<PAGE> 1
PUTNAM
VOYAGER
FUND
ANNUAL REPORT
July 31, 1994
[Logo]
BOSTON - LONDON - TOKYO
<PAGE> 2
PERFORMANCE HIGHLIGHTS
- As of 7/31/94, Morningstar gave the fund's class A shares
a four-star rating, out of a possible five stars. This
rating put the fund in the top 32.5% of all equity funds
rated for the period.*
- CDA/Wiesenberger ranked the fund's class A shares in the
top 25% of the 96 maximum capital gains funds tracked for
1-year performance, in the top 21% of 68 funds for 5-year,
and in the top 7% of 45 funds for 10-year performance as
of July 31, 1994.
- The fund's class A shares outperformed two-thirds of the
funds in Lipper's capital appreciation category for 1-year
performance, and also ranked in the top 12% for 5-year and
10-year performance as of July 31, 1994.
- Performance should always be considered in light of a
fund's investment strategy. Putnam Voyager Fund is
designed for investors aggressively seeking capital
appreciation through common stocks.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
FISCAL 1994 results at a glance
- -------------------------------------------------------------------------
Class A Class B
Total return: NAV POP NAV CDSC
- -------------------------------------------------------------------------
<S> <C> <C>
12 months ended 7/31/94
(change in value during period
plus reinvested distributions) 5.49% -0.56% 4.71% -0.29%
- -------------------------------------------------------------------------
Share value: NAV POP NAV
- -------------------------------------------------------------------------
7/31/93 $11.02 $11.69 $10.89
- -------------------------------------------------------------------------
4/1/94 - - -
- -------------------------------------------------------------------------
7/31/94 11.19 11.87 10.97
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Long- Short-
Distributions: No. Income term term Total
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1 - $0.456 - $0.456
- -------------------------------------------------------------------------
Class B 1 - 0.456 - 0.456
</TABLE>
Performance data represent past results and will differ for each share
class. For performance over longer periods, see pages 8 and 9. POP assumes
5.75% maximum sales charge. CDSC assumes 5% maximum contingent deferred
sales charge.
* Morningstar rates funds relative to funds with similar objectives,
based on risk-adjusted medium- and long-term performance, as applicable,
adjusted for sales charges. Rates are updated monthly. Past performance
is not indicative of future results.
+ CDA/Wiesenberger rankings are updated monthly, based entirely on total
return and do not take into account sales charges or fees. The fund's
class A shares ranked 24 out of 96, 14 out of 68, and 3 out of 45 for 1-,
5-, and 10-year performance, respectively.
++ Lipper Analytical Services is an independent research organization;
rankings vary over time and do not reflect the effects of sales
charges. The fund's class A shares ranked 41 out of 128, 9 out of 80, and
3 out of 48 for 1-, 5-, and 10-year performance, respectively.
2
<PAGE> 3
FROM THE CHAIRMAN
DEAR SHAREHOLDER:
A BRIEF SURGE OF OPTIMISM LIFTED FINANCIAL MARKETS WORLDWIDE AS PUTNAM
VOYAGER FUND REACHED THE CLOSE OF ITS FISCAL YEAR ON JULY 31, 1994.
ALTHOUGH THE RISE WAS SHORT-LIVED, IT REPRESENTED VIRTUALLY THE ONLY SIGN
IN MANY MONTHS THAT THE MARKETS AT HOME AND ABROAD RECOGNIZED THE
FUNDAMENTAL STRENGTHS OF THE WORLD'S MAJOR ECONOMIES.
SINCE JANUARY, THE MARKETS HAVE CHARTED VOLATILE AND UNCERTAIN COURSES,
REACTING TO HIGHER INTEREST RATES AND CONCERNS ABOUT PROSPECTS FOR
ADDITIONAL RATE INCREASES. HOWEVER, THE UNCERTAINTY CLOUDING THE ECONOMIC
ENVIRONMENT HAS MASKED SOME MAJOR STRUCTURAL AND FUNDAMENTAL
CHANGES IN CORPORATE AMERICA THAT HAVE PRODUCED ATTRACTIVE INVESTMENT
OPPORTUNITIES. LEADING ECONOMIC INDICATORS PRESENT A POSITIVE LONG-TERM
VIEW FOR GROWTH INVESTMENTS, ALTHOUGH RISING INTEREST RATES COULD SLOW THE
PACE OF ECONOMIC EXPANSION MORE THAN DESIRED.
AS WE GO FORWARD, PUTNAM MANAGEMENT ANTICIPATES A MORE
CHALLENGING INVESTMENT ENVIRONMENT. WE BELIEVE CAREFUL STOCK
SELECTION IN SPECIFIC INDUSTRIES WILL CONTINUE TO BE THE KEY TO
SUCCESSFUL LONG-TERM INVESTMENT PERFORMANCE.
IN THE REPORT THAT FOLLOWS, FUND MANAGERS MATT WEATHERBIE
AND CHUCK SWANBERG DISCUSS THE FISCAL YEAR JUST ENDED
AND PROSPECTS FOR FISCAL 1995.
RESPECTFULLY YOURS,
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
SEPTEMBER 14, 1994
3
<PAGE> 4
REPORT FROM THE FUND MANAGERS
MATTHEW WEATHERBIE
CHARLES SWANBERG
The forces shaping Putnam Voyager Fund's performance throughout fiscal
1994 were anything but dull - making the fund's positive total return of
5.49% for class A shares and 4.71% for class B shares at net asset
value all the more impressive. Indeed, the fund's class A shares
outperformed the Standard & Poor's [Registration Mark] 500 Index, a common
measure of stock market performance, for the 12 months ended July 31,
1994. Performance for other periods is shown on pages 8 and 9.
- - THE TWO FACES OF FISCAL '94
The first six months of fiscal 1994 - August 1, 1993, through January 31,
1994 - can be characterized as a period of moderate economic growth, low
inflation, declining long-term interest rates, and a willingness on
the part of the public to invest in long-term assets, growth stocks in
particular. This environment supported and sustained new market highs,
boosting your fund's net asset value by more than 11% at the end of
January.
The second half of the fiscal year - February 1, 1994, through July 31,
1994 - witnessed the Federal Reserve Board's series of increases in
short-term interest rates. Although economic growth and consumer
confidence remained strong, these increases, along with a weakening
dollar and growing concern about U.S. political leadership, rattled many
stock investors, sending them to the sidelines.
Smaller growth stocks, the type your fund tends to emphasize, are
especially sensitive to interest-rate changes. As interest rates rise, the
perceived value of these companies' future earnings generally decreases.
The resulting declines in perceived value translate into lower stock
prices. True to this generalization, your fund's net asset value fell by
roughly 9% between the fiscal year's midpoint and its end. Nevertheless,
the fund was able to provide a competitive total return at NAV for all of
fiscal 1994. Careful stock selection, an experienced understanding of
market forces,
4
<PAGE> 5
and a dedication to long-term results contributed to the positive
results.
- - FOUNDATION GROWTH: ADDING SELECTIVELY TO INDIVIDUAL HOLDINGS
At period's end, foundation growth stocks, those of small and midsized
companies that are aggressively expanding, made up approximately 70% of
your fund's portfolio. These stocks are typically issued by companies from
five major industry categories: technology, consumer, media, services, and
health care. We focus especially on those with innovative products or a
particular market niche, along with the potential to increase their
earnings rapidly.
Except for the business services sector, these industry groups have
experienced significant price rotation within the past six months; that
is, what was in favor before is no longer performing well, and vice versa.
