Putnam
Voyager
Fund II
SEMIANNUAL REPORT
June 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Voyager Fund II's class A shares ranked 53 out of 338 growth
funds (top 16%) tracked by Lipper Analytical Services for the 5-year
period ended June 30, 1998.*
* "Our more growth-oriented focus has allowed us to take advantage of
rapidly growing large companies in addition to the fast-growing small and
midsize companies we've always emphasized. We are optimistic about the
portfolio's positioning for the remainder of fiscal '98 and we will
continue to focus on companies of all sizes with strong long-term growth
potential."
-- Charles H. Swanberg, manager
Putnam Voyager Fund II
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
20 Financial statements
* Lipper rankings are based on total return performance, vary over time,
and do not include the effects of sales charges. For the 1-year period
ended 6/30/98, the fund's class A shares ranked 203 out of 884 growth
funds. Performance of other share classes will vary. Past performance is
not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
A slight change in portfolio orientation this spring contributed to the
positive results achieved by Putnam Voyager Fund II during the first half of
its current fiscal year. The fund's managers, who have always allocated a
portion of the portfolio to stocks of large companies, shifted the focus in
this sector to companies that are growing at more rapid rates.
As the managers explain in detail in the following report, they have been
pleased with the early results of this shift in focus. They point out,
however, that the main emphasis remains on stocks of fast-growing small to
midsize companies. The managers' current view of prospects for the fiscal
year's second half is still optimistic with little change expected in
portfolio emphasis.
I am pleased to report that Jeffrey R. Lindsey has joined your fund's
management team. He has been with Putnam since 1994 after serving with
Strategic Portfolio Management, Inc., and State Street Boston Corp. and has 14
years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
August 19, 1998
Report from the Fund Managers
Charles H. Swanberg
Roland W. Gillis
Jeffrey R. Lindsey
Strategic positioning in the media, retail, and technology industries and a
slightly more growth-oriented focus have resulted in satisfying returns for
the first half of Putnam Voyager Fund II's fiscal year. Despite stock market
volatility and struggling world economies, your fund profited from its
investments in thriving companies of all sizes -- most of which had limited
exposure to the troubled Asian markets. For the six months ended June 30,
1998, your fund's class A shares returned 16.80% at net asset value and 10.06%
at public offering price. For complete performance information, please refer
to the summary that begins on page 8.
In March, we changed the structure of the fund's portfolio slightly in order
to enhance its growth potential. The portion of the fund's assets that invests
in large-company stocks is now targeted toward companies with higher growth
rates. While the fund has always invested in rapidly growing small and midsize
companies, the large-company portion of the portfolio had invested in
companies that were growing at slower rates but were undergoing positive
changes that we believed would improve their earnings potential. Our increased
focus on large, well-established companies with exceptional growth rates has
been especially beneficial recently as the strength and resilience of these
stocks continued to astound investors.
* MEDIA STILL TOPS LIST OF DYNAMIC GROWTH SECTORS
In several of our previous reports, we have discussed the renewed vitality of
the communications media since the Telecommunications Act of 1996 was passed.
This legislation, which loosened restrictions throughout the industry,
continues to boost the growth of broadcasting, cable, and long-distance
companies.
In broadcasting, the act allows for ownership of multiple radio and/or
television stations -- a change that has generated a wave of mergers and
acquisitions. Clear Channel Communications, one of the fund's largest
holdings, is considered the premier consolidator in radio and billboard
advertising. In addition to owning 183 radio stations, the company also owns
18 television stations and 88,000 outdoor display faces. Its strategy is to
maximize advertising revenue by owning billboards and radio and TV stations
within the same region. This strategy has allowed Clear Channel to increase
cash flow growth in each of the last five years.
Two other holdings participating in the media merger mania were
Tele-Communications, Inc. (TCI) and Chancellor Media Corp. Toward the close of
the period TCI, a cable operator, was acquired by AT&T in a $48 billion deal,
while Chancellor, the second-largest radio broadcaster in the United States,
most recently acquired LIN Television Corp.
Chancellor now owns and operates 108 radio stations and has also launched AMFM
Radio Networks, a national radio syndication subsidiary that reaches more than
60 million listeners weekly. Both Chancellor and TCI were highlights of the
fund's portfolio during the period. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance with the fund's
investment strategy and may vary in the future.
* U.S. ECONOMY BOOSTS RETAIL SECTOR
The U.S. economy provided fuel for the retail sector in the form of low
unemployment, low inflation, a high level of consumer confidence, and the
drawing of more lower-income consumers into the spending stream. This sector
also benefited from its low exposure to turbulent foreign markets. One strong
retail stock in the portfolio was Wal-Mart Stores, the nation's largest
retailer, which recently announced plans to enter the retail food market by
building several test supermarkets in Arkansas.
[GRAPHIC OMITTED: horizontal bar chart of TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Retail 12.7%
Computer
software 9.8%
Broadcasting 6.0%
Computer
services 5.9%
Financial
services 5.9%
Footnote reads:
* Based on net assets as of 6/30/98. Holdings will vary over time.
Also bringing strength to the fund was Dollar Tree Stores, Inc., the nation's
leading "everything for a dollar" store. This company, which had only 3 stores
in 1986, will celebrate the opening of its 1,000th store this summer. Calling
itself "the five-and-dime of the new millennium," Dollar Tree attributes its
impressive growth to its ability to offer higher quality merchandise than
traditional value retailers.
