-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KdzKdbf5uGM0YcUp9+tM8L9/bGZp0nhdFo58YBBG2A6/VFf/SsipGuwH2bBZYUFy kl9OeoOh6pU4PFFzUogD/w== 0000950135-94-000588.txt : 19940929 0000950135-94-000588.hdr.sgml : 19940929 ACCESSION NUMBER: 0000950135-94-000588 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19940928 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM VOYAGER FUND CENTRAL INDEX KEY: 0000081280 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046187125 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01682 FILM NUMBER: 94550737 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM VOYAGER FUND INC /PRED/ DATE OF NAME CHANGE: 19821109 N-30D 1 PUTNAM VOYAGER FUND FORM N-30D 1 PUTNAM VOYAGER FUND ANNUAL REPORT July 31, 1994 [Logo] BOSTON - LONDON - TOKYO 2 PERFORMANCE HIGHLIGHTS - As of 7/31/94, Morningstar gave the fund's class A shares a four-star rating, out of a possible five stars. This rating put the fund in the top 32.5% of all equity funds rated for the period.* - CDA/Wiesenberger ranked the fund's class A shares in the top 25% of the 96 maximum capital gains funds tracked for 1-year performance, in the top 21% of 68 funds for 5-year, and in the top 7% of 45 funds for 10-year performance as of July 31, 1994. - The fund's class A shares outperformed two-thirds of the funds in Lipper's capital appreciation category for 1-year performance, and also ranked in the top 12% for 5-year and 10-year performance as of July 31, 1994. - Performance should always be considered in light of a fund's investment strategy. Putnam Voyager Fund is designed for investors aggressively seeking capital appreciation through common stocks.
- ------------------------------------------------------------------------- FISCAL 1994 results at a glance - ------------------------------------------------------------------------- Class A Class B Total return: NAV POP NAV CDSC - ------------------------------------------------------------------------- 12 months ended 7/31/94 (change in value during period plus reinvested distributions) 5.49% -0.56% 4.71% -0.29% - ------------------------------------------------------------------------- Share value: NAV POP NAV - ------------------------------------------------------------------------- 7/31/93 $11.02 $11.69 $10.89 - ------------------------------------------------------------------------- 4/1/94 - - - - ------------------------------------------------------------------------- 7/31/94 11.19 11.87 10.97
Capital gains Long- Short- Distributions: No. Income term term Total - ------------------------------------------------------------------------- Class A 1 - $0.456 - $0.456 - ------------------------------------------------------------------------- Class B 1 - 0.456 - 0.456
Performance data represent past results and will differ for each share class. For performance over longer periods, see pages 8 and 9. POP assumes 5.75% maximum sales charge. CDSC assumes 5% maximum contingent deferred sales charge. * Morningstar rates funds relative to funds with similar objectives, based on risk-adjusted medium- and long-term performance, as applicable, adjusted for sales charges. Rates are updated monthly. Past performance is not indicative of future results. + CDA/Wiesenberger rankings are updated monthly, based entirely on total return and do not take into account sales charges or fees. The fund's class A shares ranked 24 out of 96, 14 out of 68, and 3 out of 45 for 1-, 5-, and 10-year performance, respectively. ++ Lipper Analytical Services is an independent research organization; rankings vary over time and do not reflect the effects of sales charges. The fund's class A shares ranked 41 out of 128, 9 out of 80, and 3 out of 48 for 1-, 5-, and 10-year performance, respectively. 2 3 FROM THE CHAIRMAN DEAR SHAREHOLDER: A BRIEF SURGE OF OPTIMISM LIFTED FINANCIAL MARKETS WORLDWIDE AS PUTNAM VOYAGER FUND REACHED THE CLOSE OF ITS FISCAL YEAR ON JULY 31, 1994. ALTHOUGH THE RISE WAS SHORT-LIVED, IT REPRESENTED VIRTUALLY THE ONLY SIGN IN MANY MONTHS THAT THE MARKETS AT HOME AND ABROAD RECOGNIZED THE FUNDAMENTAL STRENGTHS OF THE WORLD'S MAJOR ECONOMIES. SINCE JANUARY, THE MARKETS HAVE CHARTED VOLATILE AND UNCERTAIN COURSES, REACTING TO HIGHER INTEREST RATES AND CONCERNS ABOUT PROSPECTS FOR ADDITIONAL RATE INCREASES. HOWEVER, THE UNCERTAINTY CLOUDING THE ECONOMIC ENVIRONMENT HAS MASKED SOME MAJOR STRUCTURAL AND FUNDAMENTAL CHANGES IN CORPORATE AMERICA THAT HAVE PRODUCED ATTRACTIVE INVESTMENT OPPORTUNITIES. LEADING ECONOMIC INDICATORS PRESENT A POSITIVE LONG-TERM VIEW FOR GROWTH INVESTMENTS, ALTHOUGH RISING INTEREST RATES COULD SLOW THE PACE OF ECONOMIC EXPANSION MORE THAN DESIRED. AS WE GO FORWARD, PUTNAM MANAGEMENT ANTICIPATES A MORE CHALLENGING INVESTMENT ENVIRONMENT. WE BELIEVE CAREFUL STOCK SELECTION IN SPECIFIC INDUSTRIES WILL CONTINUE TO BE THE KEY TO SUCCESSFUL LONG-TERM INVESTMENT PERFORMANCE. IN THE REPORT THAT FOLLOWS, FUND MANAGERS MATT WEATHERBIE AND CHUCK SWANBERG DISCUSS THE FISCAL YEAR JUST ENDED AND PROSPECTS FOR FISCAL 1995. RESPECTFULLY YOURS, GEORGE PUTNAM CHAIRMAN OF THE TRUSTEES SEPTEMBER 14, 1994 3 4 REPORT FROM THE FUND MANAGERS MATTHEW WEATHERBIE CHARLES SWANBERG The forces shaping Putnam Voyager Fund's performance throughout fiscal 1994 were anything but dull - making the fund's positive total return of 5.49% for class A shares and 4.71% for class B shares at net asset value all the more impressive. Indeed, the fund's class A shares outperformed the Standard & Poor's [Registration Mark] 500 Index, a common measure of stock market performance, for the 12 months ended July 31, 1994. Performance for other periods is shown on pages 8 and 9. - - THE TWO FACES OF FISCAL '94 The first six months of fiscal 1994 - August 1, 1993, through January 31, 1994 - can be characterized as a period of moderate economic growth, low inflation, declining long-term interest rates, and a willingness on the part of the public to invest in long-term assets, growth stocks in particular. This environment supported and sustained new market highs, boosting your fund's net asset value by more than 11% at the end of January. The second half of the fiscal year - February 1, 1994, through July 31, 1994 - witnessed the Federal Reserve Board's series of increases in short-term interest rates. Although economic growth and consumer confidence remained strong, these increases, along with a weakening dollar and growing concern about U.S. political leadership, rattled many stock investors, sending them to the sidelines. Smaller growth stocks, the type your fund tends to emphasize, are especially sensitive to interest-rate changes. As interest rates rise, the perceived value of these companies' future earnings generally decreases. The resulting declines in perceived value translate into lower stock prices. True to this generalization, your fund's net asset value fell by roughly 9% between the fiscal year's midpoint and its end. Nevertheless, the fund was able to provide a competitive total return at NAV for all of fiscal 1994. Careful stock selection, an experienced understanding of market forces, 4 5 and a dedication to long-term results