Technology as a whole experienced higher-than-normal volatility because of
intense bouts of profit-taking and the merger collapse between Bell
Atlantic, a huge regional telephone company, and Tele-Communications, Inc.
(TCI), the nation's largest cable television company. This breakdown in
negotiations caused the media sector to underperform as well.
It is important to remember that our management style is to continue to
own companies that exhibit long-term growth potential, not to succumb to
the allure of taking short-term profits. Therefore, we've been
selectively adding to individual holdings in these industry groups on a
stock-by-stock basis to take advantage of the recent price declines. One
such company
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
TOP industry sectors*
- ---------------------------------------------------------------------
<S> <C>
Media 18.90%
- ---------------------------------------------------------------------
Services 17.39%
- ---------------------------------------------------------------------
Consumer 12.52%
- ---------------------------------------------------------------------
Health care 11.98%
- ---------------------------------------------------------------------
Technology 8.36%
</TABLE>
* Based on net assets as of 7/31/94
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<PAGE> 6
is FlightSafety International. It offers high-technology training to
operators of aircraft, ships, electrical utilities, and processing plants.
With improving demand for pilot training and a new line of advanced
visual systems, FlightSafety is well positioned for growth, in our view.
Increasingly, we will also be turning our sights overseas in search of
quality foundation growth stocks. We are seeking out foreign companies
that meet the same stringent eligibility criteria as the domestic
foundation growth companies currently represented in the portfolio.
We see this as an opportunity to add value to the fund over time, and on a
gradual basis we hope to add more of these securities to the portfolio.
- - ANSWERING OPPORTUNITY'S KNOCK
Opportunity stocks, those of larger companies that are under-going
positive change, represented approximately 26% of the fund's assets on
July 31, 1994. In addition to looking for companies that have effectively
restructured their operations, we have also focused on solidly growing
larger companies whose stock prices have been beaten down by market
pessimism or investor misunderstanding.
We've been adding to some of the fund's holdings in the areas of consumer
staples, publishing, selected specialty retailers, financial services,
and technology. Many of these companies have also undertaken cost-cutting
measures to position themselves more competitively in the marketplace.
- - OUTLOOK: SOUND ELEMENTS COULD SIGNAL STRONGER MARKETS AHEAD
Even though short-term interest rates may continue to rise in response to
gradual Fed tightening, there is precedent - the 1962-1968 market - for
growth stocks to do well in this kind of environment. Because the
underlying fundamentals of the stock market remain sound, in our opinion,
we view the current environment as a good buying opportunity. Overall,
we've not been disappointed by earnings this year; most of the
6
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- --------------------------------------------------------------------
TOP 10 HOLDINGS as of 7/31/94
LIN Broadcasting Corp.
Television, specialty publishing , cellular phone service
Liberty Media Corp.
Television broadcasting
H & R Block, Inc.
North America's largest tax preparation service
FlightSafety International, Inc.
High technology training for aircraft pilots
Telephone & Data Systems, Inc.
Major U.S. telephone holding company
Century Telephone Enterprises, Inc.
Local and cellular telephone and radio paging services
Comcast Corp.
Cable television operator
Tele-Communications, Inc.
Cable television services
Cellular Communications, Inc.
Developer of cellular telephone systems
Hospitality Franchise Systems, Inc.
World's largest hotel franchiser
These holdings represent 17.1% of the fund's net assets. Portfolio
holdings are subject to change.
companies in which your fund invests are doing well and showing strong
earnings growth. We believe growth stocks, those of small and midsized
companies in particular, are only halfway through their cycle of
outperforming large company stocks. The fund's emphasis on these smaller
issues should position it well for long-term capital appreciation.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. There is no
guarantee that the securities mentioned will continue to be held in the
future.
7
<PAGE> 8
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the fund's shares changed over
time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. We show total return in
two ways: on a cumulative long-term basis and on average how the fund
might have grown each year over varying periods. For comparative purposes,
we show how the fund performed relative to appropriate indexes and benchmarks.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 7/31/94
Standard
Class A Class B & Poor's[RM]
NAV POP NAV CDSC 500 Index CPI
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 5.49% -0.56% 4.71% -0.29% 5.19% 2.77%
5 years 86.11 75.39 - - 54.69 19.29
Annual average 13.23 11.89 - - 9.12 3.59
10 years 441.12 410.13 - - 326.18 42.56
Annual average 18.39 17.70 - - 15.60 3.61
Life of class - - 29.08 26.08 17.81 6.38
Annual average - - 11.96 10.80 7.52 2.77
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 6/30/94
(most recent calendar quarter)
Class A Class B
NAV POP NAV CDSC
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 3.89% -2.06% 3.08% -1.88%
5 years 90.62 79.63 - -
Annual average 13.77 12.43 - -
10 years 411.94 382.38 - -
Annual average 17.74 17.04 - -
Life of class - - 25.32 22.32
Annual average - - 10.91 9.68
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or, for class A shares, distribution
fees prior to implementation of the class A distribution plan in 1990.
Effective 4/27/92, the fund began offering class B shares. Performance of
share classes will differ. Performance data represent past results.
Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
8
<PAGE> 9
[CHART SHOWING GROWTH OF A $10,000 INVESTMENT]
Past performance is no assurance of future results. A $10,000 investment in
the fund's class B shares at inception (4/27/92) would have grown to
$12,908 by 7/31/94 ($12,608 with a redemption at the end of the period).
year over varying periods. For comparative purposes, we show how the
fund performed relative to appropriate indexes and benchmarks.
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge.
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of
the redemption of Class B shares and assumes redemption at the end of the
period. Your fund's 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.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S[RM] 500 INDEX is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance. The
index assumes reinvestment of all distributions and does not take into
account brokerage commissions or other costs. The fund's portfolio
contains securities that do not match those in the index.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
9
<PAGE> 10
THE PUTNAM FUND SELECTOR[TM]
The Putnam Fund Selector shows the many opportunities for investors
within every investment strategy. All investors should first
accumulate a base of conservative, cash-equivalent investments. Then,
with the help of your investment advisor, diversify your portfolio by
investing in the Putnam Family of Funds.
PUTNAM GROWTH FUNDS
PUTNAM GROWTH
AND INCOME FUNDS
PUTNAM INCOME or
TAX-FREE FUNDS
MOST CONSERVATIVE INVESTMENTS
10
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<TABLE>
<CAPTION>
PUTNAM GROWTH FUNDS PUTNAM TAX-FREE
INCOME FUNDS
<S> <C>
Asia Pacific Growth Fund Intermediate Tax Exempt Fund
Diversified Equity Trust Municipal Income Fund
Europe Growth Fund Tax Exempt Income Fund
Global Growth Fund Tax-Free High Yield Fund
Health Sciences Trust Tax-Free Insured Fund
Investors Fund STATE TAX-FREE INCOME FUNDS+
Natural Resources Fund* Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New
New Opportunities Fund York, Ohio, and Pennsylvania
OTC Emerging Growth Fund LIFESTAGE[SM] FUNDS
Overseas Growth Fund Putnam Asset Allocation Funds-three investment portfolios that
spread your money across a variety of stocks, bonds, and money market
Vista Fund investments to help maximize your return and reduce your risk.