Another stellar retail stock was that of Kohl's Corporation, which operates
197 family-oriented specialty department stores, primarily in the Midwest. The
company plans to grow to 300 stores by the end of 2000.
Starbucks Corporation, a retail holding that's often a highlight of the
portfolio, is also extremely popular with consumers. The company sells
high-quality whole-bean coffees, Italian-style beverages, and pastries.
Starbucks continues to open new stores and recently acquired Seattle Coffee
Co., the largest coffee chain in the United Kingdom. Starbucks has succeeded
in part by clustering its new stores near existing ones, providing more
efficiency in overhead and advertising.
* TECHNOLOGY SECTOR OFFERS MANY HIGHLIGHTS
In the technology sector, telecommunications stocks such as Lucent
Technologies continued to benefit from the world's love affair with wireless
communications. Lucent, which was spun off from AT&T Corp. shortly after it
went public in 1996, earns the bulk of its revenue from computer network
operating systems but is also a significant player in wireless communications.
Within the crowded cellular market, Lucent continues to develop innovative new
service options to differentiate itself. Another strong performer in the
fund's technology sector was Adaptec, which provides computer networking
products for businesses.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
CBS Corp.
Broadcasting
Tele-Communications, Inc. (TCI Group)
Cable television
Costco Companies, Inc.
Retail
Clear Channel Communications, Inc.
Broadcasting
The Home Depot, Inc.
Retail
America Online, Inc.
Computer services
Kohl's Corp.
Retail
Tele-Communications TCI Ventures Group
Telephone services
Chancellor Media Corp.
Broadcasting
HBO & Co.
Health-care information services
These holdings represent 14.7% of the fund's net assets as of 6/30/98.
Portfolio holdings will vary over time.
EMC Corp., the fund's best-performing stock in fiscal '97, continued its rally
during the semiannual period. EMC produces and supports data storage systems
and has maintained a leadership position despite intense competition from
industry giants that provide similar services. The competition in this market
has been dubbed "store wars," and EMC dominates by offering enhanced features
such as faster processing and sophisticated data protection and backup
systems.
* STRATEGIES CONTINUE FOR SECOND HALF OF FISCAL '98
As we enter the second half of fiscal '98, we look forward to continued
momentum for the fund for the same reasons it has thrived in the past six
months -- a healthy U.S. economy, low interest rates, minimal exposure to
foreign markets, and a focus on rapidly growing companies of all sizes. Of
course, we expect that the markets may experience setbacks, but we are
optimistic about the portfolio's positioning and we will continue to target
stocks that we believe offer the strongest long-term growth potential.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 6/30/98, there is no guarantee the fund will continue to hold
these securities in the future. This fund invests a portion of its assets in
small to midsize companies. Such investments increase the risk of greater
price fluctuation.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Voyager Fund II is designed for investors aggressively seeking capital
appreciation primarily through common stocks.
TOTAL RETURN FOR PERIODS ENDED 6/30/98
Class A Class B Class M
(inception date) (4/14/93) (10/2/95) (10/2/95)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
6 months 16.80% 10.06% 16.40% 11.40% 16.50% 12.40%
- -----------------------------------------------------------------------
1 year 32.22 24.63 31.20 26.20 31.51 26.90
- -----------------------------------------------------------------------
5 years 175.67 159.84 165.59 163.59 169.07 159.52
Annual average 22.48 21.04 21.57 21.39 21.89 21.01
- -----------------------------------------------------------------------
Life of fund 187.66 171.08 176.63 175.63 180.32 170.58
Annual average 22.48 21.10 21.57 21.48 21.88 21.05
- -----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS
ENDED 6/30/98
Standard Russell Midcap
& Poor's Growth Consumer
500 Index Index Price Index
- -------------------------------------------------------------------------
6 months 17.71% 11.87% 1.05%
- -------------------------------------------------------------------------
1 year 30.16 24.02 1.68
- -------------------------------------------------------------------------
5 years 182.42 132.60 12.88
Annual average 23.08 18.39 2.45
- -------------------------------------------------------------------------
Life of fund 183.80 132.62 13.51
Annual average 21.99 17.45 2.44
- -------------------------------------------------------------------------
Past performance is no assurance of future results. Returns for class A
and class M shares reflect the current maximum initial sales charges of
5.75% and 3.50%, respectively. Class B share returns for the 1-, 5-, and
10-year (where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 6/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distribution (number) -- -- --
- ------------------------------------------------------------------------------
Income -- -- --
- ------------------------------------------------------------------------------
Capital gains -- -- --
- ------------------------------------------------------------------------------
Total $0.000 $0.000 $0.000
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
12/31/97 $19.11 $20.28 $18.78 $18.91 $19.60
- ------------------------------------------------------------------------------
6/30/98 22.32 23.68 21.86 22.03 22.83
- ------------------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B 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 Index* is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
Consumer Price Index is a commonly used measure of inflation; it does not
represent an investment return.
Russell Midcap Growth Index*+ is composed of all medium and medium/small
companies in the Russell 1000 Index. The Russell 1000 represents the
universe of stocks from which the most active money managers typically
select.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
+ Putnam management has recently undertaken a review of benchmarks for
various funds. This index will replace the S&P 500 Index as a benchmark
for this fund because Putnam management has determined that the securities
tracked by this index more accurately reflect the types of securities
generally held by the fund.
