Semiannual Report
For the period ended April 30, 2005
THLee
Putnam
Capital
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:
TH Lee, Putnam Emerging Opportunities Portfolio
About the fund and TH Lee, Putnam Capital LLC
TH Lee, Putnam Emerging Opportunities Portfolio ("the fund") is a closed-end
interval fund. This innovative fund pursues aggressive growth by combining
investments in publicly traded stocks and privately held companies in a
closed-end format. With this special structure, the fund can tap into
companies with the best growth potential while maintaining diversification
across public and private markets.
The fund is sponsored by an affiliate of TH Lee, Putnam Capital LLC, which
is a joint venture of Putnam Investments ("Putnam") and Thomas H. Lee
Partners LP ("TH Lee"). This venture was founded in 1999 to offer
alternative investment products to individual investors who have
historically lacked access to the private-equity marketplace. Thomas H. Lee
Partners LP, founded in 1974, is one of the oldest and most successful
private-equity investment firms in the United States. The firm's investment
strategy targets growth companies with competitive advantages in expanding
or consolidating industries. Putnam Investments, founded in 1937, is one of
the world's largest mutual fund companies and a leader in investment
research and portfolio management through disciplined teamwork.
The fund is managed by Richard Weed, Frederick Wynn, and Raymond Haddad, who
are members of Putnam's Small and Emerging Growth Team, which analyzes
small- and mid-capitalization growth stocks.
The fund's management structure also includes an Investment Committee
consisting of senior Putnam and TH Lee investment professionals. The
Investment Committee consults with the management team and gives final
approval to the structure of all private-equity deals.
Report from Fund Management
Performance commentary
During the first half of the portfolio's fiscal year, the stock market made
a modest advance and the portfolio's return at net asset value (NAV)
slightly outperformed its benchmark of publicly offered aggressive growth
stocks. We are pleased to report that one of the fund's private equity
holdings, Spirit Finance, made a successful initial public offering during
the period, which contributed to the portfolio's results. Holdings across
many sectors, including health care, energy, and financials, contributed
positively to results, though our portfolio team's stock selection had a
negative impact in the technology sector.
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RETURN FOR PERIODS ENDED APRIL 30, 2005
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Russell 2500
TH Lee, Putnam Emerging Opportunities Portfolio NAV POP Growth Index
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6 months 1.41% -2.91% 1.12%
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1 year 4.89 0.42 2.65
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Life of fund (since inception 7/30/01) 12.87 8.07 6.08
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Annual average 3.27 2.09 1.58
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RETURN FOR PERIODS ENDED MARCH 31, 2005 (most recent quarter)
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Russell 2500
TH Lee, Putnam Emerging Opportunities Portfolio NAV POP Growth Index
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6 months 9.34% 4.68% 9.94%
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1 year 5.67 1.17 3.91
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Life of fund (since inception 7/30/01) 17.52 12.53 12.14
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Annual average 4.49 3.26 3.16
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Past performance does not indicate future results. Performance assumes
reinvestment of distributions and does not account for taxes. More recent
returns may be less or more than those shown. Investment returns will
fluctuate and you may have a gain or a loss when you sell your shares.
Returns at public offering price (POP) reflect the highest applicable sales
charge of 4.25%. Sales charges differ with the original purchase amount. The
fund currently is closed to new investments. The Russell 2500 Growth Index
is an unmanaged index of those companies in the small/mid-cap Russell 2500
Index chosen for their growth orientation. Indexes are not available for
direct investment. For a portion of the period this fund limited expenses,
without which returns would have been lower.
Market overview
The beginning of the semiannual period, in November, coincided with the
start of a stock-market rally triggered by the uneventful resolution of the
presidential election. Concerns about the possibility of a disputed outcome
or a terrorist attack had kept markets flat for months before Election Day;
but afterwards, relief was followed by enthusiasm about solid economic
growth, low inflation, and relatively low interest rates. After December,
however, a renewed jump in energy prices and the Federal Reserve Board's
(the Fed's) ongoing series of interest-rate increases created doubts about
the pace of the expansion. The Fed's statements lent credibility to
indications of building inflationary pressures.
For the aggressive growth area of the market, industry-specific problems
caused a setback for several sectors. First, in the pharmaceuticals
industry, regulatory issues and patent expirations at large high-profile
companies provoked pessimism for the industry, and contributed to declines
among small- and mid-capitalization stocks. In the technology sector, stocks
declined because of lower estimates for future sales growth. Semiconductor
stocks were the first group hit by these concerns, but the trend spread to
other industries. In April, after IBM reported disappointing sales growth--
in particular, for its global services division, which markets technology
and business expertise to large corporations-- technology stocks broadly
declined, dragging down the portfolio's results in the last month of its
semiannual reporting period. The technology sector rebounded in May.
Strategy overview
The portfolio includes investments in both public and private equities that
we select with a strategy designed to target companies with aggressive
growth characteristics. With regard to the publicly traded holdings, we
focus our research on small- and mid-capitalization stocks that we consider
likely to achieve some of the top rates of earnings growth. Our selection
process combines analysis of quantitative data with fundamental analysis of
individual companies. The portfolio invests across all industry sectors,
although the sector weightings of the public equity holdings tend to reflect
those of the benchmark, the Russell 2500 Growth Index, which has large
absolute weightings in technology, health care, and consumer cyclicals, and
small absolute weightings in slow-growing sectors such as utilities,
conglomerates, and basic materials.
[GRAPHIC OMITTED: pie chart ASSET ALLOCATION AS OF 4/30/05]
ASSET ALLOCATION AS OF 4/30/05
ASSET CLASS PERCENT OF FUND
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* Public equities 59.5%
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* Private equities 35.0
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* Short-term investments 5.5
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Footnote reads:
Weightings are shown as a percentage of investments. Holdings will vary over
time.