Voyager Fund The three portfolios:
PUTNAM GROWTH Putnam Asset Allocation: Balanced Portfolio
AND INCOME FUNDS
Convertible Income-Growth Trust Putnam Asset Allocation: Conservative Portfolio
Dividend Growth Fund Putnam Asset Allocation: Growth Portfolio
Equity Income Fund MOST CONSERVATIVE INVESTMENTS
The George Putnam Fund of Boston PUTNAM MONEY MARKET FUNDS:
The Putnam Fund for Growth and Income Money Market Fund[ss]
Managed Income Trust California Tax Exempt Money Market Fund
Utilities Growth and Income Fund New York Tax-Exempt Money Market Fund
PUTNAM INCOME FUNDS Tax Exempt Money Market Fund
Adjustable Rate U.S. Government Fund CDS AND SAVINGS ACCOUNTS**
American Government Income Fund * Formerly Energy-Resources Trust.
Balanced Government Fund + Not available in all states.
Corporate Asset Trust ++ Relative to above.
Diversified Income Trust [ss] Formerly Daily Dividend Trust.
Federal Income Trust ** Not offered by Putnam Investments. Certificates of deposit
offer a fixed rate of return and may be insured, up to
Global Governmental Income certain limits, by federal/state agencies. Savings accounts
may also be insured up to certain limits.
Trust
High Yield Advantage Fund Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more
High Yield Trust complete information, including charges and
expenses. Read it carefully before you invest or send money.
Income Fund
U.S. Government Income Trust
</TABLE>
11
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
For the year ended July 31, 1994
To the Trustees and Shareholders of Putnam Voyager Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of Putnam
Voyager Fund (the "fund") at July 31, 1994, and the results of its
operations, the changes in its net assets, and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of portfolio positions at
July 31, 1994 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
September 13, 1994
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS OWNED
July 31, 1994
<TABLE>
<CAPTION>
COMMON STOCKS (89.1%)(a)
NUMBER OF SHARES VALUE
<S> <C>
BUSINESS EQUIPMENT AND SERVICES (10.2%)
724,330 Airgas, Inc. (b) $ 19,737,993
453,300 Antec Corp. 12,834,056
2,358,780 Block (H & R), Inc. 91,992,420
963,022 Danka Business Systems ADR (c) 41,289,567
386,530 First USA, Inc. 12,948,755
306,490 ITEL Corp. 10,382,348
577,152 Interim Services, Inc.(b) 13,563,072
1,179,844 Interpublic Group of Cos., Inc. 38,197,450
1,201,940 Kelly Services, Inc. Class A 35,457,230
1,007,520 Manpower, Inc. 24,180,480
1,854,927 Office Depot, Inc. 39,185,333
840,865 Olsten Corp. (The) 28,379,194
624,525 Paychex, Inc. 20,921,587
200,000 Robert Half International, Inc.(b) 8,725,000
219,900 Tandy Corp. 8,218,763
868,150 Westcott Communications, Inc. (b) 8,952,797
------------
414,966,045
RETAIL (7.0%)
680,886 Albertsons, Inc. 18,383,922
399,800 AnnTaylor (b) 16,441,775
1,356,010 Bed Bath & Beyond, Inc. (b) 41,019,303
326,270 Books-A-Million, Inc. (b) 7,748,913
69,329 Castorama Dubois Investisse 9,925,181
7,517,697 Cifra S.A. de C.V. Series C 19,651,260
362,270 Gap, Inc. 13,947,395
458,160 Gymboree Corp. (b) 18,784,560
560,050 Heilig-Meyers Co. 14,841,325
214,300 Hennes & Mauritz AB 11,016,799
885,100 Home Depot, Inc. (The) 36,289,100
419,800 Limited Inc. (The) 8,291,050
461,274 Lowes Cos., Inc. 16,605,864
2,811,100 Next PLC 11,096,817
862,090 Stein Mart, Inc. (b) 14,224,485
346,837 Sysco Corp. 8,194,024
476,812 Talbots, Inc. (b) 15,555,992
------------
282,017,765
CABLE TELEVISION (6.7%)
385,570 Cablevision Systems Corp. Class A (b) 21,977,490
964,240 Century Communications Corp. 8,075,510
3,320,767 Comcast Corp. Special Class A 55,207,751
4,377,625 Liberty Media Corp. Class A (b) 97,949,358
1,046,345 TCA Cable TV, Inc. 23,281,176
2,038,805 Tele-Communications, Inc. Class A (b) 47,529,642
445,610 Viacom, Inc. Class B (b) 15,596,350
------------
269,617,277
</TABLE>
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<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
HEALTH CARE SERVICES (5.5%)
353,200 Amgen, Inc. (b) $ 17,549,625
122,000 Biomet, Inc. (b) 1,189,500
191,900 Columbia/HCA Healthcare Corp. 7,771,950
49,235 Coventry Corp. (b) 1,686,299
1,306,717 Health Management Assoc., Inc.(b) 27,277,717
500,000 Homedco Group, Inc. (b) 14,750,000
370,655 Horizon Healthcare Corp. (b) 8,664,061
1,365,750 Lincare Holdings, Inc. (b) 29,192,906
586,915 Pacificare Health Systems, Inc. Class B (b) 29,785,936
588,500 Renal Treatment Centers, Inc. (b) 9,268,875
200,000 Rotech Medical Corp. 3,800,000
322,630 Target Therapeutics, Inc. (b) 6,775,230
481,938 United Healthcare Corp. (b) 21,928,179
436,155 Value Health, Inc. (b) 19,626,975
586,900 Vencor, Inc. (b) 22,742,375
------------
222,009,628
CELLULAR BROADCASTING (5.3%)
102,450 Associated Communications Corp. Class B (b) 2,663,700
534,680 Cellular Communications of Puerto Rico, Inc. 13,233,330
363,000 Cellular Communications, Inc. Class A (b) 18,921,375
774,520 DSC Communications Corp. 18,975,740
836,330 LIN Broadcasting Corp. (b) 104,541,250
160,000 McCaw Cellular Communications, Inc. Class A (b) 8,500,000
1,532,780 Paging Network, Inc. (b) 40,810,267
180,300 Vanguard Cellular Systems, Inc. 6,806,325
------------
214,451,987
COMPUTER SOFTWARE (5.2%)
1,127,740 CUC International, Inc. 33,973,167
393,600 Computer Associates International, Inc. 15,301,200
545,700 Compuware Corp.(b) 21,486,937
391,210 FTP Software, Inc. (b) 4,890,125
134,600 Intuit, Inc. (b) 4,845,600
546,787 Lotus Development Corp. 17,770,577
234,800 Oracle Systems Corp. (b) 8,981,100
192,410 Parametric Technology Corp. (b) 4,762,147
400,000 PeopleSoft, Inc. (b) 13,900,000
150,000 Powersoft Corp. (b) 6,450,000
915,560 Sybase, Inc. (b) 36,050,175
136,460 Synopsys, Inc. (b) 5,253,710
449,980 Wall Data, Inc.(b) 16,086,785
952,950 Wellfleet Communications, Inc. (b) 19,178,119
------------
208,929,642
TELEPHONE SERVICES (5.1%)
750,280 ALC Communications Corp. (b) 24,290,315
2,440,495 Century Telephone Enterprises, Inc. 63,452,870
195,700 LDDS Communications, Inc. 3,816,150