<TABLE>
<CAPTION>
Portfolio of investments owned
June 30, 1998 (Unaudited)
COMMON STOCKS (96.3%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (1.7%)
- ------------------------------------------------------------------------------------------
122,244 Lamar Advertising Co. (NON) $ 4,385,504
121,866 Omnicom Group Inc. 6,078,067
428,793 Outdoor Systems, Inc. (NON) 12,006,183
28,463 TMP Worldwide Inc. (NON) 992,647
------------
23,462,401
Aerospace and Defense (0.1%)
- ------------------------------------------------------------------------------------------
40,470 Orbital Sciences Corp. (NON) 1,512,566
Airlines (0.3%)
- ------------------------------------------------------------------------------------------
131,600 Ryanair Holdings, PLC ADR (Ireland) (NON) 4,688,250
Apparel (0.8%)
- ------------------------------------------------------------------------------------------
27,157 Gucci Group N.V. (Italy) 1,439,321
91,200 Jones Apparel Group, Inc. (NON) 3,334,500
24,300 Nike, Inc. 1,183,106
109,866 Stage Stores, Inc. (NON) 4,971,437
------------
10,928,364
Banks (1.5%)
- ------------------------------------------------------------------------------------------
36,200 BankAmerica Corp. 3,129,038
158,500 Fifth Third Bancorp 9,985,500
53,000 Northern Trust Corp. 4,041,250
73,650 Washington Mutual, Inc. 3,199,172
------------
20,354,960
Broadcasting (6.0%)
- ------------------------------------------------------------------------------------------
797,121 CBS Corp. 25,308,592
333,884 Chancellor Media Corp. (NON) 16,579,427
21,900 Citadel Communications Corp. (NON) 350,400
193,099 Clear Channel Communications, Inc. (NON) 21,071,928
74,670 Heftel Broadcasting Corp. Class A (NON) 3,341,483
119,694 Scandinavian Broadcasting System S.A. (Luxembourg) (NON) 3,613,263
215,628 Sinclair Broadcast Group, Inc. Class A (NON) 6,199,305
68,500 Univision Communications Inc. Class A (NON) 2,551,625
49,600 Viacom, Inc. Class B 2,889,200
29,466 Westwood One, Inc. (NON) 743,096
------------
82,648,319
Business Equipment and Services (0.9%)
- ------------------------------------------------------------------------------------------
38,700 Avery Dennison Corp. 2,080,125
147,600 Cintas Corp. 7,527,600
85,898 Renaissance Worldwide, Inc. 1,868,282
33,200 Staff Leasing, Inc. (NON) 979,400
------------
12,455,407
Business Services (4.2%)
- ------------------------------------------------------------------------------------------
143,643 Accustaff, Inc. (NON) 4,488,844
484,222 Cendant Corp. (NON) 10,108,134
101,475 Interpublic Group Cos. Inc. 6,158,264
56,868 Metamor Worldwide, Inc. (NON) 2,001,043
40,737 NOVA Corp./Georgia (NON) 1,456,348
2 Paychex, Inc. 61
66,400 Pitney Bowes, Inc. 3,195,500
2,169,340 Rentokil Group PLC (United Kingdom) 15,585,274
74,950 Robert Half International, Inc. (NON) 4,187,831
158,839 Serco Group PLC (United Kingdom) (NON) 3,659,104
59,390 Snyder Communications, Inc. (NON) 2,613,160
160,170 Viking Office Products, Inc. (NON) 5,025,334
------------
58,478,897
Cable Television (2.6%)
- ------------------------------------------------------------------------------------------
106,200 MediaOne Group Inc. (NON) 4,666,163
60,000 Tele-Comm Liberty Media Group, Inc. Class A (NON) 2,328,750
637,991 Tele-Communications Inc. (TCI Group) Class A (NON) 24,522,779
159,960 USA Networks, Inc. (NON) 4,018,995
------------
35,536,687
Computer Equipment (1.2%)
- ------------------------------------------------------------------------------------------
101,984 Artesyn Technologies, Inc. (NON) 1,631,744
315,354 EMC Corp. (NON) 14,131,801
------------
15,763,545
Computer Services (5.9%)
- ------------------------------------------------------------------------------------------
185,554 America Online, Inc. (NON) 19,668,724
24,100 AnswerThink Consulting Group, Inc. (NON) 518,150
184,780 Capita Group PLC (United Kingdom) 1,593,181
56,415 CheckFree Holdings Corp. (NON) 1,660,717
102,036 CMG Information Services, Inc. (NON) 7,219,047
81,300 DAOU Systems, Inc. (NON) 1,859,738
80,000 DST Systems, Inc. (NON) 4,480,000
90,200 ECsoft Group PLC ADR (United Kingdom) (NON) 2,920,225
103,500 Getronics Electric N.V. (Netherlands) 5,357,826
124,838 IDT Corp. (NON) 3,752,942
58,101 IDX Systems Corp. (NON) 2,676,277
260,248 Keane, Inc. (NON) 14,573,888
30,143 Misys PLC (United Kingdom) 1,710,855
75,377 Pegasus Systems, Inc. (NON) 1,931,536
243,480 Sterling Commerce, Inc. (NON) 11,808,780
------------
81,731,886
Computer Software (9.8%)
- ------------------------------------------------------------------------------------------
80,000 Aspect Development, Inc. (NON) 6,050,000
251,732 BMC Software, Inc. (NON) 13,074,331
200,000 Cadence Design Systems, Inc. (NON) 6,250,000
57,700 Cerner Corp. (NON) 1,633,631
