Putnam Voyager Fund II
ANNUAL REPORT
December 31, 1995
Fund highlights
* According to Lipper Analytical Services, Putnam Voyager Fund
II's class A share total return ranked 3 out of 572 growth funds for the
12 months ended December 31, 1995, placing it in the top 1% of funds in
this category.*
* "The impact of interest rates on stocks is enormous. In
fact, as far as stocks have come in the last year . . . many analysts
believe the stock market is still undervalued relative to bond yields."
--Business Week, December 25, 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
21 Financial statements
*Lipper Analytical Services, an independent research organization, ranks
funds according to total-return performance. Their rankings vary over
time and do not reflect the effects of sales charges. For periods ended
12/31/95, the fund's class A shares ranked 3 out of 572 growth funds for
1-year performance and 5 out of 379 growth funds for life-of-fund
performance. Class B and class M shares became available on 10/2/95 and
currently are not ranked by Lipper.
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
It would be difficult to conceal our satisfaction with the outstanding
results delivered by Putnam Voyager Fund II during its debut as a
nationally offered fund -- the fiscal year that closed on December 31,
1995. At the same time, it behooves us to counsel that while we are
still looking for another positive year in fiscal 1996, a performance of
similar proportions is not likely.
For one thing, the much heralded strength of technology stocks is
beginning to level off. For another, the market is quite likely to take
a breather or two as it digests the sustained rise of 1995. Finally, the
economic slowdown is almost certain to be reflected in more modest
corporate earnings expectations -- and in actual earnings -- over the
months ahead.
Thus, the market may be in for some choppiness, especially over the near
term. Nevertheless, Putnam Management believes equities, on balance,
will continue their upward course in 1996, though at a more subdued pace
than they enjoyed in 1995.
Respectfully yours,
/s/George Putnam
-------------
George Putnam
Chairman of the Trustees
February 21, 1996
Report from the Fund Managers
Charles H. Swanberg
Roland W. Gillis
Robert R. Beck
Throughout fiscal 1995, the dramatic rally in domestic financial markets
was echoed in outstanding performance from Putnam Voyager Fund II.
Despite a gradual slowdown in economic growth, stocks generally
continued to prosper. Corporate earnings remained strong largely because
of diligent cost-cutting efforts and sustained growth in certain sectors
of the economy, and interest rates fell markedly from their November
1994 peak.
Amid this auspicious environment, your fund's class A shares produced a
41.57% total return at public offering price (50.14% at net asset value)
for the 12 months ended December 31, 1995. This performance outpaced the
37.45% return posted by the fund's benchmark, the Standard & Poor's
500(registered trademark) Index, over the same period.
* A BROADER INVESTMENT FOCUS EXPANDS OPPORTUNITIES
At the beginning of the fourth quarter of fiscal 1995, we altered the
fund's investment strategy, which had emphasized middle- and large-
capitalization growth companies. On October 2, 1995, with the approval
of the fund's Trustees, we expanded the fund's investment focus to allow
increased investment in small-capitalization companies.
While this change significantly affected the fund's overall investment
strategy, it did not alter its underlying objective: to seek long-term
growth of capital. Furthermore, the new strategy freed us to select
growth opportunities from a larger and more diverse universe of stocks.
Indeed, this expanded freedom was an important contributor to the fund's
strong performance late in the fiscal year.
* TECHNOLOGY STOCKS LEAD THE CHARGE
Among the economic sectors that contributed to your fund's vigorous
performance during the fiscal year, technology was the obvious leader.
Stocks in this sector represented a significant portion of your fund's
portfolio during the period, allowing the fund to capitalize on their
spirited behavior throughout virtually all of 1995. The recent rally in
technology stocks was propelled by several factors, including solid
revenues among Internet-related companies and stable-to-declining
interest rates.
Your fund benefited from exceptional performance among several of its
holdings in this sector. America Online, a leading on-line services
provider, has seen its stock's value rise steadily since 1994, with a
total price appreciation of 193% during 1995. Other companies in the
portfolio whose stock values surged during the year include Cisco
Systems, a manufacturer of computer networking systems, and U.S.
Robotics, which produces and sells modems and other computer networking
equipment.
Despite the downturn that affected the stocks of semiconductor
manufacturers late in 1995, many securities in this division of the
technology sector reported outstanding performance and enhanced your
fund's total return during the fiscal year. Linear Technology, Analog
Devices, and Xilinx each aided your fund's performance with stock price
gains of more than 50% during 1995. But the true champion among
semiconductor producers in terms of your fund's portfolio was Maxim
Integrated Products. This company's impressive earnings and high
profitability in 1995 stemmed largely from its new product
introductions, and enabled its stock price to climb approximately 117%
since the beginning of the year.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*
showing:
Technology 25.7%
Consumer products 25.7%
Health care 16.8%
Service 9.5%
Financial 4.3%
Footnote reads:
(bullet)Based on net assets as of 12/31/95. Holdings will
vary over time.]
In addition to technology, your fund was able to capitalize on growth
opportunities in other sectors of the economy. One that offered
significant benefits was the medical devices industry, in which your
fund has several holdings that excelled during the year. Boston
Scientific, an innovator in noninvasive surgical devices such as laser
and ultrasound equipment, ended the year with its stock value up 50%. We
also added to the fund's position in Thermo Cardiosystems, a
manufacturer of devices that assist the human heart. By the end of the
year, the value of this stock -- your fund's largest holding -- had
soared well over 300%.