contributed to the positive results. - - FOUNDATION GROWTH: ADDING SELECTIVELY TO INDIVIDUAL HOLDINGS At period's end, foundation growth stocks, those of small and midsized companies that are aggressively expanding, made up approximately 70% of your fund's portfolio. These stocks are typically issued by companies from five major industry categories: technology, consumer, media, services, and health care. We focus especially on those with innovative products or a particular market niche, along with the potential to increase their earnings rapidly. Except for the business services sector, these industry groups have experienced significant price rotation within the past six months; that is, what was in favor before is no longer performing well, and vice versa. Technology as a whole experienced higher-than-normal volatility because of intense bouts of profit-taking and the merger collapse between Bell Atlantic, a huge regional telephone company, and Tele-Communications, Inc. (TCI), the nation's largest cable television company. This breakdown in negotiations caused the media sector to underperform as well. It is important to remember that our management style is to continue to own companies that exhibit long-term growth potential, not to succumb to the allure of taking short-term profits. Therefore, we've been selectively adding to individual holdings in these industry groups on a stock-by-stock basis to take advantage of the recent price declines. One such company
- --------------------------------------------------------------------- TOP industry sectors* - --------------------------------------------------------------------- Media 18.90% - --------------------------------------------------------------------- Services 17.39% - --------------------------------------------------------------------- Consumer 12.52% - --------------------------------------------------------------------- Health care 11.98% - --------------------------------------------------------------------- Technology 8.36%
* Based on net assets as of 7/31/94 5 6 is FlightSafety International. It offers high-technology training to operators of aircraft, ships, electrical utilities, and processing plants. With improving demand for pilot training and a new line of advanced visual systems, FlightSafety is well positioned for growth, in our view. Increasingly, we will also be turning our sights overseas in search of quality foundation growth stocks. We are seeking out foreign companies that meet the same stringent eligibility criteria as the domestic foundation growth companies currently represented in the portfolio. We see this as an opportunity to add value to the fund over time, and on a gradual basis we hope to add more of these securities to the portfolio. - - ANSWERING OPPORTUNITY'S KNOCK Opportunity stocks, those of larger companies that are under-going positive change, represented approximately 26% of the fund's assets on July 31, 1994. In addition to looking for companies that have effectively restructured their operations, we have also focused on solidly growing larger companies whose stock prices have been beaten down by market pessimism or investor misunderstanding. We've been adding to some of the fund's holdings in the areas of consumer staples, publishing, selected specialty retailers, financial services, and technology. Many of these companies have also undertaken cost-cutting measures to position themselves more competitively in the marketplace. - - OUTLOOK: SOUND ELEMENTS COULD SIGNAL STRONGER MARKETS AHEAD Even though short-term interest rates may continue to rise in response to gradual Fed tightening, there is precedent - the 1962-1968 market - for growth stocks to do well in this kind of environment. Because the underlying fundamentals of the stock market remain sound, in our opinion, we view the current environment as a good buying opportunity. Overall, we've not been disappointed by earnings this year; most of the 6 7 - -------------------------------------------------------------------- TOP 10 HOLDINGS as of 7/31/94 LIN Broadcasting Corp. Television, specialty publishing , cellular phone service Liberty Media Corp. Television broadcasting H & R Block, Inc. North America's largest tax preparation service FlightSafety International, Inc. High technology training for aircraft pilots Telephone & Data Systems, Inc. Major U.S. telephone holding company Century Telephone Enterprises, Inc. Local and cellular telephone and radio paging services Comcast Corp. Cable television operator Tele-Communications, Inc. Cable television services Cellular Communications, Inc. Developer of cellular telephone systems Hospitality Franchise Systems, Inc. World's largest hotel franchiser These holdings represent 17.1% of the fund's net assets. Portfolio holdings are subject to change. companies in which your fund invests are doing well and showing strong earnings growth. We believe growth stocks, those of small and midsized companies in particular, are only halfway through their cycle of outperforming large company stocks. The fund's emphasis on these smaller issues should position it well for long-term capital appreciation. The views expressed throughout the report are exclusively those of Putnam Management. They are not meant as investment advice. There is no guarantee that the securities mentioned will continue to be held in the future. 7 8 PERFORMANCE SUMMARY This section provides, at a glance, information about your fund's performance. Total return shows how the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions back into the fund. We show total return in two ways: on a cumulative long-term basis and on average how the fund might have grown each year over varying periods. For comparative purposes, we show how the fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 7/31/94 Standard Class A Class B & Poor's[RM] NAV POP NAV CDSC 500 Index CPI - --------------------------------------------------------------------------- 1 year 5.49% -0.56% 4.71% -0.29% 5.19% 2.77% 5 years 86.11 75.39 - - 54.69 19.29 Annual average 13.23 11.89 - - 9.12 3.59 10 years 441.12 410.13 - - 326.18 42.56 Annual average 18.39 17.70 - - 15.60 3.61 Life of class - - 29.08 26.08 17.81 6.38 Annual average - - 11.96 10.80 7.52 2.77
TOTAL RETURN FOR PERIODS ENDED 6/30/94 (most recent calendar quarter) Class A Class B NAV POP NAV CDSC - ---------------------------------------------------------- 1 year 3.89% -2.06% 3.08% -1.88% 5 years 90.62 79.63 - - Annual average 13.77 12.43 - - 10 years 411.94 382.38 - - Annual average 17.74 17.04 - - Life of class - - 25.32 22.32 Annual average - - 10.91 9.68
Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions or, for class A shares, distribution fees prior to implementation of the class A distribution plan in 1990. Effective 4/27/92, the fund began offering class B shares. Performance of share classes will differ. Performance data represent past results. Investment returns and net asset value will fluctuate so an investor's shares, when sold, may be worth more or less than their original cost. 8 9 [CHART SHOWING GROWTH OF A $10,000 INVESTMENT] Past performance is no assurance of future results. A $10,000 investment in the fund's class B shares at inception (4/27/92) would have grown to $12,908 by 7/31/94 ($12,608 with a redemption at the end of the period). year over varying periods. For comparative purposes, we show how the fund performed relative to appropriate indexes and benchmarks. TERMS AND DEFINITIONS NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the maximum 5.75% sales charge. CLASS A SHARES are generally subject to an initial sales charge. CLASS B SHARES may be subject to a sales charge upon redemption. CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the redemption of Class B shares and assumes redemption at the end of the period. Your fund's CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS STANDARD & POOR'S[RM] 500 INDEX is an unmanaged list of common stocks that is frequently used as a general measure of stock market performance. The index assumes reinvestment of all distributions and does not take into account brokerage commissions or other costs. The fund's portfolio contains securities that do not match those in the index. CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not represent an investment return. 9 10 THE PUTNAM FUND SELECTOR[TM] The Putnam Fund Selector shows the many opportunities for investors within every investment strategy. All investors should first accumulate a base of conservative, cash-equivalent investments. Then, with the help of your investment advisor, diversify your portfolio by investing in the Putnam Family of Funds. PUTNAM GROWTH FUNDS PUTNAM GROWTH AND INCOME FUNDS PUTNAM INCOME or TAX-FREE FUNDS MOST CONSERVATIVE INVESTMENTS 10 11
PUTNAM GROWTH FUNDS PUTNAM TAX-FREE INCOME FUNDS Asia Pacific Growth Fund Intermediate Tax Exempt Fund Diversified Equity Trust Municipal Income Fund Europe Growth Fund Tax Exempt Income Fund Global Growth Fund Tax-Free High Yield Fund Health Sciences Trust Tax-Free Insured Fund Investors Fund STATE TAX-FREE INCOME FUNDS+ Natural Resources Fund* Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New New Opportunities Fund York, Ohio, and Pennsylvania OTC Emerging Growth Fund LIFESTAGE[SM] FUNDS Overseas Growth Fund Putnam Asset Allocation Funds-three investment portfolios that spread your money across a variety of stocks, bonds, and money market Vista Fund investments to help maximize your return and reduce your risk. Voyager Fund The three portfolios: PUTNAM GROWTH Putnam Asset Allocation: Balanced Portfolio AND INCOME FUNDS Convertible Income-Growth Trust Putnam Asset Allocation: Conservative Portfolio Dividend Growth Fund Putnam Asset Allocation: Growth Portfolio Equity Income Fund MOST CONSERVATIVE INVESTMENTS The George Putnam Fund of Boston PUTNAM MONEY MARKET FUNDS: The Putnam Fund for Growth and Income Money Market Fund[ss] Managed Income Trust California Tax Exempt Money Market Fund Utilities Growth and Income Fund New York Tax-Exempt Money Market Fund PUTNAM INCOME FUNDS Tax Exempt Money Market Fund Adjustable Rate U.S. Government Fund CDS AND SAVINGS ACCOUNTS** American Government Income Fund * Formerly Energy-Resources Trust. Balanced Government Fund + Not available in all states. Corporate Asset Trust ++ Relative to above. Diversified Income Trust [ss] Formerly Daily Dividend Trust. Federal Income Trust ** Not offered by Putnam Investments. Certificates of deposit offer a fixed rate of return and may be insured, up to Global Governmental Income certain limits, by federal/state agencies. Savings accounts may also be insured up to certain limits. Trust High Yield Advantage Fund Please call your financial advisor or Putnam to obtain a prospectus for any Putnam fund. It contains more High Yield Trust complete information, including charges and expenses. Read it carefully before you invest or send money. Income Fund U.S. Government Income Trust
11 12 REPORT OF INDEPENDENT ACCOUNTANTS For the year ended July 31, 1994 To the Trustees and Shareholders of Putnam Voyager Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments owned, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Voyager Fund (the "fund") at July 31, 1994, and the results of its operations, the changes in its net assets, and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of portfolio positions at July 31, 1994 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts September 13, 1994 12 13 PORTFOLIO OF INVESTMENTS OWNED July 31, 1994
COMMON STOCKS (89.1%)(a) NUMBER OF SHARES VALUE BUSINESS EQUIPMENT AND SERVICES (10.2%) 724,330 Airgas, Inc. (b) $ 19,737,993 453,300 Antec Corp. 12,834,056 2,358,780 Block (H & R), Inc. 91,992,420 963,022 Danka Business Systems ADR (c) 41,289,567 386,530 First USA, Inc. 12,948,755 306,490 ITEL Corp. 10,382,348 577,152 Interim Services, Inc.(b) 13,563,072 1,179,844 Interpublic Group of Cos., Inc. 38,197,450 1,201,940 Kelly Services, Inc. Class A 35,457,230 1,007,520 Manpower, Inc. 24,180,480 1,854,927 Office Depot, Inc. 39,185,333 840,865 Olsten Corp. (The) 28,379,194 624,525 Paychex, Inc. 20,921,587 200,000 Robert Half International, Inc.(b) 8,725,000 219,900 Tandy Corp. 8,218,763 868,150 Westcott Communications, Inc. (b) 8,952,797 ------------ 414,966,045 RETAIL (7.0%) 680,886 Albertsons, Inc. 18,383,922 399,800 AnnTaylor (b) 16,441,775 1,356,010 Bed Bath & Beyond, Inc. (b) 41,019,303 326,270 Books-A-Million, Inc. (b) 7,748,913 69,329 Castorama Dubois Investisse 9,925,181 7,517,697 Cifra S.A. de C.V. Series C 19,651,260 362,270 Gap, Inc. 13,947,395 458,160 Gymboree Corp. (b) 18,784,560 560,050 Heilig-Meyers Co. 14,841,325 214,300 Hennes & Mauritz AB 11,016,799 885,100 Home Depot, Inc. (The) 36,289,100 419,800 Limited Inc. (The) 8,291,050 461,274 Lowes Cos., Inc. 16,605,864 2,811,100 Next PLC 11,096,817 862,090 Stein Mart, Inc. (b) 14,224,485 346,837 Sysco Corp. 8,194,024 476,812 Talbots, Inc. (b) 15,555,992 ------------ 282,017,765 CABLE TELEVISION (6.7%) 385,570 Cablevision Systems Corp. Class A (b) 21,977,490 964,240 Century Communications Corp. 8,075,510 3,320,767 Comcast Corp. Special Class A 55,207,751 4,377,625 Liberty Media Corp. Class A (b) 97,949,358 1,046,345 TCA Cable TV, Inc. 23,281,176 2,038,805 Tele-Communications, Inc. Class A (b) 47,529,642 445,610 Viacom, Inc. Class B (b) 15,596,350 ------------ 269,617,277