The private equity holdings in the portfolio are small companies in the late
venture-capital stage of development. Each decision to take a position in a
specific holding is the result of a patient, diligent research process,
designed to identify companies with effective, seasoned management,
competitive products and services, and strong business models designed for
growth. In January 2005 we decided, in consultation with the fund's Board of
Trustees, that the fund will not make additional private equity investments
(other than follow-on investments to protect the fund's current positions)
for the foreseeable future because the current weighting of private equities
is near the fund's target weighting. We will continue to monitor closely the
fundamental business progress made by the private companies currently held
in the portfolio.
How fund holdings affected performance
With regard to public equity holdings, one of the top performers in the
period was United Defense Industries, which was an overweight position
relative to the benchmark. When this company agreed to be acquired by BAE
Systems Plc., a large armaments company based in the United Kingdom, the
stock rose in value by approximately 50% and we sold the position at a
profit.
Our stock selection decisions in both the health-care and financial sectors
contributed positively to results. One of the portfolio's strongest
health-care holdings was Coventry Health Care, a health maintenance
organization (HMO). The HMO industry performed much better than the broad
health-care sector, in part because observers believe the continuation of
President Bush's administration means a reduced likelihood of major changes
in health-care regulations. In the financials sector, a top performer was
Investors Financial Services, a company that provides specialized services,
such as global custody, multicurrency accounting, and mutual fund
administration, to mutual fund complexes, investment advisors, family
offices, banks, and insurance companies. The company has served the growing
need of the financial industry to reduce business costs. We took profits on
this position when it reached what we considered full value.
Most of the portfolio's underperforming holdings were in the technology
sector. RSA Security, an overweight holding relative to the benchmark, was
one of the main detractors from results. RSA specializes in making devices
that allow computer users to access computer networks in a secure fashion
from remote locations. However, poor sales of software applications caused
the company to miss its earnings estimates in the first quarter of the year.
Two other technology stocks that underperformed were Catapult Communications
Corp. and Skyworks Solutions. Catapult designs software that helps
telecommunications companies test their other software applications. The
stock declined when the company lost an important customer in Japan, but we
believe it has appreciation potential and we continue to own it. Skyworks,
which makes semiconductor modules for wireless communication devices,
underperformed as revenue growth slowed recently, and we decided to sell the
position because of the company's deteriorating outlook.
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TOP SECTOR WEIGHTINGS AS OF 4/30/05 (includes both public and private
holdings)
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Health care 25.8%
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Technology 22.5
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Consumer staples 15.8
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Consumer cyclicals 11.3
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Capital goods 4.6
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Weightings are shown as a percentage of net assets. Holdings will vary
over time.
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TOP 10 HOLDINGS (includes public and private companies)
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INDUSTRY
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Capella Education Co., Inc. Schools
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CommVault Systems Software
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Refractec Medical Technology
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Spirit Finance Corp. Real Estate
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Restore Medical Medical Technology
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Commerce Bancorp, Inc. Banking
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Henry Schein, Inc. Health Care Distribution
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Celgene Corp. Biotechnology
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Maverick Tube Corp. Oil and Gas Equipment
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Pediatrix Medical Group, Inc. Health Care Services
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These holdings represent 43.7% of the fund's net assets as of 4/30/05.
Portfolio holdings will vary over time.
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With regard to private equity holdings, Spirit Finance, which started the
period as a private company, completed its initial public offering in
December and became a publicly traded company. At current prices we believe
this stock offers long-term capital appreciation potential and it had an
attractive dividend yield of over 7% at the end of the reporting period.
Other private equity holdings have continued to make fundamental progress.
CommVault Systems finished its most recent fiscal year with its first
operating profit, and the company has made progress in strengthening its
relationships with Dell Computer and Hitachi Data Systems. These
relationships demonstrate the strength of the company's product offerings,
which in some cases are displacing products offered by larger,
better-capitalized competitors. Restore Medical, a company that treats
sleep-disordered breathing problems, such as obstructive sleep apnea (OSA),
has hired a new Chief Executive Officer who has a successful track record
leading small medical device companies. Restore received its CE mark in
Europe (which is similar to FDA approval in the United States) for OSA,
which allows it to market its therapy for OSA in Europe in addition to the
devices it sells for the treatment of problematic snoring. Another holding,
Refractec, a company that offers ophthalmologists a technology to correct
near-vision problems without the use of a laser, has developed a new
technique that allows physicians to achieve treatment outcomes that are more
consistent across their patients. The company has also hired a vice
president for international sales with the goal of expanding sales into
international markets that offer significant opportunities. Last, during the
period Capella Education filed an initial registration statement with the
SEC for an initial public offering. Capella, an accredited, online,
degree-granting university, has enrolled more than 12,000 students across
its many Ph.D., Master's, and Bachelor's programs.
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. In accordance with federal securities laws our ability to comment on
private equity investments that are the subject of registration statement
filings with the Securities and Exchange Commission may be limited.
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 team's plans
for responding to them.
Our strategy and positioning of the portfolio remain consistent at all
times. We will continue to emphasize aggressive growth companies of various
sizes. While we do not attempt to forecast market trends, we note that
publicly traded growth-style stocks have experienced a decline in recent
months, in part because the stock market is adjusting to the Fed's
interest-rate increases. Higher interest rates historically have compressed
price multiples, meaning that even if corporate earnings remain at today's
healthy levels, stock prices could decline until interest rates stabilize.
The byproduct is that stock valuations become generally more attractive.
While there may be volatility as the Fed continues to tighten monetary
policy, we believe the economic background is still supportive. The economy
is expanding at a moderate pace and new jobs are being created. With regard
to private equities, as we mentioned above, we will not be adding any new
holdings to the portfolio for the foreseeable future, but we remain
optimistic for the business potential of the private companies currently
held. We continue to communicate with the management and with the boards of
directors of these companies on a regular basis and monitor their business
development. Given the long-term growth rates of the companies, both private
and public, that the portfolio holds, we anticipate they can achieve capital
appreciation as the market recognizes and rewards their growth over time.
The views expressed here are exclusively those of TH Lee Putnam Capital
Management, LLC, the fund's Manager. They are not meant as investment
advice. Although the described holdings were viewed favorably as of 4/30/05,
there is no guarantee the fund will continue to hold these securities in the
future.