* ECONOMIC SECTORS TO WATCH IN THE COMING MONTHS
In the third quarter of 1995, a notable deterioration among
semiconductor stock values began to detract from the technology sector
rally that had characterized much of 1995. At this time, we started to
sell some of the fund's semiconductor holdings -- as did a great many
corporate and individual investors. This widespread selling accelerated
the existing price declines, and, as a result, many semiconductor stocks
are now relatively inexpensive. We are closely monitoring this segment
of the technology sector and, if the current trend shows signs of
reversing, we may take advantage of the resulting investment
opportunity.
As economic growth continues to slow, investors will likely begin to
search for investments in a recession-resistant economic sector. Health
care is one industry that typically delivers solid earnings even when
the economy is sluggish; inevitably, people need medical assistance
regardless of the economic environment. Health-care securities,
particularly the stocks of health maintenance organizations (HMOs),
became largely undervalued in 1995 as the Clinton administration's
health-care initiative unsettled the industry. With stock values still
relatively depressed and the economic outlook murky, we may augment the
portfolio's health-care holdings in the coming months.
One more area of interest is the biotechnology industry, which includes
prescription drug manufacturers. In 1991, a spate of drug companies went
public and began to seek FDA approval of their products. The drug
approval process typically lasts several years, and some of the
companies that initiated it in 1991 are now nearing the finish line.
While the values of their stocks have languished during the process,
those companies that have survived -- and their investors -- may be
rewarded when their products ultimately reach the market. We will use
our exhaustive research techniques to identify whether any of these
companies offer potential rewards to the fund, and will invest the
fund's assets accordingly.
TOP 10 HOLDINGS (1/31/95)*
THERMO CARDIOSYSTEMS
Medical devices
HOSPITALITY FRANCHISE SYSTEMS
Business Services
INPUT/OUTPUT INC
Electronics
MADGE NETWORKS
Computer networking systems
CISCO SYSTEMS
Computer networking systems
CABLETRON SYSTEMS
Computer networking sytems
MBNA CORP.
Financial Services
BLYTH INDUSTRIES
Household products
THERMOLASE CORP.6
Cosmetic procedures and products
THERO ELECTRON CORP.
Diversified machines
Footnote reads:
*These holdings represent 14.5% of the fund's net assets.
Portfolio holdings will vary over time.
The fund's performance so far reinforces our belief in the long-term
effectiveness of its investment strategy. Going forward, we will
continue our search for rapidly growing, prudently managed companies.
The views expressed here are exclusively those of Putnam Management,
Inc. They are not meant as investment advice. Although the described
holdings were viewed favorably as of 12/31/95, there is no guarantee
that the fund will continue to hold these securities in the future.This
fund invests all or a portion of its assets in small to medium sized
companies. Such investments increase the risk of greater price
fluctuations.
Performance should always be considered in light of a fund's investment
strategy. Putnam Voyager Fund II is designed for investors aggressively
seeking capital appreciation primarily through common stocks.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions back into the fund. We show
total return in two ways: on a cumulative long-term basis and on average
how the fund grew each year over varying periods.
TOTAL RETURN FOR PERIODS ENDED 12/31/95
Class A Class B Class M
(4/14/93)* (10/2/95)* (10/2/95)*
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------------------
1 year 50.14% 41.57% -- -- -- --
- -------------------------------------------------------------------------
Life of class 85.27 74.59 10.41% 5.41% 10.57% 6.73%
Annual average 25.45 22.74 -- -- -- --
- -------------------------------------------------------------------------
* Commencement of operations
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions. Performance data represent past
results. Investment returns and net asset value will fluctuate so an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC assumes 5% maximum contingent
deferred sales charge.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/95
Standard & Poor's Consumer
500 Index Price Index
- ------------------------------------------------------------------------
1 year 37.45% 2.54%
- ------------------------------------------------------------------------
Life of class A (since 4/14/93) 46.90 6.89
Annual average 15.19 2.48
- ------------------------------------------------------------------------
Life of class B and class M
(since 10/2/95) 6.00 0.20
- ------------------------------------------------------------------------
Past performance is not indicative of future results. You cannot invest
in an index. See page 10 for index definitions.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
Y-axis reads (top to bottom) $18,000 to $8,000 in $1,000 decrements
X-axis reads (left to right) 4/93 to 12/95 the first two dates indicate
a five month increment, the remaining dates indicate three month increments
A solid black line represents Fund's Class A at POP
ranging from $9,425 to $17,459
A solid white line represents S&P's 500 Index
ranging from $10,000 to $14,690
A solid gray line represents Consumer Prince Index
ranging from $10,000 to $10,689
Class A S&P 500 CPI
------- -------- -------
04/93 $9,425 $10,000 $10,000
06/93 9,834 10,115 10,056
09/93 10,798 10,375 10,104
12/93 11,589 10,615 10,153
03/94 10,992 10,216 10,251
06/94 10,632 10,260 10,306
09/94 11,915 10,761 10,404
12/94 11,629 10,759 10,425
03/95 12,726 xx,xxx xx,xxx
06/95 14,109 xx,xxx xx,xxx
09/95 15,780 xx,xxx xx,xxx
12/95 17,459 14,690 10,689
Cumulative total return of a $10,000
investment since 04/14/93
S&P 500 Index $ 14,690
Fund's Class A
shares at POP $ 17,459
Consumer Price Index $ 10,689
Footnote reads:
Performance for the fund assumes reinvestment of capital gains and
dividends and includes the fund's maximum 5.75% sales charge. A $10,000
investment in the fund's class B shares at inception on 10/2/95 would
have been valued at $11,041 on 12/31/95 ($10,541 with a redemption at
the end of the period). A $10,000 investment in the fund's class M shares
at inception on 10/2/95 would have been valued at $11,057 on 12/31/95
($10,673 at maximum POP). Past performance is not indicative
of future results.]