214,072 Computer Associates International, Inc. 11,894,376
284,578 Compuware Corp. (NON) 14,549,050
213,336 Electronic Arts, Inc. (NON) 11,520,144
108,116 Fundtech Ltd. (NON) 2,040,690
143,000 GT Interactive Software Corp. (NON) 1,076,969
129,458 Intuit, Inc. (NON) 7,929,303
2,300 ISS Group, Inc. (NON) 86,538
27,100 Legato Systems, Inc. (NON) 1,056,900
46,606 Lycos, Inc. (NON) 3,512,927
140,146 Microsoft Corp. (NON) 15,188,323
380,654 Parametric Technology Corp. (NON) 10,325,240
61,100 Saville Systems Ireland PLC ADR (Ireland) (NON) 3,062,638
618,800 SEMA Group PLC (United Kingdom) (NON) 7,271,918
231,501 Smallworldwide PLC ADR (United Kingdom) (NON) 6,742,467
22,300 Software AG Systems, Inc. (NON) 652,275
100,271 Synopsys, Inc. (NON) 4,587,398
8,300 Viasoft, Inc. (NON) 134,356
94,390 Visual Networks, Inc. (NON) 3,457,034
253,156 Walker Interactive Systems, Inc. (NON) 3,734,051
------------
135,830,559
Consumer Non Durables (1.1%)
- ------------------------------------------------------------------------------------------
66,100 Colgate-Palmolive Co. 5,816,800
293,770 Luxottica Group SPA ADS (Italy) 4,553,435
56,000 Procter & Gamble Co. 5,099,500
------------
15,469,735
Consumer Services (0.8%)
- ------------------------------------------------------------------------------------------
28,300 Applied Graphics Technologies, Inc. (NON) 1,294,725
77,000 Hillenbrand Industries, Inc. 4,620,000
60,600 The ServiceMaster Co. 2,306,587
92,100 Travel Services International Inc. (NON) 3,027,788
------------
11,249,100
Cosmetics (0.5%)
- ------------------------------------------------------------------------------------------
73,200 Estee Lauder Cos. Class A 5,101,125
115,114 ThermoLase Corp. (NON) 834,577
28,927 ThermoLase Corp., units (NON) 470,064
------------
6,405,766
Education Services (0.8%)
- ------------------------------------------------------------------------------------------
253,377 Apollo Group, Inc. Class A (NON) 8,377,277
37,064 CBT Group Public Ltd. Co. (Ireland) (NON) 1,982,924
------------
10,360,201
Electric Utilities (--%)
- ------------------------------------------------------------------------------------------
18,100 CalEnergy, Inc. (NON) 544,131
Electronic Components (1.0%)
- ------------------------------------------------------------------------------------------
78,800 Illinois Tool Works, Inc. 5,254,975
74,400 Metromedia Fiber Network, Inc. Class A (NON) 3,468,900
74,122 Sanmina Corp. (NON) 3,215,042
91,200 Sipex Corp. (NON) 1,960,800
------------
13,899,717
Electronics and Electrical Equipment (2.5%)
- ------------------------------------------------------------------------------------------
109,300 General Electric Co. 9,946,300
89,903 Genrad, Inc . (NON) 1,775,584
152,462 Lernout & Hauspie Speech Products N.V. (Belgium) (NON) 9,100,076
210,270 Thermo Instrument Systems, Inc. (NON) 5,519,588
228,700 ThermoQuest Corp. (NON) 3,416,206
74,366 Uniphase Corp. (NON) 4,668,790
------------
34,426,544
Energy-Related (0.9%)
- ------------------------------------------------------------------------------------------
47,053 AES Corp. (NON) 2,473,223
311,213 Thermo Electron Corp. (NON) 10,639,594
------------
13,112,817
Entertainment (0.8%)
- ------------------------------------------------------------------------------------------
89,833 Coach USA, Inc. (NON) 4,098,631
80,600 Time Warner, Inc. 6,886,263
------------
10,984,894
Environmental Control (1.2%)
- ------------------------------------------------------------------------------------------
41,000 American Disposal Services, Inc. (NON) 1,921,875
28,600 Eastern Environmental Services, Inc. (NON) 972,400
115,083 Republic Industries, Inc. (NON) 2,877,075
149,500 Republic Services, Inc. (NON) 3,588,000
159,035 USA Waste Services, Inc. (NON) 7,852,353
------------
17,211,703
Financial Services (5.9%)
- ------------------------------------------------------------------------------------------
104,882 American Express Co. 11,956,548
50,836 AMRESCO, Inc. (NON) 1,480,599
28,800 Associates First Capital Corp. 2,214,000
216,440 Federal Home Loan Mortgage Corp. 10,186,208
205,050 Federal National Mortgage Association 12,456,788
61,600 FINOVA Group, Inc. 3,488,100
141,331 FIRSTPLUS Financial Group, Inc. (NON) 5,087,916
133,249 Franchise Mortgage Acceptance Co. L.L.C. (NON) 3,472,802
52,500 HealthCare Financial Partners, Inc. (NON) 3,218,906
5,250 Marschollek, Lautenschlaeger und Partner AG (Germany) 2,506,639
169,800 MBNA Corp. 5,603,400
55,600 Merrill Lynch & Co., Inc. 5,129,100
70,400 Morgan Stanley, Dean Witter, Discover and Co. 6,432,800
54,000 Sirrom Capital Corp. 1,404,000
214,029 TCF Financial Corp. 6,313,856
------------
80,951,662
Food and Beverages (1.3%)
- ------------------------------------------------------------------------------------------