The fund is currently closed to new investments. If the fund is re-opened,
shares of the fund may be offered only to investors who have a net worth of
more than $1,500,000 or who otherwise meet the definition of a "qualified
client," as defined in and adopted under the Investment Advisers Act of
1940, as amended.
An investment in the fund involves a considerable amount of risk and should
be considered speculative. Because it is possible that you may lose some or
all of your investment, you should not invest in the fund unless you can
afford a total loss of investment. An investment in the fund involves a high
degree of risk, which includes the following specific types of risk: the
risks associated with venture-capital companies and venture-capital funds;
investing in securities that are illiquid and subject to substantial
transfer restrictions; the risks of investing in smaller companies; the
fund's ability to focus holdings in a small number of industry sectors which
may be relatively new or emerging industries; the risk of investing in a
fund that will pay an incentive fee; investing in a fund, many of whose
assets will be priced in the absence of a readily available market and may
be priced based on estimates of fair value, which may prove inaccurate; and
the risk involved in the fund Manager's limited experience in
venture-capital investing. International investing involves certain risks,
such as currency fluctuations, economic instability, and political
developments. Additional risks may be associated with emerging-market
securities, including illiquidity and volatility. The fund invests some or
all of its assets in small and/or midsize companies. Such investments
increase the risk of greater price fluctuations.
The fund's portfolio
April 30, 2005 (Unaudited)
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Common stocks (61.4%) *
NUMBER OF SHARES VALUE
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Automotive (1.1%)
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7,400 BorgWarner, Inc. $338,328
8,800 CLARCOR, Inc. 445,368
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783,696
Basic Materials (1.4%)
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21,200 Crown Holdings, Inc. (NON) 319,060
14,627 Steel Dynamics, Inc. 397,562
17,700 Worthington Industries , Inc. 287,802
--------------
1,004,424
Biotechnology (1.8%)
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9,800 Amylin Pharmaceuticals, Inc. (NON) 166,600
13,524 Celgene Corp. (NON) 512,695
8,400 Connetics Corp. (NON) 182,532
11,700 Medicines Co. (NON) 249,795
4,200 Neurocrine Biosciences, Inc. (NON) 146,832
--------------
1,258,454
Capital Goods (4.6%)
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8,800 Applied Signal Technology, Inc. 171,688
9,500 Autoliv, Inc. (Sweden) 420,375
10,100 Global Imaging Systems, Inc. (NON) 350,369
17,200 Maverick Tube Corp. (NON) 500,348
11,900 Mueller Industries, Inc. 308,210
9,600 Pactiv Corp. (NON) 205,824
5,600 Roper Industries, Inc. 378,952
6,000 Terex Corp. (NON) 224,280
12,700 Timken Co. 315,468
16,500 WESCO International, Inc. (NON) 398,970
--------------
3,274,484
Commercial and Consumer Services (0.9%)
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7,000 Arbitron, Inc. 296,240
21,500 Sotheby's Holdings, Inc. Class A (NON) 352,170
--------------
648,410
Communication Services (1.0%)
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38,100 Premiere Global Services, Inc. (NON) 411,480
3,900 Telephone and Data Systems, Inc. 301,041
--------------
712,521
Communications Equipment (0.5%)
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16,000 Aspect Communications Corp. (NON) 136,160
9,800 Comverse Technology, Inc. (NON) 223,342
--------------
359,502
Computers (1.3%)
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1,300 Avid Technology, Inc. (NON) 64,363
47,500 Brocade Communications Systems, Inc. (NON) 207,100
10,200 Catapult Communications Corp. (NON) 150,756
7,800 Intergraph Corp. (NON) 230,646
4,923 Logitech International SA ADR (Switzerland) (NON) 285,288
--------------
938,153
Conglomerates (0.4%)
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5,700 Harsco Corp. 305,805
Consumer Staples (3.2%)
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5,700 Alliance Data Systems Corp. (NON) 230,280
8,200 Blyth Industries, Inc. 224,762
14,800 Career Education Corp. (NON) 465,312
4,400 CEC Entertainment, Inc. (NON) 159,280
15,100 Education Management Corp. (NON) 422,800
5,800 Energizer Holdings, Inc. (NON) 330,426
10,800 O'Charleys, Inc. (NON) 215,352
4,500 Red Robin Gourmet Burgers, Inc. (NON) 218,070
--------------
2,266,282
Distributors (0.7%)
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18,000 Hughes Supply, Inc. 469,800
Electronics (3.1%)
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5,600 Amphenol Corp. Class A 220,864
90,870 Atmel Corp. (NON) 212,982
13,000 Freescale Semiconductor, Inc. Class A (NON) 243,360
25,900 MEMC Electronic Materials, Inc. (NON) 303,807
13,800 Omnivision Technologies, Inc. (NON) 193,200
16,900 PerkinElmer, Inc. 312,650
24,700 PLX Technology, Inc. (NON) 222,053
8,500 QLogic Corp. (NON) 282,540
7,600 Storage Technology Corp. (NON) 211,280
--------------
2,202,736
Energy (4.1%)
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8,000 CONSOL Energy, Inc. 345,920
7,600 Cooper Cameron Corp. (NON) 417,544
5,500 Newfield Exploration Co. (NON) 390,665
5,400 Noble Energy, Inc. 346,248
17,100 Oil States International, Inc. (NON) 347,301
19,000 Pride International, Inc. (NON) 423,700
11,300 Rowan Cos., Inc. 299,789
8,600 Unit Corp. (NON) 329,896
--------------
2,901,063
Entertainment (0.4%)
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8,100 Speedway Motorsports, Inc. 277,830
Financial (4.3%)
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9,900 Calamos Asset Management, Inc. Class A 230,571