558,275 MFS Communications Company, Inc. (b) 16,469,113
256,990 Pacific Telesis Group 8,416,423
215,200 Sprint Corp. 7,881,700
225,976 Telefonos de Mexico S.A., Ser. L, ADR (c) 13,728,042
1,658,940 Telephone & Data Systems, Inc. 67,601,805
------------
205,656,418
</TABLE>
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<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
INSURANCE (4.7%)
141,500 Aetna Life & Casualty Co. $ 7,287,250
170,000 American International Group, Inc. 16,022,500
599,580 Bankers Life Holding Corp. 13,040,865
195,670 Berkley (W.R.) 7,386,543
158,090 Cincinnati Financial Corp. 8,418,293
294,300 EXEL Ltd. (c) 11,808,787
589,589 Gallagher (Arthur J.) & Co. 18,645,752
213,310 General Re Corp. 24,663,969
400,000 Integon Corp. 7,400,000
399,700 Life Partners Group, Inc. 7,144,637
195,600 Lincoln National Corp. 7,359,450
3,165,280 Rentokil Group 11,567,516
444,850 Transatlantic Holdings Inc. 24,855,994
256,000 Travelers, Inc. 8,480,000
600,000 USF&G Corp. 7,650,000
324,220 Zurich Reinsurance Centre Holdings, Inc. (b) 8,834,995
------------
190,566,551
RESTAURANTS (3.3%)
195,600 Apple South, Inc. 2,982,900
1,199,500 Applebee's International, Inc. 18,292,375
104,211 Bertucci's Inc. (b) 950,925
492,255 Brinker International, Inc. (b) 11,014,206
1,909,980 Buffets, Inc. (b) 32,589,034
357,500 Hometown Buffet, Inc. 5,005,000
1,600,000 J.D. Wetherspoon PLC 9,128,640
596,958 McDonald's Corp. 16,192,486
1,002,165 Outback Steakhouse, Inc. (b) 25,304,666
169,370 Sonic, Inc. (b) 3,091,003
800,200 Taco Cabana, Inc. (b) 10,602,650
------------
135,153,885
MEDICAL EQUIPMENT AND SUPPLIES (2.6%)
147,643 Ballard Medical Products Co. 1,273,421
1,037,820 Boston Scientific Corp. 14,140,297
530,920 Haemonetics Corp. 7,963,800
181,360 Johnson & Johnson 8,523,920
498,780 Medtronic, Inc. 44,453,767
100,000 Sci-Med Life Systems, Inc. (b) 3,037,500
195,690 Sofamor/Danek Group, Inc. 3,179,963
768,890 Stryker Corp. 24,027,813
------------
106,600,481
FINANCE (2.5%)
215,200 Beneficial Corp. 8,554,200
203,600 Dean Witter, Discover & Co. 8,169,450
278,800 Federal Home Loan Mtge. Corp. 16,588,600
202,157 Federal National Mortgage Association 17,537,120
334,800 Financial Federal Corp. (b) 5,314,950
919,614 MBNA Corp. (b) 21,151,122
250,200 Morgan (J.P.) & Co., Inc. 15,762,600
244,600 Student Loan Marketing Assn. 8,530,425
------------
101,608,467
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
AEROSPACE (2.3%)
1,922,730 FlightSafety International, Inc. $ 69,698,963
586,900 GenCorp Inc. 7,409,613
280,000 Textron, Inc. 14,910,000
------------
92,018,576
BROADCASTING (2.2%)
486,000 Clear Channel Communications, Inc. (b) 22,477,500
1,409,700 Infinity Broadcasting Corp. Class A (b) 40,705,087
538,900 Renaissance Communications Corp. 12,664,150
1,841,400 Westwood One, Inc. (b) 15,191,550
------------
91,038,287
SEMICONDUCTORS (2.1%)
264,900 Intel Corp. 15,695,325
479,546 Linear Technology Corp. 19,181,840
779,350 Maxim Integrated Products Inc. (b) 37,603,637
100,000 Texas Instruments, Inc. 7,862,500
177,145 Zilog Inc. (b) 4,960,060
------------
85,303,362
LODGING (1.9%)
1,711,100 Hospitality Franchise System, Inc. 45,771,925
636,300 La Quinta Inns, Inc. 18,134,550
422,980 Promus Cos., Inc. (b) 12,266,420
------------
76,172,895
PHARMACEUTICALS (1.9%)
253,090 Abbott Laboratories 7,118,156
523,800 Astra AB 11,405,431
147,611 Genentech Inc. 7,417,453
241,420 Genzyme Corp. (b) 6,971,003
255,000 ICN Pharmaceuticals, Inc. 2,326,875
458,500 Pfizer, Inc. 28,427,000
202,943 SPI Pharmaceuticals Inc. 3,830,549
280,100 Upjohn Co. 8,403,000
------------
75,899,467
SPECIALTY CONSUMER PRODUCTS (1.7%)
664,652 Department 56, Inc. 21,518,108
392,360 Fastenal Co. 14,223,050
440,100 Harcourt General, Inc. 15,788,587
457,520 Luxottica Group ADS (c) 15,956,010
------------
67,485,755
COMPUTER SERVICES (1.6%)
371,500 America Online, Inc. (b) 20,664,687
972,200 First Data Corp. 43,505,950
------------
64,170,637
PUBLISHING (1.5%)
869,260 Marvel Entertainment Group, Inc. 15,755,337
700,000 Reuters Holdings PLC ADR (c) 30,187,500
259,430 Wolters Kluwer 16,557,186
------------
62,500,023
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
OIL AND GAS (1.5%)
299,800 Associated Natural Gas Corp. $ 9,143,900
180,000 Burlington Resources Inc. 7,042,500
130,000 Exxon Corp. 7,735,000
100,000 Mobil Corp. 8,387,500
510,000 Production Operators Corp. 12,495,000
147,200 Royal Dutch Petroleum Co. ADR (c) 16,633,600
------------
61,437,500
ELECTRONICS AND ELECTRICAL EQUIPMENT (1.4%)
480,000 Baldor Electric Co. 11,640,000
199,900 Level One Communications, Inc. 3,998,000
180,000 Motorola, Inc. 9,540,000
480,245 Stratacom, Inc. 14,767,534
264,100 Tektronix, Inc. 8,286,137
195,600 Xilinx 7,335,000
------------
55,566,671
RECREATION (1.2%)
356,505 Blockbuster Entertainment Corp. 9,269,130
255,000 Boomtown, Inc. (b) 4,143,750
492,298 Disney (Walt) Productions Inc. 20,922,665
407,630 Mirage Resorts, Inc. (b) 7,490,201
399,500 Rio Hotel & Casino, Inc. 5,193,500
------------
47,019,246
PHARMACEUTICALS AND BIOTECHNOLOGY (1.1%)
611,041 Biogen, Inc. 26,580,284
537,470 Elan Corp. PLC ADR (c) 18,341,164
------------
44,921,448
BANKS (1.0%)
290,000 Bank of Boston Corp. 7,648,750
258,700 Comerica Inc. 7,696,325
210,600 First Bank Systems, Inc. 7,686,900
170,000 First Fidelity Bancorp (New Jersey) 7,947,500
300,000 National City Corp. 8,062,500
------------
39,041,975
CHEMICALS (1.0%)
160,000 FMC Corp. (b) 9,400,000
280,000 Great Lakes Chemical Corp. 16,660,000
374,483 Schulman (A.), Inc. 10,111,041
75,215 Sigma Aldrich Corp. 2,350,469
------------
38,521,510
HEALTH CARE INFORMATION SYSTEMS (0.8%)
1,141,660 HBO & Co. 32,537,310
AUTOMOTIVE (0.8%)
300,000 General Motors Corp. 15,412,500
508,700 MascoTech, Inc. 7,121,800
220,000 Snap-On Tools Corp. 8,057,500
------------
30,591,800
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
HMOS (0.7%)
600,940 Healthsource, Inc. $ 16,976,555
323,300 Mid Atlantic Medical Services, Inc. 13,416,950
------------
30,393,505