274,700 Coca-Cola Enterprises, Inc. 10,781,975
164,775 International Home Foods, Inc. (NON) 3,748,631
60,826 Sara Lee Corp. 3,402,454
------------
17,933,060
Health Care Information Systems (0.7%)
- ------------------------------------------------------------------------------------------
90,139 IMS Health Inc. (NON) 5,363,271
135,162 Medquist, Inc. (NON) 3,902,803
------------
9,266,074
Health Care Services (2.5%)
- ------------------------------------------------------------------------------------------
72,600 Cardinal Health, Inc. 6,806,250
80,200 CareMatrix Corp. (NON) 2,160,388
75,000 Concentra Managed Care, Inc. (NON) 1,950,000
469,800 HBO & Co. 16,560,450
98,800 Lincare Holdings, Inc. (NON) 4,155,775
13,900 Province Healthcare Co. (NON) 384,856
92,506 Total Renal Care Holdings, Inc. (NON) 3,191,457
------------
35,209,176
Hospital Management (0.4%)
- ------------------------------------------------------------------------------------------
176,541 Health Management Assoc., Inc. (NON) 5,903,090
Insurance (1.0%)
- ------------------------------------------------------------------------------------------
32,600 American International Group, Inc. 4,759,600
50,700 Century Business Services, Inc. (NON) 1,014,000
26,700 Inspire Insurance Solutions, Inc. (NON) 887,775
117,900 Travelers Group Inc. 7,147,688
------------
13,809,063
Lodging (0.6%)
- ------------------------------------------------------------------------------------------
201,657 Extended Stay America, Inc. (NON) 2,268,641
45,900 Marriott International, Inc. Class A 1,486,013
104,600 Prime Hospitality Corp. (NON) 1,823,963
60,881 Promus Hotel Corp. (NON) 2,343,919
------------
7,922,536
Machinery (0.1%)
- ------------------------------------------------------------------------------------------
27,682 Sidel S.A. (France) 2,010,080
Medical Management Services (0.5%)
- ------------------------------------------------------------------------------------------
22,552 IMPATH, Inc. (NON) 548,296
158,390 Pediatrix Medical Group, Inc. (NON) 5,890,128
------------
6,438,424
Medical Supplies and Devices (4.6%)
- ------------------------------------------------------------------------------------------
51,900 Boston Scientific Corp. (NON) 3,717,338
183,900 Cyberonics, Inc. (NON) 1,953,938
33,000 Henry Schein, Inc. (NON) 1,522,125
71,362 Johnson & Johnson 5,262,948
70,000 Lifecore Biomedical, Inc. (NON) 1,155,000
105,720 Medtronic, Inc. 6,739,650
50,000 Minimed, Inc. (NON) 2,618,750
113,396 Omnicare, Inc. 4,323,223
15,200 Sofamor Danek Group, Inc. (NON) 1,315,750
36,800 Steris Corp. (NON) 2,340,250
246,074 Stryker Corp. 9,443,090
283,676 Sybron International Corp. (NON) 7,162,819
198,015 Thermo Cardiosystems, Inc. (NON) 4,504,841
26,900 Thermotrex Corp. (NON) 460,663
5,100 Trex Medical Corp. (NON) 84,150
164,800 Tyco International Ltd. (NON) 10,382,400
------------
62,986,935
Networking Equipment (2.3%)
- ------------------------------------------------------------------------------------------
286,846 Ascend Communications, Inc. (NON) 14,216,805
39,800 CIENA Corp. (NON) 2,771,075
59,800 Cisco Systems, Inc. (NON) 5,505,338
153,872 Exodus Communications, Inc. (NON) 6,885,772
112,000 FORE Systems, Inc. (NON) 2,968,000
------------
32,346,990
Nursing Homes (0.2%)
- ------------------------------------------------------------------------------------------
100,000 Assisted Living Concepts, Inc. (NON) 1,725,000
42,096 Health Care & Retirement Corp. (NON) 1,660,161
------------
3,385,161
Oil and Gas (2.3%)
- ------------------------------------------------------------------------------------------
74,170 BJ Services Co. (NON) 2,155,566
173,200 Cal Dive International, Inc. 4,773,825
68,400 Camco International, Inc. 5,326,650
122,800 Nabors Industries, Inc. (NON) 2,432,975
213,336 National-Oilwell, Inc. (NON) 5,720,072
86,032 Newpark Resources, Inc. (NON) 957,106
85,125 Schlumberger Ltd. 5,815,102
33,151 Smith International, Inc. (NON) 1,154,069
153,878 Varco International, Inc. (NON) 3,048,708
------------
31,384,073
Pharmaceuticals and Biotechnology (5.2%)
- ------------------------------------------------------------------------------------------
69,900 Bristol-Myers Squibb Co. 8,034,131
48,800 Gilead Sciences, Inc. (NON) 1,564,650
48,718 Medicis Pharmaceutical Corp. Class A (NON) 1,778,207
6,475 Novartis AG ADR (Switzerland) 10,758,986
34,061 Parexel International Corp. (NON) 1,238,969
90,300 Pfizer, Inc. 9,814,481
55,600 Quintiles Transnational Corp. (NON) 2,734,825
150,904 Schein Pharmaceutical, Inc. (NON) 4,017,819
125,400 Schering-Plough Corp. 11,489,775
5,300 Schwarz Pharamaceutical AG ADR (Germany) (NON) 413,444
60,149 Sepracor, Inc. (NON) 2,496,184
49,674 Sonus Pharmaceuticals, Inc. (NON) 611,611