25,200 Commerce Bancorp, Inc. 705,348
4,398 Compass Bancshares, Inc. 189,202
14,000 E*Trade Group, Inc. (NON) 155,540
15,500 Eaton Vance Corp. 363,165
6,700 Nuveen Investments, Inc. Class A 227,733
19,100 Providian Financial Corp. (NON) 318,397
12,000 TCF Financial Corp. 303,480
6,700 Texas Regional Bancshares, Inc. 186,729
12,900 W.R. Berkley Corp. 419,250
--------------
3,099,415
Gaming & Lottery (1.1%)
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6,500 Ameristar Casinos, Inc. 320,450
19,100 GTECH Holdings Corp. 467,377
--------------
787,827
Health Care Services (5.3%)
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9,300 Centene Corp. (NON) 259,005
5,000 Cerner Corp. (NON) 290,300
2,100 Coventry Health Care, Inc. (NON) 143,703
6,900 Genesis HealthCare Corp. (NON) 275,310
13,800 Henry Schein, Inc. (NON) 517,638
8,200 LifePoint Hospitals, Inc. (NON) 364,490
9,900 Lincare Holdings, Inc. (NON) 422,532
7,300 Pediatrix Medical Group, Inc. (NON) 497,057
5,500 Sierra Health Services, Inc. (NON) 355,795
11,700 Steris Corp. (NON) 277,056
7,200 Triad Hospitals, Inc. (NON) 369,000
--------------
3,771,886
Homebuilding (1.8%)
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6,100 Hovnanian Enterprises, Inc. Class A (NON) 309,697
3,300 Lennar Corp. 169,851
600 NVR, Inc. (NON) 431,010
5,800 Ryland Group, Inc. (The) 356,120
--------------
1,266,678
Leisure (0.4%)
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6,400 Brunswick Corp. 268,800
Medical Technology (4.5%)
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7,900 Atherogenics, Inc. (NON) 84,846
6,100 Bausch & Lomb, Inc. 457,500
3,600 C.R. Bard, Inc. 256,212
7,600 DENTSPLY International, Inc. 415,416
8,400 Diagnostic Products Corp. 407,400
11,400 DJ Orthopedics, Inc. (NON) 286,710
3,800 Kinetic Concepts, Inc. (NON) 233,510
9,900 Mentor Corp. 363,330
6,500 Respironics, Inc. (NON) 410,735
8,300 Varian Medical Systems, Inc. (NON) 280,042
--------------
3,195,701
Pharmaceuticals (2.6%)
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7,500 Barr Pharmaceuticals, Inc. (NON) 388,950
7,700 Cephalon, Inc. (NON) 338,030
16,500 IVAX Corp. (NON) 311,850
3,600 Owens & Minor, Inc. 104,436
11,600 Par Pharmaceutical Cos., Inc. (NON) 348,348
20,000 Penwest Pharmaceuticals Co. (Private) (NON) 256,000
9,395 Salix Pharmaceuticals, Ltd. (NON) 134,349
--------------
1,881,963
Real Estate (4.4%)
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300,000 Spirit Finance Corp. (R) 3,105,000
Retail (5.0%)
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4,500 Abercrombie & Fitch Co. Class A 242,775
8,500 Advance Auto Parts, Inc. (NON) 453,475
7,300 BJ's Wholesale Club, Inc. (NON) 194,545
16,800 Claire's Stores, Inc. 366,576
11,800 Michaels Stores, Inc. 391,760
17,900 Pacific Sunwear of California, Inc. (NON) 404,719
13,300 PETsMART, Inc. 354,445
15,400 Ross Stores, Inc. 411,488
4,400 Timberland Co. (The) Class A (NON) 303,820
9,200 Urban Outfitters, Inc. (NON) 407,560
--------------
3,531,163
Semiconductor (3.1%)
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12,400 Equifax, Inc. 417,260
7,300 Fair Isaac Corp. 240,024
9,100 Infospace, Inc. (NON) 282,009
19,200 Ingram Micro, Inc. Class A (NON) 319,872
13,800 Lam Research Corp. (NON) 353,970
35,700 ON Semiconductor Corp. (NON) 122,808
10,100 RSA Security, Inc. (NON) 108,474
15,100 VeriSign, Inc. (NON) 399,545
--------------
2,243,962
Software (3.1%)
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9,395 Amdocs, Ltd. (Guernsey) (NON) 250,940
9,300 Citrix Systems, Inc. (NON) 209,250
4,700 Cognos, Inc. (Canada) (NON) 177,848
8,600 FileNET Corp. (NON) 227,900
6,400 Hyperion Solutions Corp. (NON) 260,288
5,400 Kronos, Inc. (NON) 210,870
38,100 Parametric Technology Corp. (NON) 202,692
8,700 Progress Software Corp. (NON) 232,116
20,900 Synopsys, Inc. (NON) 343,596
5,600 WebEx Communications, Inc. (NON) 122,192
--------------
2,237,692
Transportation (1.3%)
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5,300 Arkansas Best Corp. 167,109
4,400 J. B. Hunt Transport Services, Inc. 171,996
11,800 Knight Transportation, Inc. 249,334
17,700 SkyWest, Inc. 320,016
--------------
908,455
--------------
Total Common stocks (cost $41,860,259) $43,701,702
Convertible preferred stocks (35.5%) *
NUMBER OF SHARES VALUE
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449,640 Capella Education Co., Inc. Ser. G, zero % cv.
pfd. (Private) (acquired 2/14/02, cost $5,009,274)
(RES) (NON) (F) $8,992,796
2,235,708 CommVault Systems Ser. CC, zero % cv. pfd.
(Private) (acquired various dates from 1/30/02
through 9/4/03, cost $7,011,032) (RES) (NON) 8,048,549
833,333 Refractec Ser. D, zero % cv. pfd. (Private)
(acquired various dates from 8/16/02 through
6/30/03, cost $4,999,998) (RES) (NON) (F) (AFF) 5,249,998
1,145,039 Restore Medical Ser. C, zero % cv. pfd. (Private)
(acquired 1/28/04, cost $3,009,673) (RES) (NON)
(AFF) (F) 3,000,002
--------------
Total Convertible preferred stocks
(cost $20,029,977) $25,291,345
Short-term investments (5.6%) * (cost $4,007,000)
PRINCIPAL AMOUNT VALUE
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$4,007,000 Repurchase agreement dated April 29, 2005 with
Bank of America due May 2, 2005 with respect
to various U.S. Government obligations--
maturity value of $4,007,985 for an effective
yield of 2.95% (collateralized by Freddie Mac
zero % due 6/30/2005, valued at $4,011,110) $4,007,000
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Total Investments (cost $65,897,236) $73,000,047
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(a) Percentages indicated are based on net assets of $71,185,425.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The total
market value of restricted securities held at April 30, 2005 was
$25,291,345 or 35.5% of net assets.