HEALTH CARE INFORMATION SERVICES (0.7%)
489,110 Oxford Health Plans Inc. (b) 28,612,935
FOOD AND BEVERAGES (0.6%)
1,400,000 Food Lion, Inc. Class A 8,312,500
3,451,310 Iceland Group 8,195,826
440,000 Pet, Inc. 8,195,000
------------
24,703,326
CELLULAR COMMUNICATIONS (0.6%)
937,033 Airtouch Communications, Inc. 24,362,857
CONGLOMERATES (0.5%)
807,020 Loewen Group, Inc. 19,671,113
TOBACCO (0.4%)
588,600 UST Inc. 16,995,825
HOUSEHOLD PRODUCTS (0.4%)
360,000 Dial Corp. (The) 7,425,000
220,000 Premark International, Inc. 9,212,500
------------
16,637,500
STEEL (0.4%)
804,810 Worthington Industries, Inc. 16,498,605
TELEPHONE UTILITIES (0.4%)
299,800 ALLTEL Corp. 8,094,600
190,000 Southwestern Bell Corp. 7,980,000
------------
16,074,600
OIL SERVICES (0.4%)
249,000 Halliburton Co. 8,466,000
127,200 Schlumberger Ltd. 7,504,800
------------
15,970,800
GAS (0.3%)
575,050 Western Gas Resources, Inc. 13,010,506
COMPUTER PERIPHERALS (0.3%)
763,500 American Power Conversion Corp. 12,597,750
COMPUTERS (0.2%)
225,200 Compaq Computer Corp. 7,121,950
195,700 EMC Corp. (b) 2,911,038
------------
10,032,988
RAILROADS (0.2%)
140,000 Union Pacific Corp. 8,260,000
ALCOHOLIC BEVERAGES (0.2%)
257,000 Seagram Co. Ltd. 7,902,750
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C> <C>
Consumer Products (0.2%)
215,200 Walgreen Co. $ 7,881,700
Transportation (0.2%)
111,800 Federal Express Corp. 7,434,700
Containers (0.2%)
619,670 Owens-Illinois Inc. (b) 6,583,994
Nursing Homes (0.1%)
1,168,200 Takare PLC 4,053,070
---------------
Total Common Stocks
(cost $3,091,480,311) $ 3,603,483,132
CONVERTIBLE PREFERRED STOCKS (1.4%)(a)
NUMBER OF SHARES VALUE
880,900 Cellular Communications, Inc. $0.01 cv. pfd. $ 45,916,913
170,190 Equitable Cos. $3.00 cv. pfd. (d) 8,849,880
---------------
Total Convertible Preferred Stocks (cost $34,686,066) $ 54,766,793
PREFERRED STOCKS (.3%)(a) (cost $12,882,058)
NUMBER OF SHARES VALUE
12,283 Hornbach Preferred $ 11,825,495
WARRANTS (-%)(a) (cost $ --)
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
10,673 Jan Bell Marketing, Inc. 12/16/98 $ 672
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (8.4%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$ 20,000,000 Bellsouth Telecommunication Inc. 4.28s, August 8, 1994 $ 19,983,355
13,000,000 CS First Boston Group Inc. 4.25s, August 4, 1994 12,995,396
42,600,000 Corporate Asset Funding Co. Inc. 4.22s to 4.35,
with various due dates to August 23, 1994 42,536,236
10,000,000 Federal Farm Credit Banks 4.35s, August 15, 1994 9,983,083
44,882,000 Federal Home Loan Mortgage Corp. 4.30s to 4.35s,
with various due dates to September 16, 1994 44,669,484
14,000,000 Federal National Mortgage Association 4.33s,
September 1, 1994 13,947,799
35,000,000 Goldman Sachs Group 4.30s, August 15, 1994 34,941,472
20,000,000 Household Finance Corp. 4.50s, August 31, 1994 19,925,000
60,000,000 IBM Credit Corp. 4.25s to 4.40s, with various due dates
to August 18, 1994 59,930,584
40,000,000 Merrill Lynch & Co. Inc. 4.25s, August 3, 1994 39,990,557
43,086,000 Interest in $530,000,000 joint repurchase agreement
dated July 29, 1994 with Bankers Trust Co. due
August 1, 1994 with respect to various U.S. Treasury
obligations -- maturity value of $43,101,080 for an
effective yield of 4.20%. 43,101,080
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $342,004,046) $ 342,004,046
--------------
TOTAL INVESTMENTS
(cost $3,481,052,481) (e) $4,012,080,138
--------------
</TABLE>
19
<PAGE> 20
NOTES
(a) Percentages indicated are based on total net assets of $4,045,048,716,
which correspond to a net asset value per class A, class B and class Y
share of $11.19, $10.97 and $11.22, respectively.
(b) Non-income-producing security.
(c) Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR or
ADS after the name of a foreign security stands for American Depository
Receipt and American Depository Shares, respectively, representing
ownership of foreign securities on deposit with a domestic custodian
bank.
(d) Security exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration normally to qualified institutional buyers. At July 31,
1994, this security was valued at $8,849,88 0 or 0.2% of net assets.
(e) The aggregate identified cost for federal income tax purposes is
$3,486,268,563 resulting in gross unrealized appreciation and
depreciation of $685,393,725 and $159,582,150 respectively, or net
unrealized appreciation of $525,811,575.
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1994
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (identified cost $3,481,052,481) (Note 1) $4,012,080,138
Cash 3,034
Dividends, interest and other receivables 1,661,693
Receivable for shares of the fund sold 22,223,676
Receivable for securities sold 59,311,793
--------------
Total assets 4,095,280,334
LIABILITIES
Payable for securities purchased 36,895,618
Payable for shares of the fund repurchased 2,714,967
Payable for compensation of Manager (Note 2) 5,306,549
Payable for investor servicing and custodian fees (Note 2) 2,783,650
Payable for administrative services (Note 2) 18,052
Payable for distribution fees (Note 2) 1,382,412
Other accrued expenses 1,130,370
Total liabilities 50,231,618
--------------
Net assets $4,045,048,716
REPRESENTED BY
Paid-in capital (Notes 1, 4 and 5) $3,368,664,805
Accumulated net realized gain on investment transactions (Notes 1 and 5) 145,356,254
Net unrealized appreciation of investments 531,027,657
--------------
Total - Representing net assets applicable to capital shares outstanding $4,045,048,716
--------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price of class A shares
($3,051,878,360 divided by 272,772,618 shares) $11.19
Offering price of class A shares (100/94.25 of $11.19)* $11.87
Net asset value, offering price and redemption price of class B shares
($911,068,632 divided by 83,057,506 shares) $10.97
Net asset value, offering price and redemption price of class Y shares
($82,101,724 divided by 7,319,977 shares) $11.22
<FN>
* 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.