PRICE AND DISTRIBUTION INFORMATION
12 months ended 12/31/95
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 2 1 1
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term $0.197 $0.052 $0.052
- ------------------------------------------------------------------------
Short-term $0.023 $0.016 $0.016
- ------------------------------------------------------------------------
Total $0.220 $0.068 $0.068
- ------------------------------------------------------------------------
Share value NAV POP NAV NAV POP
- ------------------------------------------------------------------------
12/31/94 $9.75 $10.34 -- -- --
- ------------------------------------------------------------------------
10/2/95 (inception of
class B and class M shares -- -- $13.08 $13.08 $13.55
- ------------------------------------------------------------------------
12/31/95 14.40 15.28 14.37 14.39 14.91
- ------------------------------------------------------------------------
Past performance is not indicative of future results
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 for class A
shares and 3.50% for class M shares.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
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 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Consumer Price Index (CPI), prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of the rate of inflation. The
index shows the average change in the cost of selected consumer goods
and services and does not represent a return on an investment vehicle.
Indexes are unmanaged list of stocks, assume reinvestment of all
distributions, and do not take into account brokerage commissions or
other costs. Holdings differ from fund holdings, and you cannot invest
in an index. Past performance is not indicative of future results.
Report of independent accountants
For the fiscal year ended December 31, 1995
To the Trustees and Shareholders of
Putnam Voyager Fund II
We have audited the accompanying statement of assets and liabilities of
Putnam Voyager Fund II (formerly known as Putnam Growth Fund), including
the portfolio of investments owned, as of December 31, 1995, and the
related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Voyager Fund II as of December 31, 1995,
the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 14, 1996
<TABLE>
<CAPTION
Portfolio of investments owned
December 31, 1995
COMMON STOCKS (94.7%)*
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advertising (0.4%)
16,830 Omnicom Group $626,918
Alcoholic Beverages (0.5%)
- -------------------------------------------------------------------------------------------------------------
6,300 Anheuser-Busch Cos., Inc. 421,313
10,300 Seagram Co., Ltd. 356,638
--------------
777,951
Apparel (0.6%)
- -------------------------------------------------------------------------------------------------------------
23,000 Intimate Brands, Inc. 345,000
12,500 Tommy Hilfiger Corp. + 529,688
--------------
874,688
Automotive (0.6%)
- -------------------------------------------------------------------------------------------------------------
15,000 Echlin, Inc. 547,500
7,700 Snap-On Inc. 348,425
--------------
895,925
Banks (1.5%)
- -------------------------------------------------------------------------------------------------------------
8,000 BankAmerica Corp. 518,000
7,200 Citicorp 484,200
41,504 TCF Financial Corp. 1,374,820
--------------
2,377,020
Broadcasting (2.2%)
- -------------------------------------------------------------------------------------------------------------
3,100 Capital Cities/ABC, Inc. 382,462
5,291 Central European Media Enterprises + 108,466
18,414 Clear Channel Communications, Inc. + 812,518
4,390 Evergreen Media Corp. Class A + 140,480
27,461 Infinity Broadcasting Corp. Class A + 1,022,922
8,943 LIN Television Corp. + 266,054
12,860 Renaissance Communications Corp. + 284,528
4,578 Sinclair Broadcast Group, Inc. Class A + 78,971
19,466 Westwood One, Inc. + 274,957
--------------
3,371,358
Business Equipment and Services (4.7%)
- -------------------------------------------------------------------------------------------------------------
6,708 Corestaff, Inc. + 244,842
41,350 Corporate Express, Inc. + 1,245,669
26,420 Danka Business Systems ADR (United Kingdom) 977,540
8,100 Dow Jones & Co., Inc. $322,988
3,800 Interim Services, Inc. + 132,050
11,564 Manpower, Inc. 325,238
29,872 Paychex, Inc. 1,489,866
274,670 Rentokil Group PLC (United Kingdom) 1,426,224
26,778 Robert Half International, Inc. + 1,121,329
--------------
7,285,746
Cable Television (0.5%)
- -------------------------------------------------------------------------------------------------------------
9,632 Century Communications Corp. Class A + 77,056
4,100 TCA Cable TV, Inc. 113,263
8,450 Tele-Comm Liberty Media Group, Inc. Class A + 227,094
17,000 Tele-Communications Inc. Class A + 337,875
--------------
755,288
Chemicals (0.7%)
- -------------------------------------------------------------------------------------------------------------
3,700 Great Lakes Chemical Corp. 266,400
10,000 Praxair, Inc. 336,250
8,000 Raychem Corp. 455,000
--------------
1,057,650
Computer Services (2.6%)
- -------------------------------------------------------------------------------------------------------------