71,672 Transkaryotic Therapies, Inc. (Malaysia) (NON) 1,845,554
80,529 Vertex Pharmaceuticals, Inc. (NON) 1,811,903
186,600 Warner-Lambert Co. 12,945,375
------------
71,555,914
Publishing (0.9%)
- ------------------------------------------------------------------------------------------
120,931 Peterson Companies, Inc. Class A (NON) 3,098,857
64,847 Wolters Kluwer N.V. (Netherlands) 8,883,848
------------
11,982,705
Restaurants (1.0%)
- ------------------------------------------------------------------------------------------
54,750 Cracker Barrel Old Country Store, Inc. 1,738,313
249,773 J.D. Wetherspoon PLC (United Kingdom) 1,199,078
57,700 Landry's Seafood Restaurants, Inc. (NON) 1,044,009
44,500 Papa Johns International, Inc. (NON) 1,754,969
565,920 PizzaExpress PLC (United Kingdom) 8,131,522
------------
13,867,891
Retail (12.7%)
- ------------------------------------------------------------------------------------------
61,794 Bed Bath & Beyond, Inc. (NON) 3,201,702
196,696 Borders Group, Inc. (NON) 7,277,752
76,500 Brylane Inc. (NON) 3,519,000
2,850 CompUSA, Inc. (NON) 51,478
62,379 Consolidated Stores Corp. (NON) 2,261,239
356,400 Costco Companies, Inc. (NON) 22,475,475
162,400 CVS Corp. 6,323,450
79,090 Dollar General Corp. 3,128,998
350,925 Dollar Tree Stores, Inc. (NON) 14,256,328
192,933 Fred Meyer, Inc. (NON) 8,199,653
135,550 General Nutrition Companies, Inc. (NON) 4,218,994
243,600 Home Depot, Inc. (The) 20,234,025
354,724 Kohls Corp. (NON) 18,401,308
100,790 Michaels Stores, Inc. 3,555,997
230,400 MSC Industrial Direct Co., Inc. Class A (NON) 6,566,400
320,400 Office Depot, Inc. (NON) 10,112,625
140,100 Payment Svcs., Inc. (NON) 3,563,794
184,300 Rite Aid Corp. 6,922,769
272,527 Starbucks Corp. (NON) 14,563,162
188,600 TJX Cos., Inc. (The) 4,549,975
139,700 Wal-Mart Stores, Inc. 8,486,775
111,356 Williams-Sonoma, Inc. (NON) 3,542,513
24,500 Wolverine World Wide, Inc. 531,344
------------
175,944,756
Semiconductors (1.3%)
- ------------------------------------------------------------------------------------------
150,000 Galileo Technology Ltd. (Israel) (NON) 2,025,000
10,300 Integrated Process Equipment Corp. (NON) 115,875
90,546 Linear Technology Corp. 5,461,056
316,176 Maxim Integrated Products Inc. (NON) 10,018,827
------------
17,620,758
Specialty Consumer Products (1.0%)
- ------------------------------------------------------------------------------------------
96,704 Central Garden and Pet Co. (NON) 3,009,912
48,243 Fastenal Co. 2,240,284
104,211 Guitar Center, Inc. (NON) 3,139,356
136,100 Mattel, Inc. 5,758,731
------------
14,148,283
Steel (0.1%)
- ------------------------------------------------------------------------------------------
65,800 Lone Star Technologies, Inc. (NON) 1,003,450
Telecommunication (2.0%)
- ------------------------------------------------------------------------------------------
262,100 Brightpoint, Inc. (NON) 3,800,450
80,423 E. Spire Communications, Inc. (NON) 1,814,544
145,847 Global Telesystems Group Inc. (NON) 7,110,041
112,900 Lucent Technologies, Inc. 9,391,869
90,100 PanAmSat Corp. (NON) 5,124,438
18,700 STET Hellas Telecommunications S.A. (NON) 776,050
------------
28,017,392
Telecommunication Equipment (1.8%)
- ------------------------------------------------------------------------------------------
102,274 Advanced Fibre Communications (NON) 4,097,352
102,238 GeoTel Communications Corp. (NON) 4,166,199
94,900 Northern Telecom Ltd. (Canada) 5,385,575
20,000 Oy Nokia AB Class A, (Finland) 1,469,169
74,667 Premisys Communications, Inc. (NON) 1,857,342
131,778 Qwest Communications International, Inc. (NON) 4,595,758
52,063 Tellabs, Inc. (NON) 3,729,012
------------
25,300,407
Telephone Services (2.8%)
- ------------------------------------------------------------------------------------------
65,700 American Telephone & Telegraph Co. 3,753,113
100,974 Intermedia Communications, Inc. (NON) 4,234,597
62,006 NEXTLINK Communications, Inc. Class A (NON) 2,348,477
34,600 RSL Communications, Ltd. Class A (NON) 1,038,000
76,000 Sprint Corp. 5,358,000
879,325 Tele-Communications TCI ventures Group Class A (NON) 17,641,458
77,600 WorldCom, Inc. (NON) 3,758,750
------------
38,132,395
Textiles (0.1%)
- ------------------------------------------------------------------------------------------
72,650 Wolford AG ADR (Austria) 921,064
Wireless Communications (0.4%)
- ------------------------------------------------------------------------------------------
101,200 AirTouch Communications, Inc. (NON) 5,913,875
------------
Total Common Stocks (cost $983,696,145) $1,331,011,663
PREFERRED STOCKS (0.5%) (a) (cost $1,589,264)
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------
13,689 Marschollek, Lautenschlaeger und Partner AG, DEM 3.05 pfd.