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COMMON STOCKS NUMBER OF SHARES VALUE HEALTH CARE SERVICES (5.5%) 353,200 Amgen, Inc. (b) $ 17,549,625 122,000 Biomet, Inc. (b) 1,189,500 191,900 Columbia/HCA Healthcare Corp. 7,771,950 49,235 Coventry Corp. (b) 1,686,299 1,306,717 Health Management Assoc., Inc.(b) 27,277,717 500,000 Homedco Group, Inc. (b) 14,750,000 370,655 Horizon Healthcare Corp. (b) 8,664,061 1,365,750 Lincare Holdings, Inc. (b) 29,192,906 586,915 Pacificare Health Systems, Inc. Class B (b) 29,785,936 588,500 Renal Treatment Centers, Inc. (b) 9,268,875 200,000 Rotech Medical Corp. 3,800,000 322,630 Target Therapeutics, Inc. (b) 6,775,230 481,938 United Healthcare Corp. (b) 21,928,179 436,155 Value Health, Inc. (b) 19,626,975 586,900 Vencor, Inc. (b) 22,742,375 ------------ 222,009,628 CELLULAR BROADCASTING (5.3%) 102,450 Associated Communications Corp. Class B (b) 2,663,700 534,680 Cellular Communications of Puerto Rico, Inc. 13,233,330 363,000 Cellular Communications, Inc. Class A (b) 18,921,375 774,520 DSC Communications Corp. 18,975,740 836,330 LIN Broadcasting Corp. (b) 104,541,250 160,000 McCaw Cellular Communications, Inc. Class A (b) 8,500,000 1,532,780 Paging Network, Inc. (b) 40,810,267 180,300 Vanguard Cellular Systems, Inc. 6,806,325 ------------ 214,451,987 COMPUTER SOFTWARE (5.2%) 1,127,740 CUC International, Inc. 33,973,167 393,600 Computer Associates International, Inc. 15,301,200 545,700 Compuware Corp.(b) 21,486,937 391,210 FTP Software, Inc. (b) 4,890,125 134,600 Intuit, Inc. (b) 4,845,600 546,787 Lotus Development Corp. 17,770,577 234,800 Oracle Systems Corp. (b) 8,981,100 192,410 Parametric Technology Corp. (b) 4,762,147 400,000 PeopleSoft, Inc. (b) 13,900,000 150,000 Powersoft Corp. (b) 6,450,000 915,560 Sybase, Inc. (b) 36,050,175 136,460 Synopsys, Inc. (b) 5,253,710 449,980 Wall Data, Inc.(b) 16,086,785 952,950 Wellfleet Communications, Inc. (b) 19,178,119 ------------ 208,929,642 TELEPHONE SERVICES (5.1%) 750,280 ALC Communications Corp. (b) 24,290,315 2,440,495 Century Telephone Enterprises, Inc. 63,452,870 195,700 LDDS Communications, Inc. 3,816,150 558,275 MFS Communications Company, Inc. (b) 16,469,113 256,990 Pacific Telesis Group 8,416,423 215,200 Sprint Corp. 7,881,700 225,976 Telefonos de Mexico S.A., Ser. L, ADR (c) 13,728,042 1,658,940 Telephone & Data Systems, Inc. 67,601,805 ------------ 205,656,418
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COMMON STOCKS NUMBER OF SHARES VALUE INSURANCE (4.7%) 141,500 Aetna Life & Casualty Co. $ 7,287,250 170,000 American International Group, Inc. 16,022,500 599,580 Bankers Life Holding Corp. 13,040,865 195,670 Berkley (W.R.) 7,386,543 158,090 Cincinnati Financial Corp. 8,418,293 294,300 EXEL Ltd. (c) 11,808,787 589,589 Gallagher (Arthur J.) & Co. 18,645,752 213,310 General Re Corp. 24,663,969 400,000 Integon Corp. 7,400,000 399,700 Life Partners Group, Inc. 7,144,637 195,600 Lincoln National Corp. 7,359,450 3,165,280 Rentokil Group 11,567,516 444,850 Transatlantic Holdings Inc. 24,855,994 256,000 Travelers, Inc. 8,480,000 600,000 USF&G Corp. 7,650,000 324,220 Zurich Reinsurance Centre Holdings, Inc. (b) 8,834,995 ------------ 190,566,551 RESTAURANTS (3.3%) 195,600 Apple South, Inc. 2,982,900 1,199,500 Applebee's International, Inc. 18,292,375 104,211 Bertucci's Inc. (b) 950,925 492,255 Brinker International, Inc. (b) 11,014,206 1,909,980 Buffets, Inc. (b) 32,589,034 357,500 Hometown Buffet, Inc. 5,005,000 1,600,000 J.D. Wetherspoon PLC 9,128,640 596,958 McDonald's Corp. 16,192,486 1,002,165 Outback Steakhouse, Inc. (b) 25,304,666 169,370 Sonic, Inc. (b) 3,091,003 800,200 Taco Cabana, Inc. (b) 10,602,650 ------------ 135,153,885 MEDICAL EQUIPMENT AND SUPPLIES (2.6%) 147,643 Ballard Medical Products Co. 1,273,421 1,037,820 Boston Scientific Corp. 14,140,297 530,920 Haemonetics Corp. 7,963,800 181,360 Johnson & Johnson 8,523,920 498,780 Medtronic, Inc. 44,453,767 100,000 Sci-Med Life Systems, Inc. (b) 3,037,500 195,690 Sofamor/Danek Group, Inc. 3,179,963 768,890 Stryker Corp. 24,027,813 ------------ 106,600,481 FINANCE (2.5%) 215,200 Beneficial Corp. 8,554,200 203,600 Dean Witter, Discover & Co. 8,169,450 278,800 Federal Home Loan Mtge. Corp. 16,588,600 202,157 Federal National Mortgage Association 17,537,120 334,800 Financial Federal Corp. (b) 5,314,950 919,614 MBNA Corp. (b) 21,151,122 250,200 Morgan (J.P.) & Co., Inc. 15,762,600 244,600 Student Loan Marketing Assn. 8,530,425 ------------ 101,608,467
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COMMON STOCKS NUMBER OF SHARES VALUE AEROSPACE (2.3%) 1,922,730 FlightSafety International, Inc. $ 69,698,963 586,900 GenCorp Inc. 7,409,613 280,000 Textron, Inc. 14,910,000 ------------ 92,018,576 BROADCASTING (2.2%) 486,000 Clear Channel Communications, Inc. (b) 22,477,500 1,409,700 Infinity Broadcasting Corp. Class A (b) 40,705,087 538,900 Renaissance Communications Corp. 12,664,150 1,841,400 Westwood One, Inc. (b) 15,191,550 ------------ 91,038,287 SEMICONDUCTORS (2.1%) 264,900 Intel Corp. 15,695,325 479,546 Linear Technology Corp. 19,181,840 779,350 Maxim Integrated Products Inc. (b) 37,603,637 100,000 Texas Instruments, Inc. 7,862,500 177,145 Zilog Inc. (b) 4,960,060 ------------ 85,303,362 LODGING (1.9%) 1,711,100 Hospitality Franchise System, Inc. 45,771,925 636,300 La Quinta Inns, Inc. 18,134,550 422,980 Promus Cos., Inc. (b) 12,266,420 ------------ 76,172,895 PHARMACEUTICALS (1.9%) 253,090 Abbott Laboratories 7,118,156 523,800 Astra AB 11,405,431 147,611 Genentech Inc. 7,417,453 241,420 Genzyme Corp. (b) 6,971,003 255,000 ICN Pharmaceuticals, Inc. 2,326,875 458,500 Pfizer, Inc. 28,427,000 202,943 SPI Pharmaceuticals Inc. 3,830,549 280,100 Upjohn Co. 8,403,000 ------------ 75,899,467 SPECIALTY CONSUMER PRODUCTS (1.7%) 664,652 Department 56, Inc. 21,518,108 392,360 Fastenal Co. 14,223,050 440,100 Harcourt General, Inc. 15,788,587 457,520 Luxottica Group ADS (c) 15,956,010 ------------ 67,485,755 COMPUTER SERVICES (1.6%) 371,500 America Online, Inc. (b) 20,664,687 972,200 First Data Corp. 43,505,950 ------------ 64,170,637 PUBLISHING (1.5%) 869,260 Marvel Entertainment Group, Inc. 15,755,337 700,000 Reuters Holdings PLC ADR (c) 30,187,500 259,430 Wolters Kluwer 16,557,186 ------------ 62,500,023
16 17
COMMON STOCKS NUMBER OF SHARES VALUE OIL AND GAS (1.5%) 299,800 Associated Natural Gas Corp. $ 9,143,900 180,000 Burlington Resources Inc. 7,042,500 130,000 Exxon Corp. 7,735,000 100,000 Mobil Corp. 8,387,500 510,000 Production Operators Corp. 12,495,000 147,200 Royal Dutch Petroleum Co. ADR (c) 16,633,600 ------------ 61,437,500 ELECTRONICS AND ELECTRICAL EQUIPMENT (1.4%) 480,000 Baldor Electric Co. 11,640,000 199,900 Level One Communications, Inc. 3,998,000 180,000 Motorola, Inc. 9,540,000 480,245 Stratacom, Inc. 14,767,534 264,100 Tektronix, Inc. 8,286,137 195,600 Xilinx 7,335,000 ------------ 55,566,671 RECREATION (1.2%) 356,505 Blockbuster Entertainment Corp. 9,269,130 255,000 Boomtown, Inc. (b) 4,143,750 492,298 Disney (Walt) Productions Inc. 20,922,665 407,630 Mirage Resorts, Inc. (b) 7,490,201 399,500 Rio Hotel & Casino, Inc. 5,193,500 ------------ 47,019,246 PHARMACEUTICALS AND BIOTECHNOLOGY (1.1%) 611,041 Biogen, Inc. 26,580,284 537,470 Elan Corp. PLC ADR (c) 18,341,164 ------------ 44,921,448 BANKS (1.0%) 290,000 Bank of Boston Corp. 7,648,750 258,700 Comerica Inc. 7,696,325 210,600 First Bank Systems, Inc. 7,686,900 170,000 First Fidelity Bancorp (New Jersey) 7,947,500 300,000 National City Corp. 8,062,500 ------------ 39,041,975 CHEMICALS (1.0%) 160,000 FMC Corp. (b) 9,400,000 280,000 Great Lakes Chemical Corp. 16,660,000 374,483 Schulman (A.), Inc. 10,111,041 75,215 Sigma Aldrich Corp. 2,350,469 ------------ 38,521,510 HEALTH CARE INFORMATION SYSTEMS (0.8%) 1,141,660 HBO & Co. 32,537,310 AUTOMOTIVE (0.8%) 300,000 General Motors Corp. 15,412,500 508,700 MascoTech, Inc. 7,121,800 220,000 Snap-On Tools Corp. 8,057,500 ------------ 30,591,800
17 18