30,044 America Online, Inc. + 1,126,650
10,878 CBT Group PLC ADR (Ireland) + 576,534
7,300 CMG Information Services, Inc. + 677,988
20,910 First Data Corp. 1,398,356
8,144 Tivoli Systems, Inc. + 274,860
--------------
4,054,388
Computer Software (14.9%)
- -------------------------------------------------------------------------------------------------------------
16,298 Adobe Systems, Inc. 1,010,476
13,678 Baan Co., N.V. (Netherlands)+ 618,930
5,707 Business Objects S.A., ADR (France)+ 276,076
25,600 Citrix Systems, Inc. + 832,000
8,971 Clarify, Inc.+ 269,130
20,021 Computer Associates Intl., Inc. 1,138,694
5,222 Datastream Systems, Inc. + 99,218
6,600 Digital Equipment Corp. + 423,225
17,437 Discreet Logic, Inc. (Canada) + 435,925
32,963 Electronic Arts, Inc. + 861,158
33,598 Electronics for Imaging + 1,469,913
14,500 Epic Design Technology, Inc. + 304,500
5,024 Fulcrum Technologies, Inc. + 163,280
22,209 Gemstar Intl. Group Ltd. + 630,180
15,800 Geoworks + 300,200
5,600 GT Interactive Software Corp. 78,400
40,596 Informix Corp. + 1,217,880
13,200 Insignia Solutions, Inc. ADR + 155,100
10,949 Intuit, Inc. + 854,022
20,200 Lernout & Hauspie Speech Products NV (Netherlands) + 565,600
10,377 Macromedia, Inc. + 542,198
7,702 Mercury Interactive Corp. + 140,562
200 Metatools, Inc. + 5,200
11,749 Microsoft Corp. + 1,030,975
6,342 Netscape Communications Corp. + 881,538
21,300 Objective Systems Integrator + 1,166,175
17,407 Pairgain Technologies, Inc. + 953,033
22,013 Parametric Technology Corp. + 1,463,865
13,100 Pri Automation, Inc. + 460,138
11,500 Psinet, Inc. + 263,063
13,000 Scopus Technology, Inc. + 328,250
14,700 Secure Computing Corp. + 823,200
16,000 Security Dynamics Technologies, Inc. + 872,000
11,860 Softkey International, Inc. + 274,263
12,274 Spyglass, Inc. + 699,618
28,762 Sybase, Inc. + 1,035,432
10,678 Synopsys, Inc.+ 405,764
6,900 VideoServer, Inc. + 217,350
--------------
23,266,531
Computers (1.4%)
- -------------------------------------------------------------------------------------------------------------
26,202 Cabletron Systems, Inc. + 2,122,362
Consumer Non Durables (1.4%)
- -------------------------------------------------------------------------------------------------------------
30,807 Department 56, Inc. + 1,182,219
18,058 Luxottica Group SPA ADR (Italy) 1,056,392
--------------
2,238,611
Consumer Products (0.3%)
- -------------------------------------------------------------------------------------------------------------
6,031 Kimberly-Clark Corp. 499,065
Consumer Services (1.6%)
- -------------------------------------------------------------------------------------------------------------
34,580 Block (H & R), Inc. 1,400,490
24,486 CUC International, Inc. + 835,585
8,347 Loewen Group, Inc. 211,283
--------------
2,447,358
Cosmetics (1.1%)
- -------------------------------------------------------------------------------------------------------------
68,878 Thermolase Corp. 1,782,218
Drugs (1.1%)
- -------------------------------------------------------------------------------------------------------------
31,200 Bio-Vascular, Inc. 366,600
29,371 Martek Biosciences Corp. + 741,617
27,900 Oravax, Inc. + 327,825
23,328 Vical, Inc. + 282,852
--------------
1,718,894
Electronics and Electrical Equipment (2.8%)
- -------------------------------------------------------------------------------------------------------------
19,000 ADT Ltd. + $285,000
9,064 Adtran, Inc. + 492,289
5,927 Cyberoptics Corp. + 235,598
5,009 ESS Technology + 115,207
5,750 General Electric Co. 414,000
40,587 Input/Output, Inc. + 2,343,899
8,200 KLA Instruments Corp. + 213,713
1,300 Motorola, Inc. 74,100
13,900 Silicon Storage Technology + 184,175
--------------
4,357,981
Energy-Related (1.1%)
- -------------------------------------------------------------------------------------------------------------
32,167 Thermo Electron Corp. + 1,672,684
Entertainment (0.9%)
- -------------------------------------------------------------------------------------------------------------
15,165 Disney (Walt) Productions, Inc. 894,735
12,878 Scientific Games Holdings Corp. + 486,145
--------------
1,380,880
Environmental Control (0.3%)
- -------------------------------------------------------------------------------------------------------------
6,708 Memtec Ltd. ADR 111,520
15,000 WMX Technologies, Inc. 448,125
--------------
559,645
Finance (1.0%)
- -------------------------------------------------------------------------------------------------------------
34,911 American Express Co. 1,444,442
8,464 Financial Federal Corp. + 189,382
--------------
1,633,824
Financial Services (1.6%)
- -------------------------------------------------------------------------------------------------------------
300 First USA, Inc. 13,313
57,224 MBNA Corp. 2,110,135
33,363 Mercury Finance Co. 442,060
--------------
2,565,508
Food and Beverages (0.5%)
- -------------------------------------------------------------------------------------------------------------
20,300 Archer Daniels Midland Co. 365,400
15,600 Whitman Corporation 362,700
--------------
728,100
Gaming (0.3%)
- -------------------------------------------------------------------------------------------------------------
16,310 Circus Circus Enterprises, Inc. + 454,641