(AFF) Affiliated Companies (Note 4).
(F) Security is valued at fair value following procedures approved by the
Trustees (Note 1).
(R) Real Estate Investment Trust.
ADR after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with
a custodian bank.
The accompanying notes are an integral part of these financial
statements.
Written options outstanding at April 30, 2005 (Unaudited)
(premiums received $6,829)
CONTRACT EXPIRATION DATE/
AMOUNT STRIKE PRICE VALUE
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1,431 Ambercrombie & Fitch Co. (Call) May 05/64.44 $29
2,719 Celgene Corp. (Call) May 05/39.35 2,507
939 Citrix Systems, Inc. (Call) May 05/25.75 4
5,041 Skyworks Solution, Inc. (Put) May 05/5.67 2,353
---------
$4,893
Statement of assets and liabilities
April 30, 2005 (Unaudited)
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Assets
- ------------------------------------------------------------------------------
Investment in securities, at value (Note 1):
- ------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $57,887,565) $64,750,047
- ------------------------------------------------------------------------------
Affiliated issuers (identified cost $8,009,671) (Note 4) 8,250,000
- ------------------------------------------------------------------------------
Cash 82
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Dividends receivable 12,406
- ------------------------------------------------------------------------------
Receivable for securities sold 396,308
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Total assets $73,408,843
- ------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------
Payable for securities purchased 821,782
- ------------------------------------------------------------------------------
Payable for shareholder servicing fees (Note 2) 61,927
- ------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 150,885
- ------------------------------------------------------------------------------
Payable for incentive fee (Note 2) 1,073,274
- ------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 18,641
- ------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 18,750
- ------------------------------------------------------------------------------
Payable for administrative services (Note 2) 6,372
- ------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $6,829)
(Note 1) 4,893
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Other accrued expenses 66,894
- ------------------------------------------------------------------------------
Total liabilities 2,223,418
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Net assets $71,185,425
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Represented by
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Paid-in capital (Note 1) $59,018,192
- ------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,972,492)
- ------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 7,034,978
- ------------------------------------------------------------------------------
Net unrealized appreciation of investments 7,104,747
- ------------------------------------------------------------------------------
Total-- Representing net assets applicable to capital shares
outstanding $71,185,425
- ------------------------------------------------------------------------------
Computation of net asset value
- ------------------------------------------------------------------------------
Net asset value and redemption price per common share
($71,185,245 divided by 2,693,108 shares) $26.43
- ------------------------------------------------------------------------------
Offering price per common share (100/95.75 of $26.43) * $27.60
- ------------------------------------------------------------------------------
* On single retail shares of less than $500,000. On sales of $500,000 or
more and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
Statement of operations
Six months ended April 30, 2005 (Unaudited)
- ------------------------------------------------------------------------------
Investment income:
- ------------------------------------------------------------------------------
Dividends (net of foreign tax of $354) $274,112
- ------------------------------------------------------------------------------
Interest 30,522
- ------------------------------------------------------------------------------
Total investment income 304,634
- ------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------
Compensation of Manager (Note 2) 452,248
- ------------------------------------------------------------------------------
Incentive fee (Note 2) 211,288
- ------------------------------------------------------------------------------
Investor servicing fees (Note 2) 26,368
- ------------------------------------------------------------------------------
Custodian fees (Note 2) 42,613
- ------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 38,207
- ------------------------------------------------------------------------------
Administrative services (Note 2) 38,082
- ------------------------------------------------------------------------------
Shareholder servicing fees (Note 2) 91,083
- ------------------------------------------------------------------------------
Legal 66,803
- ------------------------------------------------------------------------------
Other 43,012
- ------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (101,201)
- ------------------------------------------------------------------------------
Net expenses 908,503
- ------------------------------------------------------------------------------
Net investment loss (603,869)
- ------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,900,554
- ------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 11,767
- ------------------------------------------------------------------------------
Net unrealized depreciation of investments and written
options during the period (3,948,518)
- ------------------------------------------------------------------------------
Net gain on investments 1,963,803
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,359,934
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
2005* 2004
- ------------------------------------------------------------------------------
Decrease in net assets
- ------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------
Net investment loss $(603,869) $(1,857,057)
- ------------------------------------------------------------------------------
Net realized gain on investments 5,912,321 11,775,704
- ------------------------------------------------------------------------------
Net unrealized depreciation of investments (3,948,518) (6,255,100)
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,359,934 3,663,547
- ------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- ------------------------------------------------------------------------------
From net realized long-term gain on investments (1,368,623) --
- ------------------------------------------------------------------------------
Capital share transactions:
- ------------------------------------------------------------------------------
Proceeds from shares issued 898,627 2,119,730
- ------------------------------------------------------------------------------
Reinvested in connection with distributions 995,905 --
- ------------------------------------------------------------------------------
Cost of shares repurchased (Note 5) (8,242,286) (18,261,812)
- ------------------------------------------------------------------------------
Decrease from capital share transactions (6,347,754) (16,142,082)
- ------------------------------------------------------------------------------
Total decrease in net assets (6,356,443) (12,478,535)
- ------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------
Beginning of period 77,541,868 90,020,403
- ------------------------------------------------------------------------------
End of period $71,185,425 $77,541,868
- ------------------------------------------------------------------------------
Number of fund shares
- ------------------------------------------------------------------------------
Shares outstanding at beginning of period 2,921,173 3,554,909
- ------------------------------------------------------------------------------
Shares issued 32,676 81,188
- ------------------------------------------------------------------------------
Shares reinvested 36,790 --
- ------------------------------------------------------------------------------
Shares repurchased (Note 5) (297,531) (714,924)