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
STATEMENT OF OPERATIONS
Year ended July 31, 1994
<TABLE>
<S> <C>
Investment income:
Dividends (net of foreign tax of $484,964) $ 27,020,535
Interest 5,660,918
-------------
Total investment income 32,681,453
=============
Expenses:
Compensation of Manager (Note 2) 19,355,624
Investor servicing and custodian fees (Note 2) 8,560,460
Compensation of Trustees (Note 2) 89,945
Distribution fees -- class A (Note 2) 7,100,587
Distribution fees -- class B (Note 2) 6,695,183
Reports to shareholders 385,218
Auditing 37,500
Legal 54,272
Postage 941,829
Administrative services (Note 2) 58,585
Registration fees 347,251
Other 156,855
-------------
TOTAL EXPENSES 43,783,309
=============
NET INVESTMENT LOSS (11,101,856)
=============
Net realized gain on investments (Notes 1 and 3) 197,390,941
Net unrealized depreciation of investments
during the year (66,870,273)
-------------
NET GAIN ON INVESTMENTS 130,520,668
=============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 119,418,812
=============
The accompanying notes are an integral part of these financial statements.
</TABLE>
22
<PAGE> 23
STATEMENT OF CHANGES OF NET ASSETS
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS YEAR ENDED JULY 31
----------------------------------
1994 1993
------------ -------------
<S> <C> <C>
Operations:
Net investment loss $ (11,101,856) $ (4,392,957)
Net realized gain on investments 197,390,941 112,163,843
Net realized loss on options -- (1,185,231)
Net unrealized appreciation (depreciation)
of investments (66,870,273) 269,280,865
Net increase in net assets
resulting from operations 119,418,812 375,866,520
Distributions to shareholders from:
Net investment income -- (170,569)
Net realized gain on investments:
Class A (104,366,667) (90,141,397)
Class B (22,949,719) (6,173,738)
Increase from capital share transactions
(Note 4) 1,241,253,150 940,692,692
-------------- --------------
TOTAL INCREASE IN NET ASSETS 1,233,355,576 1,220,073,508
Beginning of year 2,811,693,140 1,591,619,632
End of year (including distribution
in excess of net investment income
$0 and $(318,367), respectively) $4,045,048,716 $2,811,693,140
============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
23
<PAGE> 24
FINANCIAL HIGHLIGHTS*
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
April 1, 1994 April 27, 1992
(commencement of (commencement of
operations) operations)**
to July 31 Year ended July 31 to July 31
---------------- --------------------------------------------
1994 1994 1993 1992
---------------- ------- ------- ----------------
Class Y Class B
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.24 $10.89 $9.63 $9.34
Investment Operations
Net Investment Income (Loss) -- (.05) (.03) (.04)
Net Realized and Unrealized Gain (Loss) on Investments (.02) .59 1.81 .33
Total from Investment Operations (.02) .54 1.78 .29
Less Distributions From:
Net Investment Income -- -- -- --
Net Realized Gain on Investments -- (.46) (.52) --
Total Distributions -- (.46) (.52) --
Net Asset Value, End of Period $11.22 $10.97 $10.89 $9.63
Total Investment Return at Net Asset Value (%) (b) (0.18)(c) 4.71 18.79 3.77
NET ASSETS, END OF PERIOD (IN THOUSANDS) $82,102 $911,069 $408,361 $42,492
------- -------- -------- -------
Ratio of Interest Expense to Average Net Assets (%) -- -- -- --
Ratio of Other Operating Expenses to Average
Net Assets (%) .31(c) 1.84 1.87 .63(c)
Ratio of Total Expenses to Average Net Assets (%) .31(c) 1.84 1.87 .63(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (.05)(c) (.91) (.91) (.39)(c)
Portfolio Turnover (%) 57.74 57.74 64.62 44.17
</TABLE>
See page 27 for notes to Financial Highlights.
24
<PAGE> 25
<TABLE>
<CAPTION>
Year ended July 31
----------------------------------------
1994 1993 1992
------- ------- ------
Class A
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.02 $9.67 $9.00
Investment Operations
Net Investment Income (Loss) (.02) (.02) .02
Net Realized and Unrealized Gain (Loss) on Investments .65 1.89 1.16
Total from Investment Operations .63 1.87 1.18
Less Distributions From:
Net Investment Income -- -- (.03)
Net Realized Gain on Investments (.46) (.52) (.48)
Total Distributions (.46) (.52) (.51)
Net Asset Value, End of Period $11.19 $11.02 $9.67
Total Investment Return at Net Asset Value (%) (b) 5.49 19.69 13.39
NET ASSETS, END OF PERIOD (IN THOUSANDS) $3,051,878 $2,403,332 $1,549,128
---------- ---------- ----------
Ratio of Interest Expense to Average Net Assets (%) -- -- --
Ratio of Other Operating Expenses to Average
Net Assets (%) 1.10 1.12 1.20
Ratio of Total Expenses to Average Net Assets (%) 1.10 1.12 1.20
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (.18) (.14) .27
Portfolio Turnover (%) 57.74 64.62 44.17
</TABLE>
25
<PAGE> 26
FINANCIAL HIGHLIGHTS*
(Continued)
<TABLE>
<CAPTION>
Year ended July 31
----------------------------------
1991 1990 1989
---- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $7.98 $8.51 $6.56
Investment Operations
Net Investment Income (Loss) .02 .09 .08
Net Realized and Unrealized Gain (Loss) on Investments 1.70 .28 2.02
Total from Investment Operations 1.72 .37 2.10
Less Distributions From:
Net Investment Income (.07) (.10) (.02)
Net Realized Gain on Investments (.63) (.80) (.13)
Total Distributions (.70) (.90) (.15)
Net Asset Value, End of Period $9.00 $7.98 $8.51
Total Investment Return at Net Asset Value (%) (b) 24.04 4.80 32.59
NET ASSETS, END OF PERIOD (IN THOUSANDS) $1,016,539 $755,550 $697,248
---------- -------- --------
Ratio of Interest Expense to Average Net Assets (%) -- -- --
Ratio of Other Operating Expenses to Average
Net Assets (%) 1.10 .97 1.00
Ratio of Total Expenses to Average Net Assets (%) 1.10 .97 1.00
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) .29 1.10 1.04
Portfolio Turnover (%) 49.43 61.71 70.87
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
Year ended July 31
-----------------------------------------------
1988 1987 1986 1985
---- ---- ---- ----
Class A
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $8.71 $7.43 $6.05 $4.77
Investment Operations
Net Investment Income (Loss) .04(a) .02 .04 .05
Net Realized and Unrealized Gain (Loss) on Investments (.84) 2.22 1.71 1.64
Total from Investment Operations (.80) 2.24 1.75 1.69
Less Distributions From:
Net Investment Income (.03) (.05) (.05) (.05)
Net Realized Gain on Investments (1.32) (.91) (.32) (.36)
Total Distributions (1.35) (.96) (.37) (.41)
Net Asset Value, End of Period $6.56 $8.71 $7.43 $6.05
Total Investment Return at Net Asset Value (%) (b) (10.26) 35.71 31.33 37.12
NET ASSETS, END OF PERIOD (IN THOUSANDS) $549,799 $610,966 $378,532 $282,868
-------- -------- -------- --------
Ratio of Interest Expense to Average Net Assets (%) -- .19 .01 .06
Ratio of Other Operating Expenses to Average
Net Assets (%) 1.05(a) 1.01 .88 .96
Ratio of Total Expenses to Average Net Assets (%) 1.05(a) 1.20 .89 1.02
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) .68(a) .41 .72 .99
Portfolio Turnover (%) 65.75 79.10 75.57 60.29
<FN>
*Table has been restated to reflect a 3-for-1 share split
declared by the Fund to shareholders of record on October 27, 1989.
**Per share net investment income has been determined on the
basis of weighted average number of shares outstanding during the period.