Gas Utilities (0.3%)
- -------------------------------------------------------------------------------------------------------------
9,200 Columbia Gas System, Inc. + 403,650
HMOs (1.8%)
- -------------------------------------------------------------------------------------------------------------
18,028 Healthsource, Inc. 649,008
18,400 Oxford Health Plans Inc. + 1,359,300
5,778 Pacificare Health Systems, Inc. Class B + 502,685
9,095 Sierra Health Services + 288,765
--------------
2,799,758
Health Care Information Systems (1.0%)
- -------------------------------------------------------------------------------------------------------------
20,478 HBO & Co. 1,569,127
Health Care Services (3.0%)
- -------------------------------------------------------------------------------------------------------------
14,978 ABR Information Services, Inc. + 659,032
9,300 Access Health, Inc. + 411,525
14,746 Apria Healthcare Group, Inc. 416,575
7,000 Columbia/HCA Healthcare Corp. 355,250
8,378 Genesis Health Ventures, Inc. + 305,796
37,896 Healthsouth Rehabilitation Corp. + 1,103,720
19,305 Lincare Holdings, Inc. + 482,625
5,078 Renal Treatment Centers, Inc. + 223,432
21,229 Vencor, Inc. + 689,943
--------------
4,647,898
Home Building (0.6%)
- -------------------------------------------------------------------------------------------------------------
43,325 Clayton Homes, Inc. 926,072
Hospital Management (0.4%)
- -------------------------------------------------------------------------------------------------------------
21,878 Owen Healthcare, Inc. + 604,380
Household Products (1.4%)
- -------------------------------------------------------------------------------------------------------------
68,880 Blyth Industries, Inc. + 2,031,960
4,700 Premark International, Inc. 237,937
--------------
2,269,897
Insurance and Finance (0.9%)
- -------------------------------------------------------------------------------------------------------------
11,100 American General Corp. 387,112
26,154 Amerin Corp. + 699,620
17,000 USF&G Corp. 286,875
--------------
1,373,607
Lodging (2.7%)
- -------------------------------------------------------------------------------------------------------------
1,600 Bristol Hotel Co. + 39,000
2,974 Doubletree Corp. + 78,068
38,663 HFS, Inc. 3,160,700
288 Red Lion Hotels, Inc. + 5,040
34,378 Renaissance Hotel Group, N.A. + 876,639
--------------
4,159,447
Medical Equipment and Supplies (5.3%)
- -------------------------------------------------------------------------------------------------------------
31,022 Boston Scientific Corp. + 1,520,078.00
53,191 Cytotherapeutics, Inc. + 910,895
38,300 Endosonics Corp. + 579,288
42,265 Lifecore Biomedical Inc. + 792,469
14,500 Medisense Inc. + 458,562
23,650 Medtronic, Inc. 1,321,444
19,200 Steris Corp. + 619,200
22,638 Stryker Corp. 1,188,495
36,100 Uromed Corp. + 464,788
17,500 U.S. Surgical Corp. 374,062
--------------
8,229,281
Metals and Mining (0.2%)
- -------------------------------------------------------------------------------------------------------------
12,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 336,000
Networking (1.4%)
- -------------------------------------------------------------------------------------------------------------
48,817 Madge Networks N.V. (Netherlands)+ 2,184,560
Networking Equipment (3.4%)
- -------------------------------------------------------------------------------------------------------------
9,110 Cascade Communications Corp. + 776,628
29,022 Cisco Systems, Inc. + 2,165,766
27,866 Premisys Communications, Inc. + 1,560,496
10,578 Shiva Corp. + 769,550
--------------
5,272,440
Nursing Homes (0.8%)
- -------------------------------------------------------------------------------------------------------------
14,364 Health Care & Retirement Corp. + 502,740
27,296 Health Management Assoc., Inc. + 713,095
--------------
1,215,835
Office Equipment (0.8%)
- -------------------------------------------------------------------------------------------------------------
25,545 Viking Office Products, Inc. + 1,187,842
Oil and Gas (0.4%)
- -------------------------------------------------------------------------------------------------------------
18,500 Total Corp. ADR (France) 629,000
Paging (0.9%)
- -------------------------------------------------------------------------------------------------------------
59,713 Paging Network, Inc. + 1,455,504
Pharmaceuticals and Biotechnology (6.5%)
- -------------------------------------------------------------------------------------------------------------
8,900 Abbott Laboratories 371,575
28,880 Astra AB (Sweden) 1,152,209
34,200 Biochem Pharmaceutical, Inc. + 1,372,275
33,090 Gilead Sciences, Inc. + 1,058,880
4,700 Immulogic Pharmaceutical Corp. + 90,475
24,956 Neurogen Corp. 670,693
9,830 Pfizer, Inc. 619,290
9,343 Pharmacia & Upjohn, Inc. + 362,022
23,814 Smithkline Beecham PLC ADR (United Kingdom) 1,321,677
41,355 Thermo Cardiosystems, Inc. + 3,194,673
--------------
10,213,769
Photography (0.6%)
- -------------------------------------------------------------------------------------------------------------
6,600 Eastman Kodak Co. 442,200
11,600 Polaroid Corp. 549,550
--------------
991,750
Publishing (0.5%)