COMMON STOCKS NUMBER OF SHARES VALUE HMOS (0.7%) 600,940 Healthsource, Inc. $ 16,976,555 323,300 Mid Atlantic Medical Services, Inc. 13,416,950 ------------ 30,393,505 HEALTH CARE INFORMATION SERVICES (0.7%) 489,110 Oxford Health Plans Inc. (b) 28,612,935 FOOD AND BEVERAGES (0.6%) 1,400,000 Food Lion, Inc. Class A 8,312,500 3,451,310 Iceland Group 8,195,826 440,000 Pet, Inc. 8,195,000 ------------ 24,703,326 CELLULAR COMMUNICATIONS (0.6%) 937,033 Airtouch Communications, Inc. 24,362,857 CONGLOMERATES (0.5%) 807,020 Loewen Group, Inc. 19,671,113 TOBACCO (0.4%) 588,600 UST Inc. 16,995,825 HOUSEHOLD PRODUCTS (0.4%) 360,000 Dial Corp. (The) 7,425,000 220,000 Premark International, Inc. 9,212,500 ------------ 16,637,500 STEEL (0.4%) 804,810 Worthington Industries, Inc. 16,498,605 TELEPHONE UTILITIES (0.4%) 299,800 ALLTEL Corp. 8,094,600 190,000 Southwestern Bell Corp. 7,980,000 ------------ 16,074,600 OIL SERVICES (0.4%) 249,000 Halliburton Co. 8,466,000 127,200 Schlumberger Ltd. 7,504,800 ------------ 15,970,800 GAS (0.3%) 575,050 Western Gas Resources, Inc. 13,010,506 COMPUTER PERIPHERALS (0.3%) 763,500 American Power Conversion Corp. 12,597,750 COMPUTERS (0.2%) 225,200 Compaq Computer Corp. 7,121,950 195,700 EMC Corp. (b) 2,911,038 ------------ 10,032,988 RAILROADS (0.2%) 140,000 Union Pacific Corp. 8,260,000 ALCOHOLIC BEVERAGES (0.2%) 257,000 Seagram Co. Ltd. 7,902,750
18 19
COMMON STOCKS NUMBER OF SHARES VALUE Consumer Products (0.2%) 215,200 Walgreen Co. $ 7,881,700 Transportation (0.2%) 111,800 Federal Express Corp. 7,434,700 Containers (0.2%) 619,670 Owens-Illinois Inc. (b) 6,583,994 Nursing Homes (0.1%) 1,168,200 Takare PLC 4,053,070 --------------- Total Common Stocks (cost $3,091,480,311) $ 3,603,483,132 CONVERTIBLE PREFERRED STOCKS (1.4%)(a) NUMBER OF SHARES VALUE 880,900 Cellular Communications, Inc. $0.01 cv. pfd. $ 45,916,913 170,190 Equitable Cos. $3.00 cv. pfd. (d) 8,849,880 --------------- Total Convertible Preferred Stocks (cost $34,686,066) $ 54,766,793 PREFERRED STOCKS (.3%)(a) (cost $12,882,058) NUMBER OF SHARES VALUE 12,283 Hornbach Preferred $ 11,825,495 WARRANTS (-%)(a) (cost $ --) NUMBER OF EXPIRATION WARRANTS DATE VALUE 10,673 Jan Bell Marketing, Inc. 12/16/98 $ 672
SHORT-TERM INVESTMENTS (8.4%)(a) PRINCIPAL AMOUNT VALUE $ 20,000,000 Bellsouth Telecommunication Inc. 4.28s, August 8, 1994 $ 19,983,355 13,000,000 CS First Boston Group Inc. 4.25s, August 4, 1994 12,995,396 42,600,000 Corporate Asset Funding Co. Inc. 4.22s to 4.35, with various due dates to August 23, 1994 42,536,236 10,000,000 Federal Farm Credit Banks 4.35s, August 15, 1994 9,983,083 44,882,000 Federal Home Loan Mortgage Corp. 4.30s to 4.35s, with various due dates to September 16, 1994 44,669,484 14,000,000 Federal National Mortgage Association 4.33s, September 1, 1994 13,947,799 35,000,000 Goldman Sachs Group 4.30s, August 15, 1994 34,941,472 20,000,000 Household Finance Corp. 4.50s, August 31, 1994 19,925,000 60,000,000 IBM Credit Corp. 4.25s to 4.40s, with various due dates to August 18, 1994 59,930,584 40,000,000 Merrill Lynch & Co. Inc. 4.25s, August 3, 1994 39,990,557 43,086,000 Interest in $530,000,000 joint repurchase agreement dated July 29, 1994 with Bankers Trust Co. due August 1, 1994 with respect to various U.S. Treasury obligations -- maturity value of $43,101,080 for an effective yield of 4.20%. 43,101,080 -------------- TOTAL SHORT-TERM INVESTMENTS (cost $342,004,046) $ 342,004,046 -------------- TOTAL INVESTMENTS (cost $3,481,052,481) (e) $4,012,080,138 --------------
19 20 NOTES (a) Percentages indicated are based on total net assets of $4,045,048,716, which correspond to a net asset value per class A, class B and class Y share of $11.19, $10.97 and $11.22, respectively. (b) Non-income-producing security. (c) Securities whose value is determined or significantly influenced by trading on exchanges not located in the United States or Canada. ADR or ADS after the name of a foreign security stands for American Depository Receipt and American Depository Shares, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. (d) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration normally to qualified institutional buyers. At July 31, 1994, this security was valued at $8,849,88 0 or 0.2% of net assets. (e) The aggregate identified cost for federal income tax purposes is $3,486,268,563 resulting in gross unrealized appreciation and depreciation of $685,393,725 and $159,582,150 respectively, or net unrealized appreciation of $525,811,575. The accompanying notes are an integral part of these financial statements. 20 21 STATEMENT OF ASSETS AND LIABILITIES July 31, 1994 ASSETS Investments in securities, at value (identified cost $3,481,052,481) (Note 1) $4,012,080,138 Cash 3,034 Dividends, interest and other receivables 1,661,693 Receivable for shares of the fund sold 22,223,676 Receivable for securities sold 59,311,793 -------------- Total assets 4,095,280,334 LIABILITIES Payable for securities purchased 36,895,618 Payable for shares of the fund repurchased 2,714,967 Payable for compensation of Manager (Note 2) 5,306,549 Payable for investor servicing and custodian fees (Note 2) 2,783,650 Payable for administrative services (Note 2) 18,052 Payable for distribution fees (Note 2) 1,382,412 Other accrued expenses 1,130,370 Total liabilities 50,231,618 -------------- Net assets $4,045,048,716 REPRESENTED BY Paid-in capital (Notes 1, 4 and 5) $3,368,664,805 Accumulated net realized gain on investment transactions (Notes 1 and 5) 145,356,254 Net unrealized appreciation of investments 531,027,657 -------------- Total - Representing net assets applicable to capital shares outstanding $4,045,048,716 -------------- COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE Net asset value and redemption price of class A shares ($3,051,878,360 divided by 272,772,618 shares) $11.19 Offering price of class A shares (100/94.25 of $11.19)* $11.87 Net asset value, offering price and redemption price of class B shares ($911,068,632 divided by 83,057,506 shares) $10.97 Net asset value, offering price and redemption price of class Y shares ($82,101,724 divided by 7,319,977 shares) $11.22 * 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. 21 22 STATEMENT OF OPERATIONS Year ended July 31, 1994 Investment income: Dividends (net of foreign tax of $484,964) $ 27,020,535 Interest 5,660,918 ------------- Total investment income 32,681,453 ============= Expenses: Compensation of Manager (Note 2) 19,355,624 Investor servicing and custodian fees (Note 2) 8,560,460 Compensation of Trustees (Note 2) 89,945 Distribution fees -- class A (Note 2) 7,100,587 Distribution fees -- class B (Note 2) 6,695,183 Reports to shareholders 385,218 Auditing 37,500 Legal 54,272 Postage 941,829 Administrative services (Note 2) 58,585 Registration fees 347,251 Other 156,855 ------------- TOTAL EXPENSES 43,783,309 ============= NET INVESTMENT LOSS (11,101,856) ============= Net realized gain on investments (Notes 1 and 3) 197,390,941 Net unrealized depreciation of investments during the year (66,870,273) ------------- NET GAIN ON INVESTMENTS 130,520,668 ============= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 119,418,812 ============= The accompanying notes are an integral part of these financial statements.