- ------------------------------------------------------------------------------
Shares outstanding at end of period 2,693,108 2,921,173
- ------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Statement of cash flows
For the period ended April 30, 2005 (Unaudited)
- ------------------------------------------------------------------------------
Increase in cash
- ------------------------------------------------------------------------------
Cash flows from operating activities:
- ------------------------------------------------------------------------------
Net increase in net assets from operations $1,359,934
- ------------------------------------------------------------------------------
Adjustments to reconcile net decrease in net assets from
operations to net cash used in operating activities:
- ------------------------------------------------------------------------------
Purchase of investment securities (40,560,160)
- ------------------------------------------------------------------------------
Proceeds from disposition of investment securities 53,561,538
- ------------------------------------------------------------------------------
Purchase of short-term investment securities, net (4,007,000)
- ------------------------------------------------------------------------------
Decrease in dividends receivable 213
- ------------------------------------------------------------------------------
Increase in payable for shareholder servicing fees 5,690
- ------------------------------------------------------------------------------
Decrease in payable for compensation of Manager (21,919)
- ------------------------------------------------------------------------------
Increase in payable for incentive fee 211,288
- ------------------------------------------------------------------------------
Decrease in payable for investor servicing and custodian fees (19,945)
- ------------------------------------------------------------------------------
Decrease in payable for administration services (6,108)
- ------------------------------------------------------------------------------
Increase in written options outstanding 6,829
- ------------------------------------------------------------------------------
Decrease in other accrued expenses (19,276)
- ------------------------------------------------------------------------------
Net realized gain on investments (5,912,321)
- ------------------------------------------------------------------------------
Net unrealized depreciation on investments during the period 3,948,518
- ------------------------------------------------------------------------------
Net cash used in operating and investing activities $8,547,281
- ------------------------------------------------------------------------------
Cash flows from financing activities:
- ------------------------------------------------------------------------------
Proceeds from shares sold 898,626
- ------------------------------------------------------------------------------
Payment of shares redeemed (8,242,286)
- ------------------------------------------------------------------------------
Cash distribution to shareholders paid (372,716)
- ------------------------------------------------------------------------------
Net cash provided by financing activities (7,716,376)
- ------------------------------------------------------------------------------
Net increase in cash 830,905
- ------------------------------------------------------------------------------
Cash balance, beginning of period (830,823)
- ------------------------------------------------------------------------------
Cash balance, end of period $82
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
Six months
ended For the period
April 30 July 30, 2001+
Per-share (Unaudited) Year ended October 31 to October 31
operating performance 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $26.54 $25.32 $18.91 $22.44 $23.88
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a)(b) (.22) (.59) (.45) (.38) -- (e)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .61 1.81 6.86 (3.11) (1.44)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 1.22 6.41 (3.49) (1.44)
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income -- -- -- (.04) --
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.50) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (e) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.50) -- -- (.04) --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.43 $26.54 $25.32 $18.91 $22.44
- --------------------------------------------------------------------------------------------------------------------------------
Total return at net asset value after incentive fee (%)(c) 1.41* 4.82 33.90 (15.61) (6.03)*
- --------------------------------------------------------------------------------------------------------------------------------
Total return at net asset value before incentive fee (%)(c) 1.77* 5.53 34.43 (15.61) (6.03)*
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $71,185 $77,542 $90,020 $73,682 $85,908
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets after incentive fee (%)(b)(d) 1.20* 2.49 2.30 2.21 .58*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets before incentive fee (%)(b)(d) .92* 1.85 1.85 2.21 .58*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average
net assets after incentive fee (%)(b) (.79)* (2.30) (2.17) (1.76) --*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 54.59* 100.29 93.90 102.88 11.20*
- --------------------------------------------------------------------------------------------------------------------------------
+ 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) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses of
the fund for the periods ended April 30, 2005, October 31, 2004, October 31, 2003, October 31, 2002 and October 31, 2001
reflect a reduction of 0.13%, 0.15%, 0.10%, 0.07%, and 0.04%, respectively, based on average net assets.
(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements (Note 2).
(e) Amount represents less than $0.01 per share.
Notes to financial statements
April 30, 2005 (Unaudited)
Note 1 Significant accounting policies
- ------------------------------------------------------------------------
TH Lee, Putnam Emerging Opportunities Portfolio (the "fund") is a series
of TH Lee, Putnam Investment Trust (the "trust") which is registered under
the Investment Company Act of 1940, as amended, as a non-diversified
closed-end management investment company. The objective of the fund is to
seek long-term capital appreciation by investing at least 80% of its total
assets in publicly traded growth stocks and privately issued venture
capital investments. The fund may invest up to 50% of its portfolio in
private equity investments as well as up to 5% of its assets in private
equity funds.
The fund offers its shares at net asset value plus a maximum front-end
sales charge of 4.25%. The fund provides a limited degree of liquidity to
its shareholders by conducting quarterly repurchase offers. In each
repurchase offer, the fund intends to repurchase 5% of its outstanding
shares at their net asset value. The fund may also, at any time, conduct
additional sales of its shares to qualified clients, as defined in the
Investment Advisors Act of 1940 as amended. On January 26, 2005 the
Trustees closed the fund to any new sales (except through dividend
reinvestments). The Trustees may consider reopening the fund to new sales
again if current conditions change.
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 stated
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. Market quotations are not considered to be
readily available for private equity securities: such investments are
initially valued at cost and then stated at fair value following
procedures approved by the Trustees. As part of those procedures, TH Lee,
Putnam Capital Management, LLC (the "Manager"), a subsidiary of Putnam,
LLC ("Putnam") and TH Lee, Putnam Capital, LLC (a joint venture of Putnam
and Thomas H. Lee Partners, LP) will monitor each fair valued security on
a daily basis and will adjust its value, as necessary, based on such
factors as the financial and/or operating results, the general
developments in the issuer's business including products and services
offered, management changes, changes in contracts with customers, issues
relating to financing, the likelihood of a public offering, the liquidity
of the security, any legal or contractual restrictions, the value of an
unrestricted related public security and other analytical data.