- -------------------------------------------------------------------------------------------------------------
10,100 Harcourt General, Inc. 422,938
4,800 Tribune Co. 293,400
--------------
716,338
Railroads (0.2%)
- -------------------------------------------------------------------------------------------------------------
5,000 Burlington Northern Santa Fe Corp. 390,000
Restaurants (3.2%)
- -------------------------------------------------------------------------------------------------------------
9,064 Apple South, Inc. 194,875
10,678 Applebee's International, Inc. 242,925
33,600 Boston Market, Inc. + 1,079,400
21,069 J.D. Wetherspoon PLC (United Kingdom) 209,658
60,220 Landry's Seafood Restaurants, Inc. + 1,027,504
25,229 Lone Star Steakhouse & Saloon + 968,163
36,551 Outback Steakhouse, Inc. + 1,311,267
--------------
5,033,792
Retail (4.6%)
- -------------------------------------------------------------------------------------------------------------
7,284 Barnes & Noble, Inc. 211,236
15,633 Bed Bath & Beyond, Inc. 606,756
145 Carrefour Supermarche (France) 87,819
7,302 CompUSA, Inc. + 227,275
5,500 Dayton Hudson Corporation 412,500
13,000 Federated Department Stores Inc. + 357,500
32,033 General Nutrition Companies, Inc. + 736,759
41,460 Heilig-Meyers Co. 761,827
12,753 Hollywood Entertainment Corp. + 106,806
12,900 Home Depot, Inc. (The) 617,588
11,000 May Department Stores Co. 464,750
6,800 MSC Industrial Direct Co. Class A + 187,000
5,875 Neostar Retail Group, Inc. + 43,328
10,384 Office Depot, Inc. + 205,083
9,944 Officemax, Inc. + 222,497
11,800 Revco D.S., Inc. + 333,350
45,114 Sunglass Hut International + 1,071,457
4,368 Talbots, Inc. 125,580
3,285 The Sports Authority, Inc. + 66,932
21,300 TJX Cos., Inc. (The) 402,038
--------------
7,248,081
Semiconductors (2.9%)
- -------------------------------------------------------------------------------------------------------------
5,896 Altera Corp. 293,326
12,958 Analog Devices Inc. + 458,389
9,259 Atmel Corp. + 207,170
5,700 Credence Systems Corp. + 130,388
4,047 Lam Research Corp. + 185,150
32,034 Linear Technology Corp. 1,257,335
33,672 Maxim Integrated Products Inc. + 1,296,372
13,600 National Semiconductor Corp. + 302,600
4,626 Silicon Valley Group, Inc. + 116,807
8,374 Xilinx, Inc. + 255,407
--------------
4,502,944
Specialty Consumer Products (0.8%)
- -------------------------------------------------------------------------------------------------------------
30,545 Fastenal Co. 1,290,525
Telecommunication Equipment (1.7%)
- -------------------------------------------------------------------------------------------------------------
10,994 Ascend Communications, Inc. 891,888
16,926 Stratacom, Inc. + 1,244,061
5,406 U.S. Robotics Corp. + 474,376
--------------
2,610,325
Telephone Services (1.1%)
- -------------------------------------------------------------------------------------------------------------
20,900 GTE Corp. 919,600
12,200 MCI Communications Corp. 318,725
8,100 Sprint Corp. 322,987
4,796 WorldCom, Inc. + 169,059
--------------
1,730,371
Telephone Utilities (0.6%)
- -------------------------------------------------------------------------------------------------------------
16,500 SBC Communications, Inc. 948,750
Textiles (1.5%)
- -------------------------------------------------------------------------------------------------------------
40,401 Gucci Group NV-NY Reg. Shrs. + 1,570,588
14,936 St. John Knits, Inc. 793,475
--------------
2,364,063
Tobacco (0.2%)
- -------------------------------------------------------------------------------------------------------------
8,100 UST, Inc. 270,338
Trucking (0.2%)
- -------------------------------------------------------------------------------------------------------------
15,450 Ryder System, Inc. 382,388
Utilities (0.2%)
- -------------------------------------------------------------------------------------------------------------
10,000 Airtouch Communications, Inc. + 282,500
Wireless Communications (0.4%)
- -------------------------------------------------------------------------------------------------------------
28,953 P-Com, Inc. + 579,060
--------------
Total Common Stocks (cost $137,742,038) $148,324,526
Preferred Stocks (0.4%)*(cost $600,919)
Number of Shares VALUE
- -------------------------------------------------------------------------------------------------------------
7,400 Hornbach Holding AG $633,094
Short-Term Investments (7.7%)*(cost $11,996,896)
Principal amount VALUE
- -------------------------------------------------------------------------------------------------------------
$11,991,000 Interest in $308,242,000 joint repurchase agreement
dated December 29, 1995 with Lehman Brothers Inc.
due January 1, 1996 with respect to various U.S. Treasury
obligations-maturity value of $11,996,896 for an
effective yield of 5.9% $11,996,896
--------------
Total Investments (cost $150,339,853)*** $160,954,516
- -------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on total net assets of $156,618,462.
Non-income producing security.
*** The aggregate identified cost for federal income tax purposes is $150,632,968, resulting in gross
unrealized appreciation and depreciation of $13,696,130 and $3,374,582, respectively, or net unrealized
appreciation of $10,321,548.