(a)Reflects an expense limitation during the year ended July 31,
1988. As a result of such limitation, expenses reflect
a reduction of less than $0.01 per share.
(b)Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c)Not annualized.
</TABLE>
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
July 31, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund invests primarily in common stocks of small to medium-sized companies
that Putnam Investment Management, Inc. ("Putnam Management") the funds
manager, a wholly owned subsidiary of Putnam Investment Inc. believes have
potential for capital appreciation significantly greater than that of
the market averages.
The fund offers class A, class B, and class Y shares. The fund commenced
its public offering of class Y shares on April 1, 1994. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and may be subject to a contingent deferred sales
charge if those shares are redeemed within six years of purchase. Class Y
shares, which do not pay a front end or contingent deferred sales charge,
are generally subject to the same expenses as class A shares and class B
shares, but do not bear a distribution fee. Class Y shares are sold only to
defined contribution plans with an initial investment of at least $250
million in a combination of Putnam funds and other investments managed by
Putnam. Expenses of the fund are borne pro-rata by the holders of each
class of shares, except that each class bears expenses unique to that
class including the distribution fees applicable to such class. Each class
votes 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
policies are in conformity with generally accepted accounting principles.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is deter mined using the last
reported sale price, or, if no sales are reported-as in the case of some
securities traded over the counter-the last reported bid price, except
that certain U.S. government obligations are stated at the mean between
the bid and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost which
approximates market, and other investments are stated at fair value
following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Management and certain
other accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
28
<PAGE> 29
C) Repurchase agreements The fund, through its custodian, receives delivery
of the underlying securities, the market value of which at the time of
purchase is required to be in an amount at least equal to the resale
price, including accrued interest. The fund's Manager is responsible for
determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis and
dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date. Foreign currency-denominated receivables
and payables are "marked-to-market" using the current exchange rate. The
fluctuation between the original exchange rate and the current exchange
rate is recorded as unrealized gain or loss. Upon receipt of payment, the
Funds realize a gain or loss on foreign currency amounting to the
difference between the original value and the ending value of the
receivable or payable.
E) Option accounting principles When the fund writes a call or put option,
an amount equal to the premium received by the fund is included in the
fund's "Statement of Assets and Liabilities" as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market"
to reflect the current market value of the option written. The current
market value of an option is the last sale price or, in the absence of a
sale, the last offering price. If an option expires on its stipulated
expiration date, or if the fund enters into a closing purchase transaction,
the fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. If a written
call option is exercised, the fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by
the premium originally received. If a written put option is exercised, the
amount of the premium originally received reduces the cost of the
security which the fund purchases upon exercise of the option.
The premium paid by the fund for the purchase of a call or put option is
included in the fund's "Statement of Assets and Liabilities" as an
investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the fund has purchased
expires on the stipulated expiration date, the fund realizes a loss in the
amount of the cost of the option. If the fund enters into a closing sale
transaction, the fund realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than the
cost of the option. If the fund exercises a call option, the cost of the
securities acquired by exercising the call is increased by the premium
paid to buy the call. If the fund exercises a put option, it realizes a
gain or loss from the sale of the underlying security and the proceeds
from such sale are decreased by the premium originally paid.
Stock index options are similar to options on individual securities in that
the purchaser of an index option acquires the right to buy, and the writer
undertakes the obligation to sell, an index at a stated exercise price
during the term of the option. Instead of giving the right to take or make
actual delivery of securities, the holder of a stock index option has
the right to receive a cash "exercise settlement
29
<PAGE> 30
account." This amount is equal to the amount by which the fixed exercise
price of the option exceeds (in the case of a put) or is less than (in the
case of a call) the closing value of the underlying index on the date of
the exercise, multiplied by a fixed "index multiplier." The fund writes
options on stock indices only to the extent that it holds in its
portfolio underlying securities, which, in the judgment of Putnam
Management, correlate closely with the stock index.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986. Therefore, no provision has been made for
federal taxes on income, capital gains or unrealized appreciation on
securities held and for excise tax on income and capital gains.
G) Distributions to shareholders Distributions to shareholders are recorded
by the fund on the ex-dividend date. 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.
The differences include treatment of net investment losses and losses on
wash sales transactions. 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. For the
year ended July 31, 1994, the fund reclassified $11,101,856 to reduce
accumulated net investment losses, $28,746 to increase accumulated
net realized gain and $11,130,602 to decrease paid-in capital.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management, for management and investment advisory
services, is paid quarterly based on the average net assets of the fund for
the quarter. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500 million,
0.55% of the next $500 million, and 0.50% of any amount over $1.5 billion,
subject to reduction in any year to the extent that expenses (exclusive of
brokerage, interest, taxes, distribution fees, credits allowed by PFTC and
extraordinary expenses) of the fund exceed 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million and 1.5% of any amount
over $100 million, and by the amount of certain brokerage commissions and
fees (less expenses) received by affiliates of the Manager on the
fund's portfolio transactions.
The fund also reimburses the Manager for the com pensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the year ended
July 31, 1994, the fund paid $58,585 for these services.
Trustees of the fund receive an annual Trustee's fee of $5,650, and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the
Trustees receive additional fees for attendance at certain committee
meetings.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided to the fund by Putnam Investor
Services, a division of PFTC.
30
<PAGE> 31
Fees paid for these investor servicing and custodial functions for the
year ended July 31, 1994 amounted to $8,560,460.
Investor servicing and custodian fees reported in the Statement of
operations for the year ended July 31, 1994 have been reduced by credits
allowed by PFTC.
The Fund has adopted a distribution plan with respect to its Class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Class A Plan is to compensate Putnam
Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc.,
for services provided and expenses incurred by it in distributing Class A
shares. The Trustees have approved payment by the Fund to Putnam Mutual
Funds Corp. at an annual rate of 0.25% of the Fund's average net assets
attributable to Class A shares. For the year ended July 31, 1994, the Fund
paid $7,100,587 in distribution fees for Class A shares.
During the year ended July 31, 1994, Putnam Mutual Funds Corp., acting as
an underwriter, received net commissions of $2,269,747 from the sale of
class A shares of the fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more.
For the year ended July 1993, Putnam Mutual Funds Corp., acting as
underwriter, received $20,178 on class A redemptions.