Securities fair valued at April 30, 2005 represented 35.9% of the
fund's net assets. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. For foreign
investments, if trading or events occurring in other markets after the
close of the principal exchange in which the securities are traded are
expected to materially affect the value of the investments, then those
investments are valued, taking into consideration these events, at their
fair value. Short-term investments having remaining maturities of 60 days
or less are stated at amortized cost, which approximates fair value.
B) 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 except that certain dividends from
foreign securities are recognized as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
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. The
Manager is responsible for determining that the value of these underlying
securities is at all times at least equal to the resale price, including
accrued interest.
D) 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 a reduction 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.
E) 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.
The aggregate identified cost on a tax basis is $66,092,507, resulting in
gross unrealized appreciation and depreciation of $9,507,391 and
$2,599,851, respectively, or net unrealized appreciation of $6,907,540.
F) 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.
G) Deal related costs
Deal related costs are comprised primarily of legal and consulting costs
incurred in connection with private equity investment transactions of the
fund, whether or not consummated. Deal related costs that are attributable
to existing private equity securities are added to the cost basis of the
investments. All other deal related costs are expensed as incurred.
H) Statement of cash flows
The cash amount shown in the Statement of cash flows is the amount
reported as cash in the fund's Statement of assets and liabilities and
represents cash on hand at its custodian and does not include any
short-term investments at April 30, 2005.
Note 2 Management fee, administrative services and other transactions
- ----------------------------------------------------------------------
The fund has entered into a Management Contract with the Manager. As
compensation for the services rendered and expenses borne by the Manager,
the fund pays the Manager a fee at an annual rate of 1.20% of the average
daily net assets of the fund, computed daily and payable monthly.
In addition, the fund will accrue daily a liability for incentive fees
payable equal to 20% of the realized and unrealized gains less realized
and unrealized losses on investments that were originally purchased by the
fund in private equity transactions. The fund will not accrue an incentive
fee unless all realized and unrealized losses from prior periods have been
offset by realized (and, where applicable unrealized) gains. The fund will
pay annually, on December 31, to the Manager a fee equal to 20% of the
aggregate incentive fee base, calculated from the commencement of the
fund's operations, less the cumulative amount of the incentive fee paid to
the Manager in previous periods. The incentive fee base for a private
equity security equals realized gains less realized and unrealized losses
until the issuer of the security has completed an initial public offering
and any applicable lock-up period has expired and, thereafter, equals
realized and unrealized gains less realized and unrealized losses. In the
case of private equity funds, the incentive fee base equals the sum of all
amounts that are actually distributed to the fund less realized and
unrealized losses. The fund does not pay any incentive fee on a private
equity holding until the fund sells the holding or the holding becomes
freely sellable. At April 30, 2005, incentive fees totaling $1,073,274
have been accrued based on the aggregate incentive fee base, of which
$211,288 was earned for the six months ended April 30, 2005.
The Manager has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through October 31, 2005, to the extent
that expenses of the fund (exclusive of the incentive fee, interest
expense on any borrowings, offering costs and any extraordinary expenses)
exceed an annual rate of 1.85% of its average daily net assets.
The fund has entered into an Administrative Services Contract with Putnam
Fiduciary Trust Company ("PFTC"), an affiliate of the Manager, to provide
administrative services, including fund accounting and the pricing of the
fund shares. As compensation for the services, the fund pays PFTC a fee at
an annual rate of 0.10% of the average daily net assets of the fund,
computed daily and payable monthly.
Custodial functions for the fund's assets are provided by PFTC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. For the six months ended April 30, 2005, the fund
paid PFTC $66,151 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. For the six months ended April 30, 2005,
there was no reduction to the fund's expenses under these arrangements.
Each independent Trustee of the Trust receives an annual Trustee fee of
$25,000. Trustees receive additional fees for attendance at certain
committee meetings.
The fund intends to pay compensation to selected brokers and dealers that
are not affiliated with the fund, the Manager or Putnam, that hold shares
for their customers in accordance with the shareholder servicing
agreements between the fund and the brokers and dealers. The shareholder
servicing fee is accrued daily and payable quarterly at an annual rate of
0.25% of the average daily net assets attributable to outstanding shares
beneficially owned by customers of the brokers and dealers.
For the six months ended April 30, 2005, Putnam Retail Management, acting as
underwriter received net commissions of $1,645 from the sale of common shares.
Note 3 Purchases and sales of securities
- -----------------------------------------------------------------------------
During the six months ended April 30, 2005, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $40,776,635 and $51,541,115, respectively. There were no
purchases or sales of U.S. government securities.
Written option transactions during the period are summarized as follows:
- ------------------------------------------------------------------------------
Contract Premiums
Amounts Received
Written options outstanding at beginning of period -- $--
- ------------------------------------------------------------------------------
Options opened 33,317 20,893
Options exercised (4,608) (2,297)
Options expired (18,579) (11,767)
Options closed -- --
- ------------------------------------------------------------------------------
Written options outstanding at end of period 10,130 $6,829
- ------------------------------------------------------------------------------
Note 4 Transactions with affiliated issuers
- ------------------------------------------------------------------------------
Transactions during the year with companies in which the fund owned at least
5% of the voting securities were as follows:
Name of Affiliates Purchase Cost Sales Cost Dividend Income Fair Value
- ------------------------------------------------------------------------------
Refractec $-- $-- $-- $5,249,998
Restore Medical -- -- -- 3,000,002
- ------------------------------------------------------------------------------
Totals $-- $-- $-- $8,250,000
- ------------------------------------------------------------------------------
Fair value amounts are shown for issues that are affiliated at period end.
Note 5 Share repurchase
To provide liquidity to the shareholders, the fund has a policy of making
offers to repurchase a portion of its shares on a quarterly basis.
Repurchases are made in February, May, August and November of each year.