22 23 STATEMENT OF CHANGES OF NET ASSETS
INCREASE IN NET ASSETS YEAR ENDED JULY 31 ---------------------------------- 1994 1993 ------------ ------------- Operations: Net investment loss $ (11,101,856) $ (4,392,957) Net realized gain on investments 197,390,941 112,163,843 Net realized loss on options -- (1,185,231) Net unrealized appreciation (depreciation) of investments (66,870,273) 269,280,865 Net increase in net assets resulting from operations 119,418,812 375,866,520 Distributions to shareholders from: Net investment income -- (170,569) Net realized gain on investments: Class A (104,366,667) (90,141,397) Class B (22,949,719) (6,173,738) Increase from capital share transactions (Note 4) 1,241,253,150 940,692,692 -------------- -------------- TOTAL INCREASE IN NET ASSETS 1,233,355,576 1,220,073,508 Beginning of year 2,811,693,140 1,591,619,632 End of year (including distribution in excess of net investment income $0 and $(318,367), respectively) $4,045,048,716 $2,811,693,140 ============== ============== The accompanying notes are an integral part of these financial statements.
23 24 FINANCIAL HIGHLIGHTS* (For a share outstanding throughout the period)
April 1, 1994 April 27, 1992 (commencement of (commencement of operations) operations)** to July 31 Year ended July 31 to July 31 ---------------- -------------------------------------------- 1994 1994 1993 1992 ---------------- ------- ------- ---------------- Class Y Class B Net Asset Value, Beginning of Period $11.24 $10.89 $9.63 $9.34 Investment Operations Net Investment Income (Loss) -- (.05) (.03) (.04) Net Realized and Unrealized Gain (Loss) on Investments (.02) .59 1.81 .33 Total from Investment Operations (.02) .54 1.78 .29 Less Distributions From: Net Investment Income -- -- -- -- Net Realized Gain on Investments -- (.46) (.52) -- Total Distributions -- (.46) (.52) -- Net Asset Value, End of Period $11.22 $10.97 $10.89 $9.63 Total Investment Return at Net Asset Value (%) (b) (0.18)(c) 4.71 18.79 3.77 NET ASSETS, END OF PERIOD (IN THOUSANDS) $82,102 $911,069 $408,361 $42,492 ------- -------- -------- ------- Ratio of Interest Expense to Average Net Assets (%) -- -- -- -- Ratio of Other Operating Expenses to Average Net Assets (%) .31(c) 1.84 1.87 .63(c) Ratio of Total Expenses to Average Net Assets (%) .31(c) 1.84 1.87 .63(c) Ratio of Net Investment Income (Loss) to Average Net Assets (%) (.05)(c) (.91) (.91) (.39)(c) Portfolio Turnover (%) 57.74 57.74 64.62 44.17
See page 27 for notes to Financial Highlights. 24 25
Year ended July 31 ---------------------------------------- 1994 1993 1992 ------- ------- ------ Class A Net Asset Value, Beginning of Period $11.02 $9.67 $9.00 Investment Operations Net Investment Income (Loss) (.02) (.02) .02 Net Realized and Unrealized Gain (Loss) on Investments .65 1.89 1.16 Total from Investment Operations .63 1.87 1.18 Less Distributions From: Net Investment Income -- -- (.03) Net Realized Gain on Investments (.46) (.52) (.48) Total Distributions (.46) (.52) (.51) Net Asset Value, End of Period $11.19 $11.02 $9.67 Total Investment Return at Net Asset Value (%) (b) 5.49 19.69 13.39 NET ASSETS, END OF PERIOD (IN THOUSANDS) $3,051,878 $2,403,332 $1,549,128 ---------- ---------- ---------- Ratio of Interest Expense to Average Net Assets (%) -- -- -- Ratio of Other Operating Expenses to Average Net Assets (%) 1.10 1.12 1.20 Ratio of Total Expenses to Average Net Assets (%) 1.10 1.12 1.20 Ratio of Net Investment Income (Loss) to Average Net Assets (%) (.18) (.14) .27 Portfolio Turnover (%) 57.74 64.62 44.17
25 26 FINANCIAL HIGHLIGHTS* (Continued)
Year ended July 31 ---------------------------------- 1991 1990 1989 ---- ---- ---- Net Asset Value, Beginning of Period $7.98 $8.51 $6.56 Investment Operations Net Investment Income (Loss) .02 .09 .08 Net Realized and Unrealized Gain (Loss) on Investments 1.70 .28 2.02 Total from Investment Operations 1.72 .37 2.10 Less Distributions From: Net Investment Income (.07) (.10) (.02) Net Realized Gain on Investments (.63) (.80) (.13) Total Distributions (.70) (.90) (.15) Net Asset Value, End of Period $9.00 $7.98 $8.51 Total Investment Return at Net Asset Value (%) (b) 24.04 4.80 32.59 NET ASSETS, END OF PERIOD (IN THOUSANDS) $1,016,539 $755,550 $697,248 ---------- -------- -------- Ratio of Interest Expense to Average Net Assets (%) -- -- -- Ratio of Other Operating Expenses to Average Net Assets (%) 1.10 .97 1.00 Ratio of Total Expenses to Average Net Assets (%) 1.10 .97 1.00 Ratio of Net Investment Income (Loss) to Average Net Assets (%) .29 1.10 1.04 Portfolio Turnover (%) 49.43 61.71 70.87
26 27
Year ended July 31 ----------------------------------------------- 1988 1987 1986 1985 ---- ---- ---- ---- Class A Net Asset Value, Beginning of Period $8.71 $7.43 $6.05 $4.77 Investment Operations Net Investment Income (Loss) .04(a) .02 .04 .05 Net Realized and Unrealized Gain (Loss) on Investments (.84) 2.22 1.71 1.64 Total from Investment Operations (.80) 2.24 1.75 1.69 Less Distributions From: Net Investment Income (.03) (.05) (.05) (.05) Net Realized Gain on Investments (1.32) (.91) (.32) (.36) Total Distributions (1.35) (.96) (.37) (.41) Net Asset Value, End of Period $6.56 $8.71 $7.43 $6.05 Total Investment Return at Net Asset Value (%) (b) (10.26) 35.71 31.33 37.12 NET ASSETS, END OF PERIOD (IN THOUSANDS) $549,799 $610,966 $378,532 $282,868 -------- -------- -------- -------- Ratio of Interest Expense to Average Net Assets (%) -- .19 .01 .06 Ratio of Other Operating Expenses to Average Net Assets (%) 1.05(a) 1.01 .88 .96 Ratio of Total Expenses to Average Net Assets (%) 1.05(a) 1.20 .89 1.02 Ratio of Net Investment Income (Loss) to Average Net Assets (%) .68(a) .41 .72 .99 Portfolio Turnover (%) 65.75 79.10 75.57 60.29 *Table has been restated to reflect a 3-for-1 share split declared by the Fund to shareholders of record on October 27, 1989. **Per share net investment income has been determined on the basis of weighted average number of shares outstanding during the period. (a)Reflects an expense limitation during the year ended July 31, 1988. As a result of such limitation, expenses reflect a reduction of less than $0.01 per share. (b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c)Not annualized.