The fund has adopted a distribution plan with respect to its class B shares
(the "class B Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the class B Plan is to compensate Putnam
Mutual Funds Corp. for services provided and expenses incurred by it in
distributing class B shares. The class B Plan provides for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate of up to 1.00% of the
fund's average net assets attributable to class B shares. For the year
ended July 31, 1994, the fund paid Putnam Mutual Funds Corp. distribution
fees of $6,695,183 for class B shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent
deferred sales charges on its class B share redemptions within six years of
purchase. The charge is based on declining rates, which begin at 5.00% of
the net asset value of the redeemed shares. For the year ended July 31,
1994, Putnam Mutual Funds Corp., acting as an underwriter, received
$961,176 in contingent deferred sales charges from redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended July 31, 1994, purchases and sales of investment
securities other than short-term investments aggregated $2,962,865,871 and
$1,930,831,230 respectively. There were no purchases or sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
NOTE 4
CAPITAL SHARES
At July 31, 1994, there was an unlimited number of shares of beneficial
interest authorized, divided into Class A, Class B and Class Y capital
shares. Transactions in capital shares were as follows:
31
<PAGE> 32
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1994
----------------------------
CLASS A SHARES AMOUNT
- ------- ------ ------
<S> <C> <C>
Shares sold 120,147,917 $1,398,407,256
Shares issued in connection with
reinvestment of distributions 8,467,321 99,321,439
----------- --------------
128,615,238 1,497,728,695
Shares repurchased 73,942,159 860,942,051
----------- --------------
Net increase 54,673,079 $ 636,786,644
=========== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1993
----------------------------
CLASS A SHARES AMOUNT
- ------- ------ ------
<S> <C> <C>
Shares sold 103,905,106 $1,074,340,482
Shares issued in connection with
reinvestment of distributions 7,987,904 82,835,225
----------- --------------
111,893,010 1,157,175,707
Shares repurchased 54,026,950 555,944,066
----------- --------------
Net increase 57,866,060 $ 601,231,641
=========== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1994
----------------------------
CLASS B SHARES AMOUNT
- ------- ------ ------
<S> <C> <C>
Shares sold 54,297,802 $ 622,475,746
Shares issued in connection with
reinvestment of distributions 1,839,090 21,241,295
----------- --------------
56,136,892 643,717,041
Shares repurchased 10,567,655 121,046,605
----------- --------------
Net increase 45,569,237 $ 522,670,436
=========== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1993
----------------------------
CLASS B SHARES AMOUNT
- ------- ------ ------
<S> <C> <C>
Shares sold 36,505,966 $ 374,601,722
Shares issued in connection with
reinvestment of distributions 548,375 5,648,264
----------- --------------
37,054,341 380,249,986
Shares repurchased 3,976,467 40,788,935
----------- --------------
Net increase 33,077,874 $ 339,461,051
=========== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1994
----------------------------
CLASS Y SHARES AMOUNT
- ------- ------ ------
<S> <C> <C>
Shares sold 7,360,249 $ 82,242,284
Shares issued in connection with
reinvestment of distributions -- --
----------- --------------
7,360,249 82,242,284
Shares repurchased 40,272 446,214
----------- --------------
Net increase 7,319,977 $ 81,796,070
=========== ==============
</TABLE>
NOTE 5
Effective August 1, 1993, the fund adopted the provisions of Statement of
Position 93-2 "Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies" (SOP). The purpose of this SOP is to report the
undistributed net investment income (loss) and accumulated net realized
gain (loss) accounts in such a manner as to approximate amounts available
for future tax distributions (or to offset future taxable realized capital
gains), and to achieve uniformity in the presentation of distributions
by investment companies.
As a result of the SOP, the fund has reclassified $318,367 to decrease
distributions in excess of net investment income and $4,470,089 to increase
accumulated net realized gain and $4,788,456 to decrease paid-in capital.
These reclassifications represent the cumulative amounts necessary to
report these balances through July 31, 1993. These reclassifications,
which have no impact on the total net asset value of the fund are
primarily attributable to non-taxable dividend income, market discount and
organization expenses, which are treated differently in the computation of
distributable income and capital gains under federal income tax rules and
regulation versus generally accepted accounting principles.
32
<PAGE> 33
FEDERAL TAX INFORMATION
Of the total distributions made, $.46 was classified as a long-term
capital gain, whether received in cash or additional Fund shares, and
regardless of how long you had owned your shares before the distribution
was made. The Form 1099 you receive in January 1995 will show you the tax
status of all distributions paid to your account in calendar 1994.
If you're a shareholder in an IRA or other tax-sheltered retirement plan,
this statement is for information only and will serve as a record of
distributions reinvested in your account during the fiscal year.
Money invested in these plans generally is not subject to federal income
tax until you withdraw it. As required by law, your Fund reports to the
Internal Revenue Service on a calendar year basis the amount of
distributions paid to each shareholder.
<TABLE>
<CAPTION>
Dates Investment Long-Term Total
Paid Income Capital Gain Paid
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dec. 30, 1993 - Class A -- $.456 $.456
Dec. 30, 1993 - Class B -- $.456 $.456
</TABLE>
33
<PAGE> 34
OUR COMMITMENT TO QUALITY SERVICE
- - CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
every year since the award's 1990 inception. DALBAR, an independent
research firm, ran more than 10,000 tests of 38 shareholder service
components. In every category, Putnam outperformed the industry standard.
- - HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month
from a Putnam fund or from your own checking or savings account.*
- - SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change
or termination.)
- - ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than their
original cost.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative.
- - To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number:
1-800-225-1581.
* Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market. Investors should consider their
ability to continue purchasing shares during periods of low price levels.
34
<PAGE> 35
FUND INFORMATION
<TABLE>
<S> <C>
INVESTMENT MANAGER OFFICERS
Putnam Investment Management, Inc. George Putnam
One Post Office Square President
Boston, MA 02109 Charles E. Porter
Executive Vice President
MARKETING SERVICES Patricia C. Flaherty
Putnam Mutual Funds Corp. Senior Vice President
One Post Office Square Lawrence J. Lasser
Boston, MA 02109 Vice President
Gordon H. Silver
CUSTODIAN Vice President
Putnam Fiduciary Trust Company Peter Carman
Vice President
LEGAL COUNSEL Matthew A. Weatherbie
Ropes & Gray Vice President and Fund Manager
Charles H. Swanberg
INDEPENDENT ACCOUNTANTS Vice President and Fund Manager
Price Waterhouse LLP William N. Shiebler
Vice President
TRUSTEES John R. Verani
George Putnam, Chairman Vice President
William Pounds, Vice Chairman Paul M. O'Neil
Jameson Adkins Baxter Vice President
Hans H. Estin John D. Hughes
John A. Hill Vice President and Treasurer
Elizabeth T. Kennan Beverly Marcus
Lawrence J. Lasser Clerk and Assistant Treasurer
Donald S. Perkins
Robert E. Patterson This report is for the information of
George Putnam, III shareholders of Putnam Voyager
A.J.C. Smith Fund. It may also be used as
W. Nicholas Thorndike sales literature when preceded or
accompanied by the current
prospectus, which gives details of
sales charges, investment objectives
and operating policies of the fund,
and the most recent copy of Putnam's
Quarterly Performance Summary.
</TABLE>
35
<PAGE> 36
PUTNAM INVESTMENTS _________________
The Putnam Funds Bulk Rate
One Post Office Square U.S. Postage
Boston, Massachusetts 02109 PAID
PutnamInvestments
_________________
<PAGE> 37
PUTNAM INVESTMENTS
- -------------------------------------------------------------------------------
Putnam Voyager Fund
Supplement to Annual Report dated July 31, 1994.
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of class
Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A and B
shares, which are discussed more extensively in the annual report.
<TABLE>
FISCAL 1994 RESULTS AT A GLANCE
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Standard & Poor's
Total return Class Y 500[R] Index
<S> <C> <C>
4/4/94 (commencement of offering
of class Y shares) to 7/31/94 (change in value
during period plus reinvested distributions) -0.18% +5.21%
4/4/94 to 6/30/94
most current calendar quarter -3.20% +2.00%
- ----------------------------------------------------------------------------------------------------
Share Value NAV
4/4/94 $11.24
7/31/94 $11.22
- ----------------------------------------------------------------------------------------------------
The fund's distributions are paid annually in December.
</TABLE>
Please note that past performance does not indicate future results. Investment
return and principal value will fluctuate so your shares, when redeemed, may be
worth more or less than their original cost. See full Report for information on
comparative benchmarks. If you have questions please consult your fund
prospectus or call Putnam toll free 1-800-752-9894.
14530 DC-34 9/94
