerage practices. The settlement
would involve the alleged failure by Putnam Management to fully and
effectively disclose its practices relating to the allocation of brokerage
on portfolio transactions to broker-dealers who sold shares of Putnam mutual
funds. Putnam Management ceased directing brokerage to broker-dealers in
connection with the sale of fund shares as of January 1, 2004. Under the
offer of settlement, Putnam Management would pay a civil penalty in the
amount of $40 million and disgorgement in the amount of one dollar $1. The
total amount of the payment would be paid to certain Putnam funds, pursuant
to a distribution plan to be submitted to the SEC. The settlement remains
subject to final documentation and approval by the Commissioners of the SEC.
Results of November 11, 2004
shareholder meeting
(Unaudited)
A special meeting of shareholders of the fund was held on November 11, 2004.
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
for withheld
- ----------------------------------------------------------------
Jameson A. Baxter 24,449,758 1,200,176
Charles B. Curtis 24,455,940 1,193,994
Myra R. Drucker 24,462,580 1,187,354
Charles E. Haldeman, Jr 24,455,630 1,194,304
John A. Hill 24,440,837 1,209,097
Ronald J. Jackson 24,469,184 1,180,750
Paul L. Joskow 24,476,399 1,173,535
Elizabeth T. Kennan 24,427,256 1,222,678
John H. Mullin, III 24,451,708 1,198,226
Robert E. Patterson 24,459,061 1,190,873
George Putnam, III 24,434,845 1,215,089
A.J.C. Smith 24,430,915 1,219,019
W. Thomas Stephens 24,472,029 1,177,905
Richard B. Worley 24,469,354 1,180,580
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility permitted
by the Investment Company Act was adjourned.*
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was adjourned.*
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money Market
Fund was approved as follows:
Votes Votes
for against Abstentions
- -----------------------------------------------------------------
17,404,122 1,618,468 6,627,344
A proposal to amend the fund's Agreement and Declaration of Trust to permit
the fund to satisfy redemption requests other than in cash was adjourned.*
* Since sufficient votes in favor of this proposal were not received as of
November 11, 2004, the shareholder meeting with respect to this proposal
has been adjourned until no later than January 10, 2005 to permit further
solicitation in the Trustees' discretion.
All tabulations are rounded to the nearest whole number.
Brokerage commissions
(Unaudited)
Brokerage commissions are paid to firms that execute trades on behalf of
your fund. When choosing these firms, Putnam is required by law to seek the
best execution of the trades, taking all relevant factors into
consideration, including expected quality of execution and commission rate.
Listed below are the largest relationships based upon brokerage commissions
for your fund and the other funds in Putnam's U.S. Core group for the year
ended November 30, 2004. The other Putnam mutual funds in this group are
Putnam Investors Fund, Putnam Tax Smart Equity Fund, Putnam VT Capital
Appreciation Fund, and Putnam VT Investors Fund.
The top five firms that received brokerage commissions for trades executed
for the U.S. Core group are (in descending order) Goldman Sachs, Merrill
Lynch, Citigroup, Credit Suisse First Boston, and Deutsche Bank. Commissions
paid to these firms together represented approximately 41% of the total
brokerage commissions paid for the year ended November 30, 2004.
Commissions paid to the next 10 firms together represented approximately 37%
of the total brokerage commissions paid during the period. These firms are
(in alphabetical order) Bank of America, Bear Stearns, Canadian Imperial
Bank, JP Morgan, Lazard Freres, Lehman Brothers, Morgan Stanley, Royal Bank
of Canada, Standard & Poor's, and Union Bank of Switzerland.
Additional information about brokerage commissions is available on the
Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam
funds disclose commissions by firm to the SEC in semiannual filings on form
N-SAR.
Services for shareholders
Investor services
Help your investment grow Set up a program for systematic investing with as
little as $25 a month from a Putnam fund or from your own savings or
checking account. (Regular investing does not guarantee a profit or protect
against loss in a declining market.)
Switch funds easily* You can move money from one Putnam fund to another
within the same class of shares without a service charge.
Access your money easily You can have checks sent regularly or redeem shares
any business day at the then-current net asset value, which may be more or
less than the original cost of the shares. Class B and class C shares carry
a sales charge that is applied to certain withdrawals.
How to buy additional shares You may buy shares through your financial
advisor or directly from Putnam. To open an account by mail, send a check
made payable to the name of the fund along with a completed fund
application. To add to an existing account, complete the investment slip
found at the top of your Confirmation of Activity statement and return it
with a check payable to your fund.
For more information
Visit www.putnaminvestments.com A secure section of our Web site contains
complete information on your account, including balances and transactions,
updated daily. You may also conduct transactions, such as exchanges,
additional investments, and address changes. Log on today to get your
password.
Use our toll-free number 1-800-225-1581 Ask a helpful Putnam representative
or your financial advisor for details about any of these or other services,
or see your prospectus.
* This privilege is subject to change or termination. An exchange of funds
may result in a taxable event. In addition, a 2% redemption fee will be
applied to shares exchanged or sold within 5 days of purchase, and certain
funds have imposed a 1% redemption fee on total assets redeemed or
exchanged between 6 and 90 days of purchase.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and Chief
Compliance Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Capital
Appreciation Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For
more recent performance, please visit www.putnaminvestments.com. Investors
should carefully consider the investment objective, risks, charges, and
expenses of a fund, which are described in its prospectus. For this and
other information or to request a prospectus, call 1-800-225-1581 toll
free. Please read the prospectus carefully before investing. The fund's
Statement of Additional Information contains additional information about
the fund's Trustees and is available without charge upon request by calling
1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA002-216548 1/05
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: January 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: January 28, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: January 28, 2005