ADR or ADS after the name of a foreign holding stands for American
Depository Receipts or American Depository Shares, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1995
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $150,339,853) (Note 1) $160,954,516
- ---------------------------------------------------------------------------------------------------
Cash 565
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 41,554
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 8,220,464
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 790,295
- ---------------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 85,034
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 9,037
- ---------------------------------------------------------------------------------------------------
Total assets 170,101,465
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 13,098,160
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 51,945
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 49
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,041
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 75,197
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 171,653
- ---------------------------------------------------------------------------------------------------
Payable for organizational expenses (Note 2) 17,230
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 66,728
- ---------------------------------------------------------------------------------------------------
Total liabilities 13,483,003
- ---------------------------------------------------------------------------------------------------
Net assets $156,618,462
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $146,296,930
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (14)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (293,117)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 10,614,663
- ---------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $156,618,462
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($83,525,778 divided by 5,799,915 shares) $14.40
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $14.40)* $15.28
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($66,978,175 divided by 4,660,472 shares) $14.37
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($6,114,509 divided by 425,000 shares) $14.39
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.39)** $14.91
- ---------------------------------------------------------------------------------------------------
*On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
offering price is reduced. **
**Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended December 31,1995
<S> <C>
Investment Income:
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $973) $ 93,508
- ---------------------------------------------------------------------------------------------------
Interest 93,117
- ---------------------------------------------------------------------------------------------------
Total investment income 186,625
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 135,259
- ---------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 213,736
- ---------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,559
---------------------------------------------------------------------------------------------------
Reports to shareholders 12,028
- ---------------------------------------------------------------------------------------------------
Auditing 28,139
- ---------------------------------------------------------------------------------------------------
Legal 18,832
- ---------------------------------------------------------------------------------------------------
Registration fees 59,342
- ---------------------------------------------------------------------------------------------------
Distribution fees -- class A (Note 2) 25,022
- ---------------------------------------------------------------------------------------------------
Distribution fees -- class B (Note 2) 72,419
- ---------------------------------------------------------------------------------------------------
Distribution fees -- class M (Note 2) 5,528
- ---------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 2) 3,444
- ---------------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,071
- ---------------------------------------------------------------------------------------------------
Other expenses 3,048
- ---------------------------------------------------------------------------------------------------
Fees and other expenses absorbed by Manager (Note 2) (250,466)
- ---------------------------------------------------------------------------------------------------
Total expenses 329,961
- ---------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (21,955)
- ---------------------------------------------------------------------------------------------------
Net expenses 308,006
- ---------------------------------------------------------------------------------------------------
Net investment loss (121,381)
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 466,880
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the year 10,341,405
- ---------------------------------------------------------------------------------------------------
Net gain on investments 10,808,285
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,686,904
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended December 31
---------------------------------------
1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------------------- -------------------
Increase in net assets
- --------------------------------------------------------------------------------------------------- -------------------
Operations:
- --------------------------------------------------------------------------------------------------- -------------------
Net investment loss $ (121,381) $ (5,372)
- --------------------------------------------------------------------------------------------------- -------------------
Net realized gain on investments 466,880 144,641
- --------------------------------------------------------------------------------------------------- -------------------
Net unrealized appreciation (depreciation)
of investments and options 10,341,405 (126,638)
- --------------------------------------------------------------------------------------------------- -------------------
Net increase in net assets resulting from operations 10,686,904 12,631
- --------------------------------------------------------------------------------------------------- -------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------------- -------------------
From net investment income:
Class A -- (1,089)
- --------------------------------------------------------------------------------------------------- -------------------
Class B -- --
- --------------------------------------------------------------------------------------------------- -------------------
Class M -- --
- --------------------------------------------------------------------------------------------------- -------------------
From net realized gain on investments:
Class A (218,962) (169,709)
- --------------------------------------------------------------------------------------------------- -------------------
Class B (149,415) --
- --------------------------------------------------------------------------------------------------- -------------------
Class M (13,756) --
- --------------------------------------------------------------------------------------------------- -------------------
In excess of net investment income:
Class A (167,955) --
- --------------------------------------------------------------------------------------------------- -------------------
Class B (114,610) --
- --------------------------------------------------------------------------------------------------- -------------------
Class M (10,552) --
- --------------------------------------------------------------------------------------------------- -------------------
Increase from capital share transactions (Note 4) 143,417,234 453,122
- --------------------------------------------------------------------------------------------------- -------------------
Total increase in net assets 153,428,888 294,955
- --------------------------------------------------------------------------------------------------- -------------------
Net assets
- --------------------------------------------------------------------------------------------------- -------------------
Beginning of year 3,189,574 2,894,619
- --------------------------------------------------------------------------------------------------- -------------------
End of year (including distributions in excess of net
investment income of $14 and $0, respectively) $156,618,462 $3,189,574
- --------------------------------------------------------------------------------------------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period For the period For the period
October 2, 1995 October 2, 1995 April 14, 1993
(commencement (commencement (commencement
of operations) of operations) For the year ended of operations)
to December 31 to December 31 December 31 to December 31
-----------------------------------------------------------------------------------------
1995 1995 1995 1994 1993
-----------------------------------------------------------------------------------------
Class M Class B Class A
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.08 $13.08 $9.75 $10.29 $8.50
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a)(b) -- (.04) (.01) (.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 1.38 1.40 4.88 .05 1.95
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.38 1.36 4.87 .03 1.95
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income -- -- -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.04) (.04) (.12) (.56) (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (.03) (.03) (.10) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.07) (.22) (.57) (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.39 $14.37 $14.40 $9.75 $10.29
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) (c) 10.57 (d) 10.41 (d) 50.14 0.34 22.98 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $6,115 $66,978 $83,526 $3,190 $2,895
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(e) .47 (d) .54 (d) 1.31 0.92 .72 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to
average net assets (%) (.21)(d) (.29)(d) (.28) (.18) (.04) (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 49.81 49.81 49.81 101.94 76.02 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
(b) Reflects an expense limitation which expired on December 31, 1995. As a result of
such limitation, expenses of the fund for the period ended December 31, 1993
and the year ended December 31, 1994, reflect a per share reduction of
approximately $0.11 and $0.16, respectively. Expenses for the period ended
December 31, 1995 for class A, B and M shares reflect a per share reduction
of $0.04, $0.04 and $0.03, respectively. See Note 2.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Not annualized.
(e) The ratio of expenses to average net assets for the period ended December 31,
1995 included amounts paid through expense offset arrangements. Prior period
ratios exclude these amounts. See Note 2.
</TABLE>
Performance summary
*****************************************************************
Notes to financial statements
December 31, 1995
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company. The
fund seeks long-term growth of capital by investing in primarily a
portfolio of common stocks.