(Germany) $ 6,664,631
SHORT-TERM INVESTMENTS (4.2%) (a) (cost $58,325,395)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------
$58,316,000 Interest in $750,000,000 joint repurchase agreement
dated June 30, 1998 with Goldman Sachs due
July 1, 1998 with respect to various U.S. Treasury
obligations -- maturity value of $58,325,395 for an
effective yield of 5.80% $ 58,325,395
- ------------------------------------------------------------------------------------------
Total Investments (cost $1,043,610,804) (b) $1,396,001,689
- ------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,381,699,883.
(b) The aggregate identified cost on a tax basis is $1,046,198,660, resulting in gross
unrealized appreciation and depreciation of $395,490,265 and $45,687,236,
respectively, or net unrealized appreciation of $349,803,029.
(NON) Non-income-producing security.
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
June 30, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,043,610,804) (Note 1) $1,396,001,689
- ---------------------------------------------------------------------------------------------------
Cash 735,349
- ---------------------------------------------------------------------------------------------------
Dividends and other receivables 287,687
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,188,988
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 7,124,587
- ---------------------------------------------------------------------------------------------------
Total assets 1,408,338,300
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 22,032,047
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,188,660
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,043,005
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 148,059
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 16,984
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,898
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,023,775
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 180,989
- ---------------------------------------------------------------------------------------------------
Total liabilities 26,638,417
- ---------------------------------------------------------------------------------------------------
Net assets $1,381,699,883
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) 968,959,796
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (5,898,675)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 66,247,877
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 352,390,885
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,381,699,883
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($674,741,378 divided by 30,230,967 shares) $22.32
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $22.32)* $23.68
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($632,387,522 divided by 28,928,907 shares)** $21.86
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($74,570,983 divided by 3,384,415 shares) $22.03
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $22.03)* $22.83
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended June 30, 1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends $ 2,212,739
- --------------------------------------------------------------------------------------------------
Interest 832,508
- --------------------------------------------------------------------------------------------------
Total investment income 3,045,247
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,861,884
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,219,664
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,543
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,611
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 747,845
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,790,016
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 250,320
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 945
- --------------------------------------------------------------------------------------------------
Reports to shareholders 81,524
- --------------------------------------------------------------------------------------------------
Registration fees 31,881
- --------------------------------------------------------------------------------------------------
Auditing 19,399
- --------------------------------------------------------------------------------------------------
Legal 6,877
- --------------------------------------------------------------------------------------------------
Postage 125,989
- --------------------------------------------------------------------------------------------------
Other 102,061
- --------------------------------------------------------------------------------------------------
Total expenses 9,264,559
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (320,637)
- --------------------------------------------------------------------------------------------------
Net expenses 8,943,922
- --------------------------------------------------------------------------------------------------
Net investment loss (5,898,675)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 59,751,185
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities
in foreign currencies during the period 527
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 133,820,022
- --------------------------------------------------------------------------------------------------
Net gain on investments 193,571,734
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $187,673,059
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
June 30 December 31
1998* 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss $ (5,898,675) $ (8,430,566)
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 59,751,185 34,805,611
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 133,820,549 162,017,217
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 187,673,059 188,392,262
- ---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (853,197)
- ---------------------------------------------------------------------------------------------------------------------
Class B -- (814,402)
- ---------------------------------------------------------------------------------------------------------------------
Class M -- (97,128)
- ---------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 105,595,891 187,948,510
- ---------------------------------------------------------------------------------------------------------------------
Total increase in net assets 293,268,950 374,576,045
Net assets
- ---------------------------------------------------------------------------------------------------------------------
Beginning of period 1,088,430,933 713,854,888
- ---------------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $5,898,675 and $--, respectively) $1,381,699,883 $1,088,430,933
- ---------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 April 14, 1993+
operating performance (Unaudited) Year ended December 31 to Dec. 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.11 $15.51 $14.40 $9.75 $10.29 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(d) (.06) (.10) (.11) (.01)(b) (.02)(b) --(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.27 3.73 1.22 4.88 .05 1.95
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment activities 3.21 3.63 1.11 4.87 .03 1.95
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- (.10) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.03) -- (.12) (.56) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03) -- (.22) (.57) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.32 $19.11 $15.51 $14.40 $9.75 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.80* 23.42 7.71 50.14 0.34 22.98*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $674,741 $532,287 $348,261 $83,526 $3,190 $2,895
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .57* 1.22 1.44 1.31 (b) .92 (b) .72(b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.30)* (.58) (.69) (.28)(b) (.18)(b) (.04)(b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.43* 73.73 68.95 49.81 101.94 76.02*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0470 $.0489 $.0487