27 28 NOTES TO FINANCIAL STATEMENTS July 31, 1994 NOTE 1 SIGNIFICANT ACCOUNTING POLICIES The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund invests primarily in common stocks of small to medium-sized companies that Putnam Investment Management, Inc. ("Putnam Management") the funds manager, a wholly owned subsidiary of Putnam Investment Inc. believes have potential for capital appreciation significantly greater than that of the market averages. The fund offers class A, class B, and class Y shares. The fund commenced its public offering of class Y shares on April 1, 1994. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end sales charge, but pay a higher ongoing distribution fee than class A shares, and may be subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class Y shares, which do not pay a front end or contingent deferred sales charge, are generally subject to the same expenses as class A shares and class B shares, but do not bear a distribution fee. Class Y shares are sold only to defined contribution plans with an initial investment of at least $250 million in a combination of Putnam funds and other investments managed by Putnam. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class including the distribution fees applicable to such class. Each class votes only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is deter mined using the last reported sale price, or, if no sales are reported-as in the case of some securities traded over the counter-the last reported bid price, except that certain U.S. government obligations are stated at the mean between the bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost which approximates market, and other investments are stated at fair value following procedures approved by the Trustees. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account, along with the cash of other registered investment companies managed by Putnam Management and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. 28 29 C) Repurchase agreements The fund, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The fund's Manager is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. Foreign currency-denominated receivables and payables are "marked-to-market" using the current exchange rate. The fluctuation between the original exchange rate and the current exchange rate is recorded as unrealized gain or loss. Upon receipt of payment, the Funds realize a gain or loss on foreign currency amounting to the difference between the original value and the ending value of the receivable or payable. E) Option accounting principles When the fund writes a call or put option, an amount equal to the premium received by the fund is included in the fund's "Statement of Assets and Liabilities" as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of an option is the last sale price or, in the absence of a sale, the last offering price. If an option expires on its stipulated expiration date, or if the fund enters into a closing purchase transaction, the fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written call option is exercised, the fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security which the fund purchases upon exercise of the option. The premium paid by the fund for the purchase of a call or put option is included in the fund's "Statement of Assets and Liabilities" as an investment and subsequently "marked-to-market" to reflect the current market value of the option. If an option which the fund has purchased expires on the stipulated expiration date, the fund realizes a loss in the amount of the cost of the option. If the fund enters into a closing sale transaction, the fund realizes a gain or loss, depending on whether proceeds from the closing sale transaction are greater or less than the cost of the option. If the fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium originally paid. Stock index options are similar to options on individual securities in that the purchaser of an index option acquires the right to buy, and the writer undertakes the obligation to sell, an index at a stated exercise price during the term of the option. Instead of giving the right to take or make actual delivery of securities, the holder of a stock index option has the right to receive a cash "exercise settlement 29 30 account." This amount is equal to the amount by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of the exercise, multiplied by a fixed "index multiplier." The fund writes options on stock indices only to the extent that it holds in its portfolio underlying securities, which, in the judgment of Putnam Management, correlate closely with the stock index. F) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held and for excise tax on income and capital gains. G) Distributions to shareholders Distributions to shareholders are recorded by the fund on the ex-dividend date. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. The differences include treatment of net investment losses and losses on wash sales transactions. reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended July 31, 1994, the fund reclassified $11,101,856 to reduce accumulated net investment losses, $28,746 to increase accumulated net realized gain and $11,130,602 to decrease paid-in capital. NOTE 2 MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS Compensation of Putnam Management, for management and investment advisory services, is paid quarterly based on the average net assets of the fund for the quarter. Such fee is based on the following annual rates: 0.70% of the first $500 million of average net assets, 0.60% of the next $500 million, 0.55% of the next $500 million, and 0.50% of any amount over $1.5 billion, subject to reduction in any year to the extent that expenses (exclusive of brokerage, interest, taxes, distribution fees, credits allowed by PFTC and extraordinary expenses) of the fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million and 1.5% of any amount over $100 million, and by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of the Manager on the fund's portfolio transactions. The fund also reimburses the Manager for the com pensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. For the year ended July 31, 1994, the fund paid $58,585 for these services. Trustees of the fund receive an annual Trustee's fee of $5,650, and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of the Manager and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided to the fund by Putnam Investor Services, a division of PFTC. 30 31 Fees paid for these investor servicing and custodial functions for the year ended July 31, 1994 amounted to $8,560,460. Investor servicing and custodian fees reported in the Statement of operations for the year ended July 31, 1994 have been reduced by credits allowed by PFTC. The Fund has adopted a distribution plan with respect to its Class A shares (the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services provided and expenses incurred by it in distributing Class A shares. The Trustees have approved payment by the Fund to Putnam Mutual Funds Corp. at an annual rate of 0.25% of the Fund's average net assets attributable to Class A shares. For the year ended July 31, 1994, the Fund paid $7,100,587 in distribution fees for Class A shares. During the year ended July 31, 1994, Putnam Mutual Funds Corp., acting as an underwriter, received net commissions of $2,269,747 from the sale of class A shares of the fund. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares purchased as part of an investment of $1 million or more. For the year ended July 1993, Putnam Mutual Funds Corp., acting as underwriter, received $20,178 on class A redemptions. The fund has adopted a distribution plan with respect to its class B shares (the "class B Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the class B Plan is to compensate Putnam Mutual Funds Corp. for services provided and expenses incurred by it in distributing class B shares. The class B Plan provides for payments by the fund to Putnam Mutual Funds Corp. at an annual rate of up to 1.00% of the fund's average net assets attributable to class B shares. For the year ended July 31, 1994, the fund paid Putnam Mutual Funds Corp. distribution fees of $6,695,183 for class B shares. Putnam Mutual Funds Corp. also receives the proceeds on the contingent deferred sales charges on its class B share redemptions within six years of purchase. The charge is based on declining rates, which begin at 5.00% of the net asset value of the redeemed shares. For the year ended July 31, 1994, Putnam Mutual Funds Corp., acting as an underwriter, received $961,176 in contingent deferred sales charges from redemptions. NOTE 3 PURCHASES AND SALES OF SECURITIES During the year ended July 31, 1994, purchases and sales of investment securities other than short-term investments aggregated $2,962,865,871 and $1,930,831,230 respectively. There were no purchases or sales of U.S. government obligations. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. NOTE 4 CAPITAL SHARES At July 31, 1994, there was an unlimited number of shares of beneficial interest authorized, divided into Class A, Class B and Class Y capital shares. Transactions in capital shares were as follows: 31 32