The fund offers class A, class B and class M shares. The fund commenced
its public offering of class B and M shares on October 2, 1995. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class M shares
are sold with a maximum front-end sales charge of 3.50% and pay an
ongoing distribution fee that is equal to B shares and higher than class
A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from these estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price, except that certain U.S. government obligations are stated at the
mean between the bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value, and other investments are stated at
fair value following procedures approved by
the Trustees.
B) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
C) 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 Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc. and certain other accounts. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
D) 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 102% of the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to
the resale price, including accrued interest.
E) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). 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.
F) Federal income 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 of securities held and excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid 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.
These differences include treatment of 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 December 31, 1995, the fund reclassified $121,367 to decrease
distributions in excess of net investment income and $114,180 to
increase accumulated net realized loss on investment transactions with a
decrease to paid in capital of $7,187. The calculation of net investment
income per share in the financial highlights table excludes these
adjustments.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various state and the initial public
offering of its shares were $17,221. These expenses are being amortized
on a straight-line basis over a five-year period. The fund will
reimburse Putnam Management for the payment of the expenses.
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, 0.50% of the next
$5 billion, 0.475% of the next $5 billion, 0.455% of the next
$5 billion, 0.44 % of the next $5 billion and 0.43% thereafter. Prior to
October 2, 1995, such fee was based on the following annual rates: 0.65%
of the first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million and 0.45% of any amount over
$1.5 billion.
Prior to December 31, 1995, the Manager agreed to reduce its
compensation, to the extent that expenses of the fund exceeded 1.1% of
the fund's average net assets. The fund's expenses subject to this
limitation were exclusive of brokerage, interest, taxes, insurance,
amortization of deferred organization expenses and extraordinary
expenses, if any, and expenses incurred under the fund's distribution
plan described below. This limitation was accomplished by a reduction of
the compensation payable under the management contract to the Manager.
The fund reimburses the Putnam Management for the compensation and
related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all
such reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $100 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
During the year ended December 31, 1995, the fund adopted a Trustee Fee
Deferral Plan (the "Plan") which allows the Trustees to defer the
receipt of all or a portion of Trustees Fees payable on or after July 1,
1995. The deferred fees remain in the fund and are invested in the fund
or in other Putnam funds until distribution in accordance with
the Plan.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended December 31, 1995, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $47,759 and $2,604 from the
sale of class A and class M shares, respectively and received $26,343 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended December 31, 1995, Putnam Mutual
Funds Corp., acting as underwriter received no monies on class A
redemptions.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended December 31, 1995, fund expenses were reduced by
$21,955 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested the assets utilized in connection
with the expense offset arrangements in an income producing asset if it
had not entered into such arrangements.
Note 3
Purchases and sales of securities
During the year ended December 31, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$147,207,316 and $12,111,244, respectively. There were no purchases and
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 December 31, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended December 31 1995
Class A Shares Amount
- ----------------------------------------------------
Shares sold 6,559,419 $89,096,620
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 27,847 377,316
- ----------------------------------------------------
6,587,266 89,473,936
Shares
repurchased (1,114,390) (15,228,902)
- ----------------------------------------------------
Net increase 5,472,876 $74,245,034
- ----------------------------------------------------
Year ended December 31 1994
Class A Shares Amount
- ----------------------------------------------------
Shares sold 78,823 $798,762
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 17,582 170,795
- ----------------------------------------------------
96,405 969,557
Shares
repurchased (50,565) (516,435)
- ----------------------------------------------------
Net increase 45,840 $453,122
- ----------------------------------------------------
From October 2, 1995
(commencement of operations)
to December 31 1995
Class B Shares Amount
- ----------------------------------------------------
Shares sold 4,792,353 $65,229,944
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 18,762 254,787
- ----------------------------------------------------
4,811,115 65,484,731
Shares
repurchased (150,643) (2,067,751)
- ----------------------------------------------------
Net increase 4,660,472 $63,416,980
- ----------------------------------------------------
From October 2, 1995
(commencement of operations)
to December 31 1995
Class M Shares Amount
- ----------------------------------------------------
Shares sold 444,206 $6,019,954
Shares issued in
connection with
reinvestment of
distributions 1,787 24,308
- ----------------------------------------------------
445,993 6,044,262
Shares repurchased (20,993) (289,042)
- ----------------------------------------------------
Net increase 425,000 $5,755,220
- ----------------------------------------------------
* FEDERAL TAX INFORMATION
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
Pursuant to section 852 of the Internal Revenue Code, the fund hereby
designates $0.197 per share for class A and $0.052 per share for classes
B and M (or if different, the amount necessary to offset net capital
gain earned by the fund) as capital gain dividends for its taxable year
ended December 31, 1995.
* RESULTS OF SEPTEMBER 8, 1995 SHAREHOLDER MEETING
An annual meeting of shareholders of the fund was held on September 8,
1995.
A proposal to ratify the selection of Coopers & Lybrand L.L.P. as
auditors for the fund was approved as follows: 296,644 votes for, and 0
votes against, with 0 abstensions and broker non-votes. A proposal to
approve a new management contract increasing the management fees payable
to Putnam Investment Management, Inc. was approved as follows: 295,692
votes for, and 902 votes against, 70 abstensions and broker non-votes.
All tabulations have been rounded to the nearest whole number.
OUR COMMITMENT TO QUALITY SERVICE
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your 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 the
original cost of the shares.
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.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Charles H. Swanberg
Vice President and Fund Manager
Roland W. Gillis
Vice President and Fund Manager
Robert R. Beck
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Voyager
Fund II. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free 1-800-225-1581.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston Massachusetts, 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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22797-377/2AR/20A 2/96
15
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