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 Year ended October 2, 1995+
operating performance (Unaudited) December 31 to Dec. 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $18.78 $15.36 $14.37 $13.08
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) (.14) (.22) (.22) (.04)(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.22 3.67 1.21 1.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment activities 3.08 3.45 .99 1.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.03) -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03) -- (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.86 $18.78 $15.36 $14.37
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.40* 22.48 6.89 10.41 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $632,388 $496,501 $328,268 $66,978
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .94* 1.97 2.19 .54(b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.67)* (1.33) (1.45) (.29)(b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.43* 73.73 68.95 49.81
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0470 $.0489 $.0487
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 Year ended October 2, 1995+
operating performance (Unaudited) December 31 to Dec. 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $18.91 $15.42 $14.39 $13.08
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) (.11) (.18) (.19) --(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.23 3.70 1.22 1.38
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment activities 3.12 3.52 1.03 1.38
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.03) -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03) -- (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.03 $18.91 $15.42 $14.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.50* 22.84 7.16 10.57*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $74,571 $59,643 $37,325 $6,115
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .82* 1.72 1.94 .47 (b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.55)* (1.08) (1.20) (.21)(b)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.43* 73.73 68.95 49.81
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0470 $.0489 $.0487
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
Notes to financial statements
June 30, 1998 (Unaudited)
Note 1
Significant accounting policies
The Putnam Voyager Fund II ("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. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which convert
to class A shares in approximately eight years, do not pay a front-end sales
charge, but pay a higher ongoing distribution fee than class A shares, and are
subject to a contingent deferred sales charge, if those shares are redeemed
within six years of purchase. Class M shares are sold with a maximum front-end
sales charge of 3.50% and pay an ongoing distribution fee that is lower than
class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost which approximates market, 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 and certain other accounts managed by Putnam Investment
management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed).
Interest income is recorded on the accrual basis. 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.
E) 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 gains and losses 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 appreciation and
depreciation of assets and liabilities in foreign currencies 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.
F) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended June 30, 1998, the
fund had no borrowings against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange commission and with various states and the initial public offering of
its shares were $17,221. These expenses have been fully amortized on projected
net assets over a five-year period.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.70% 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.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended June 30, 1998, fund expenses were reduced by $320,637
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,440 has
been allocated to the fund, and an additional fee for each Trustee's 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.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B 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 currently limit payment by the fund to 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 six months ended June 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $407,259 and $25,839 from the sale of
class A and class M shares, respectively and $431,732 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended June 30, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $23,967 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended June 30, 1998, purchases and sales of investment
securities other than short-term investments aggregated $617,385,769 and
$534,685,838, 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 June 30, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
June 30, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 5,633,646 $117,036,608
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
5,633,646 117,036,608
Shares
repurchased (3,263,295) (67,416,456)
- ------------------------------------------------------------
Net increase 2,370,351 $ 49,620,152
- ------------------------------------------------------------
Year ended
December 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 24,925,536 $422,035,179
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 45,311 827,369
- ------------------------------------------------------------
24,970,847 422,862,548
Shares
repurchased (19,565,421) (333,283,469)
- ------------------------------------------------------------
Net increase 5,405,426 $ 89,579,079
- ------------------------------------------------------------
Six months ended
June 30, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 4,579,486 $93,623,686
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
4,579,486 93,623,686
Shares
repurchased (2,085,748) (42,442,711)
- ------------------------------------------------------------
Net increase 2,493,738 $51,180,975
- ------------------------------------------------------------
Year ended
December 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 9,403,980 $157,063,061
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 42,522 763,271
- ------------------------------------------------------------
9,446,502 157,826,332
Shares
repurchased (4,384,774) (72,186,037)
- ------------------------------------------------------------
Net increase 5,061,728 $ 85,640,295
- ------------------------------------------------------------
Six months ended
June 30, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 818,544 $16,881,818
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
818,544 16,881,818
Shares
repurchased (588,039) (12,087,054)
- ------------------------------------------------------------
Net increase 230,505 $ 4,794,764
- ------------------------------------------------------------
Year ended
December 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,955,241 $33,450,592
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,218 94,283
- ------------------------------------------------------------
1,960,459 33,544,875
Shares
repurchased (1,226,918) (20,815,739)
- ------------------------------------------------------------
Net increase 733,541 $12,729,136
- ------------------------------------------------------------
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Daniel L. Miller
Vice President
Carol C. McMullen
Vice President
Charles H. Swanberg
Vice President and Fund Manager
Roland W. Gillis
Vice President and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency;
and involve risk, including the possible loss of the principal amount
invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA017-44636-377/2AR/2AO