YEAR ENDED JULY 31, 1994 ---------------------------- CLASS A SHARES AMOUNT - ------- ------ ------ Shares sold 120,147,917 $1,398,407,256 Shares issued in connection with reinvestment of distributions 8,467,321 99,321,439 ----------- -------------- 128,615,238 1,497,728,695 Shares repurchased 73,942,159 860,942,051 ----------- -------------- Net increase 54,673,079 $ 636,786,644 =========== ==============
YEAR ENDED JULY 31, 1993 ---------------------------- CLASS A SHARES AMOUNT - ------- ------ ------ Shares sold 103,905,106 $1,074,340,482 Shares issued in connection with reinvestment of distributions 7,987,904 82,835,225 ----------- -------------- 111,893,010 1,157,175,707 Shares repurchased 54,026,950 555,944,066 ----------- -------------- Net increase 57,866,060 $ 601,231,641 =========== ==============
YEAR ENDED JULY 31, 1994 ---------------------------- CLASS B SHARES AMOUNT - ------- ------ ------ Shares sold 54,297,802 $ 622,475,746 Shares issued in connection with reinvestment of distributions 1,839,090 21,241,295 ----------- -------------- 56,136,892 643,717,041 Shares repurchased 10,567,655 121,046,605 ----------- -------------- Net increase 45,569,237 $ 522,670,436 =========== ==============
YEAR ENDED JULY 31, 1993 ---------------------------- CLASS B SHARES AMOUNT - ------- ------ ------ Shares sold 36,505,966 $ 374,601,722 Shares issued in connection with reinvestment of distributions 548,375 5,648,264 ----------- -------------- 37,054,341 380,249,986 Shares repurchased 3,976,467 40,788,935 ----------- -------------- Net increase 33,077,874 $ 339,461,051 =========== ==============
YEAR ENDED JULY 31, 1994 ---------------------------- CLASS Y SHARES AMOUNT - ------- ------ ------ Shares sold 7,360,249 $ 82,242,284 Shares issued in connection with reinvestment of distributions -- -- ----------- -------------- 7,360,249 82,242,284 Shares repurchased 40,272 446,214 ----------- -------------- Net increase 7,319,977 $ 81,796,070 =========== ==============
NOTE 5 Effective August 1, 1993, the fund adopted the provisions of Statement of Position 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain and Return of Capital Distributions by Investment Companies" (SOP). The purpose of this SOP is to report the undistributed net investment income (loss) and accumulated net realized gain (loss) accounts in such a manner as to approximate amounts available for future tax distributions (or to offset future taxable realized capital gains), and to achieve uniformity in the presentation of distributions by investment companies. As a result of the SOP, the fund has reclassified $318,367 to decrease distributions in excess of net investment income and $4,470,089 to increase accumulated net realized gain and $4,788,456 to decrease paid-in capital. These reclassifications represent the cumulative amounts necessary to report these balances through July 31, 1993. These reclassifications, which have no impact on the total net asset value of the fund are primarily attributable to non-taxable dividend income, market discount and organization expenses, which are treated differently in the computation of distributable income and capital gains under federal income tax rules and regulation versus generally accepted accounting principles. 32 33 FEDERAL TAX INFORMATION Of the total distributions made, $.46 was classified as a long-term capital gain, whether received in cash or additional Fund shares, and regardless of how long you had owned your shares before the distribution was made. The Form 1099 you receive in January 1995 will show you the tax status of all distributions paid to your account in calendar 1994. If you're a shareholder in an IRA or other tax-sheltered retirement plan, this statement is for information only and will serve as a record of distributions reinvested in your account during the fiscal year. Money invested in these plans generally is not subject to federal income tax until you withdraw it. As required by law, your Fund reports to the Internal Revenue Service on a calendar year basis the amount of distributions paid to each shareholder.
Dates Investment Long-Term Total Paid Income Capital Gain Paid - --------------------------------------------------------------------------------------------- Dec. 30, 1993 - Class A -- $.456 $.456 Dec. 30, 1993 - Class B -- $.456 $.456
33 34 OUR COMMITMENT TO QUALITY SERVICE - - CHOOSE AWARD-WINNING SERVICE. Putnam Investor Services has won the DALBAR Quality Tested Service Seal every year since the award's 1990 inception. DALBAR, an independent research firm, ran more than 10,000 tests of 38 shareholder service components. In every category, Putnam outperformed the industry standard. - - HELP YOUR INVESTMENT GROW. Set up a systematic program for investing with as little as $25 a month from a Putnam fund or from your own checking or savings account.* - - SWITCH FUNDS EASILY. You can move money from one account to another with the same class of shares without a service charge. (This privilege is subject to change or termination.) - - ACCESS YOUR MONEY QUICKLY. You can get checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than their original cost. For details about any of these or other services, contact your financial advisor or call the toll-free number shown below and speak with a helpful Putnam representative. - - To make an additional investment in this or any other Putnam fund, contact your financial advisor or call our toll-free number: 1-800-225-1581. * Regular investing, of course, does not guarantee a profit or protect against a loss in a declining market. Investors should consider their ability to continue purchasing shares during periods of low price levels. 34 35 FUND INFORMATION INVESTMENT MANAGER OFFICERS Putnam Investment Management, Inc. George Putnam One Post Office Square President Boston, MA 02109 Charles E. Porter Executive Vice President MARKETING SERVICES Patricia C. Flaherty Putnam Mutual Funds Corp. Senior Vice President One Post Office Square Lawrence J. Lasser Boston, MA 02109 Vice President Gordon H. Silver CUSTODIAN Vice President Putnam Fiduciary Trust Company Peter Carman Vice President LEGAL COUNSEL Matthew A. Weatherbie Ropes & Gray Vice President and Fund Manager Charles H. Swanberg INDEPENDENT ACCOUNTANTS Vice President and Fund Manager Price Waterhouse LLP William N. Shiebler Vice President TRUSTEES John R. Verani George Putnam, Chairman Vice President William Pounds, Vice Chairman Paul M. O'Neil Jameson Adkins Baxter Vice President Hans H. Estin John D. Hughes John A. Hill Vice President and Treasurer Elizabeth T. Kennan Beverly Marcus Lawrence J. Lasser Clerk and Assistant Treasurer Donald S. Perkins Robert E. Patterson This report is for the information of George Putnam, III shareholders of Putnam Voyager A.J.C. Smith Fund. It may also be used as W. Nicholas Thorndike sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary.
35 36 PUTNAM INVESTMENTS _________________ The Putnam Funds Bulk Rate One Post Office Square U.S. Postage Boston, Massachusetts 02109 PAID PutnamInvestments _________________ 37 PUTNAM INVESTMENTS - ------------------------------------------------------------------------------- Putnam Voyager Fund Supplement to Annual Report dated July 31, 1994. The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to defined contribution plans investing $250 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A and B shares, which are discussed more extensively in the annual report. FISCAL 1994 RESULTS AT A GLANCE - ----------------------------------------------------------------------------------------------------
Standard & Poor's Total return Class Y 500[R] Index 4/4/94 (commencement of offering of class Y shares) to 7/31/94 (change in value during period plus reinvested distributions) -0.18% +5.21% 4/4/94 to 6/30/94 most current calendar quarter -3.20% +2.00% - ---------------------------------------------------------------------------------------------------- Share Value NAV 4/4/94 $11.24 7/31/94 $11.22 - ---------------------------------------------------------------------------------------------------- The fund's distributions are paid annually in December.
Please note that past performance does not indicate future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full Report for information on comparative benchmarks. If you have questions please consult your fund prospectus or call Putnam toll free 1-800-752-9894. 14530 DC-34 9/94 -----END PRIVACY-ENHANCED MESSAGE-----