Repurchase offers are made for at least 5% (but not more than 25%) of its
shares in any quarter with the approval of the Trustees. If the number of
shares tendered for repurchase exceeds the offering limit, or if the
Manager in its discretion elects to limit repurchases to 5% of the fund's
shares, the fund will repurchase shares on a pro-rata basis, and tendering
shareholders will not have all of their tendered shares repurchased by the
fund. During the six months ended April 30, 2005, the fund repurchased
297,531 shares valued at $8,242,286.
On February 11, 2005, the fund received actual redemption requests
totaling $5,060,332 or 6.463% of total fund assets above the 5% offering
limit. To protect the liquidity of the fund and as a protective measure
for shareholders choosing to remain in the fund, the Manager elected to
pro-rate the repurchases, and each shareholder requesting a redemption of
his/her shares received a pro-rated portion equal to 77% of the shares the
shareholder requested be repurchased.
Shares
Date Repurchased Amount
- ---------------------------------------------------------------------------
November 2004 156,492 $4,312,929
February 2005 141,039 3,929,357
- ---------------------------------------------------------------------------
At April 30, 2005, the Manager owned 209,687 shares of the fund (7.8% of
shares outstanding) valued at $5,542,027.
Note 6 Regulatory matters and litigation
- ---------------------------------------------------------------------------
Putnam Investment Management, LLC, ("Putnam Management") an indirect
wholly owned subsidiary of Putnam, LLC, and an affiliate of TH Lee, Putnam
Capital Management LLC, entered into agreements with the Securities and
Exchange Commission ("SEC") and the Massachusetts Securities Division
settling charges connected 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. Pursuant to these settlement agreements, Putnam Management will pay
a total of $193.5 million in penalties and restitution, with $153.5
million being paid to shareholders and the funds. The restitution amount
will be allocated to shareholders of certain Putnam funds (not including
the fund) pursuant to a plan developed by an independent consultant, with
payments to shareholders of such funds currently expected by the end of
the summer.
The Securities and Exchange Commission'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 (but not including the fund). Putnam Management will bear any
costs incurred by Putnam funds in connection with these lawsuits. 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.
On March 23, 2005, Putnam Management entered into a settlement with the
Securities and Exchange Commission resolving its inquiry into Putnam
Management's alleged failure to fully and effectively disclose a former
brokerage allocation practice to the Board of Trustees and shareholders of
the Putnam Funds. This practice, which Putnam Management ceased as of
January 1, 2004, involved allocating a portion of the brokerage on mutual
fund portfolio transactions to certain broker-dealers who sold shares of
Putnam mutual funds. Under the settlement order, Putnam Management has
paid a civil penalty of $40 million and disgorgement of $1 to the
Securities and Exchange Commission. These amounts subsequently will be
distributed to certain Putnam funds pursuant to a plan to be approved by
the Securities and Exchange Commission. As part of the settlement, Putnam
Management neither admitted nor denied any wrongdoing. Although the
Manager is not a party to this settlement, the Manager intends to make a
voluntary payment to the fund on the same basis as the civil penalty
payable to the applicable Putnam funds.
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
TH Lee, Putnam Capital is committed to managing its mutual funds in the
best interests of shareholders. The Fund's 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
fund's 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.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Fund information
INVESTMENT MANAGER
TH Lee, Putnam Capital Management, LLC
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, L.P.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Sullivan & Cromwell LLP
TRUSTEES
John A. Hill
Chairman
Joseph L. Bower
Stephen B. Kay
Thomas H. Lee
OFFICERS
Linwood E. Bradford
President and Principal Executive Officer
Stephen D. Krichmar
Vice President and Principal Financial Officer
Michael T. Healy
Vice President and Principal Accounting Officer
Amrit Kanwal
Vice President and Treasurer
Francis J. McNamara, III
Vice President, Chief Legal Officer and Clerk
Robert R. Leveille
Vice President and Assistant Clerk
James P. Pappas
Vice President
Charles A. Ruys de Perez
Vice President and Chief Compliance Officer
TH Lee Putnam Capital
One Post Office Square
Boston, Massachusetts 02109
225019 6/05
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
- -------------------------------------------------------------------------
Company and Affiliated Purchasers
- ---------------------------------
Registrant Purchase of Equity Securities
- --------------------------------------------------------------------------------------------------------------------------
Total Number of Shares
Purchased as Part Maximum Number (or Approximate Dollar
Total Number of Average Price Paid of Publicly Announced Value) of Shares that May Yet Be Purchased
Period Shares Purchased per Share Plans or Programs under the Plans or Programs
- --------------------------------------------------------------------------------------------------------------------------
August 14, 2004
November 12, 2004 156,492 $27.56 156,492 --
November 13, 2004
through
February 11, 2005 141,039 $27.86 141,039 --
- --------------------------------------------------------------------------------------------------------------------------
The fund has a policy of making offers to repurchase a portion of its
shares on a quarterly basis. Repurchase offers are made for at least 5%
(but not more than 25%) of its shares in any quarter with the approval of
the Trustees. If the number of shares tendered for repurchase exceeds the
offering limit, or if the Manager in its discretion elects to limit
repurchases to 5% of the fund's shares, the fund will repurchase shares on
a pro-rata basis, and tendering shareholders will not have all of their
tendered shares repurchased by the fund.
On February 11, 2005, the fund received actual redemption requests totaling
6.463% of the total fund assets above the 5% offering limit. To prtect the
liquidity of the fund and as a protective measure for shareholders choosing
to remain in the fund, the Manager elected to pro-rate the repurchases, and
each shareholder requesting a redemption of his/her shares received a
pro-rated portion equal to 77% of the shares the shareholder requested be
repurchased.
Date Plan Announced Expiration Date
August 14, 2004 ------------------- -----------------
November 12, 2004 October 20, 2004 November 12, 2004
November 13, 2004 through
February 11, 2005 January 12, 2005 February 11, 2005
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, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report 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: June 24, 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/Linwood E. Bradford
---------------------------
Linwood E. Bradford
Principal Executive Officer
Date: June 24, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 24, 2005