<PAGE> 1
PUTNAM
DIVERSIFIED
EQUITY
TRUST
SEMIANNUAL REPORT
August 31, 1994
[LOGO]
BOSTON - LONDON - TOKYO
<PAGE> 2
PERFORMANCE HIGHLIGHTS
- - For the two months ended August 31, 1994, the fund's class A shares and
class B shares provided a competitive return to the Standard & Poor's 500(R)
and outperformed the Morgan Stanley Capital International Europe, Australia,
and Far East Index.
- - One of the main benefits of this fund, because of its trisector investment
strategy, is that it has the potential to provide lower volatility than an
investment in either domestic growth, domestic value, or international
stocks alone -- as well as the potential for a higher return than an
all-U.S. stock portfolio.
- - Performance should always be considered in light of a fund's investment
strategy. Putnam Diversified Equity Trust is designed for investors seeking
capital appreciation through a diversified portfolio consisting primarily of
domestic growth, domestic value, and international stocks.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FISCAL 1995 RESULTS AT A GLANCE
- -------------------------------------------------------------------------------
Class A Class B
Total return: NAV POP NAV CDSC
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(change in value during
period plus reinvested
distributions)
Life of fund (since 7/1/94) 5.53% 0.79% 5.53% 0.53%
- -------------------------------------------------------------------------------
Share Value: NAV POP NAV
- -------------------------------------------------------------------------------
7/1/94 $8.50 $8.90 $8.50
- -------------------------------------------------------------------------------
8/31/94 8.97 9.39 8.97
</TABLE>
Performance data represent past results and will differ for
each class of shares. For performance over longer periods, see pages 8 and 9.
POP assumes 4.50% maximum sales charge. CDSC assumes 5% maximum contingent
deferred sales charge.
2
<PAGE> 3
FROM THE CHAIRMAN
[Photograph of George Putnam]
C. Karsh, Ottawa
DEAR SHAREHOLDER:
BY THE TIME YOU RECEIVE THIS REPORT, 1994 WILL BE WELL INTO THE FINAL QUARTER
OF WHAT IS PROVING TO BE ANYTHING BUT A QUIET YEAR ON THE INVESTMENT FRONT. THE
STOCK MARKET HAS BEEN ESPECIALLY RESTIVE DURING THE PAST SEVERAL MONTHS --
PROVIDING PUTNAM DIVERSIFIED EQUITY TRUST WITH SOME ATTRACTIVE INVESTMENT
OPPORTUNITIES DURING ITS FIRST TWO MONTHS OF OPERATION.
CONTINUED VOLATILITY, RATHER THAN A NEW SUSTAINED RISE, IS THE PROBABLE COURSE
FOR STOCKS OVER THE MONTHS IMMEDIATELY AHEAD. THE FED WILL LIKELY CONTINUE ITS
TIGHT REIN ON CREDIT UNTIL IT IS CONVINCED THAT THE ECONOMY'S GROWTH HAS
ACHIEVED A SUSTAINABLE RATE AND INFLATION FEARS HAVE BEEN PUT TO REST.
IN THE REPORT THAT FOLLOWS, FUND MANAGERS DAVID KING, CHARLES SWANBERG, AND JOHN
STORKERSON EXPLAIN HOW AND WHERE THEY INVESTED THE FUND'S INITIAL ASSETS IN
THIS CHALLENGING MARKET AND WHAT THEY SEE IN STORE FOR THE PERIOD AHEAD.
RESPECTFULLY YOURS,
[signature]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
OCTOBER 19, 1994
3
<PAGE> 4
REPORT FROM THE FUND MANAGERS
DAVID L. KING, LEAD MANAGER
JOHN K. STORKERSON
CHARLES H. SWANBERG
Putnam Diversified Equity Trust is off to a promising start. For the two months
ended August 31, 1994, the fund's class A and class B shares provided
attractive returns at net asset value. When reviewing performance, it's
important to keep in mind that investing the millions of dollars that poured
into the fund during its start-up phase posed special challenges. We rose to
those challenges and achieved a return that surpassed the Morgan Stanley
Capital International Europe, Australia, and Far East Index (EAFE) and was only
one and a half percentage points lower than the S&P 500, lending credence to
the fund's trisector investment strategy.
Since January, stock markets at home and abroad have experienced unnerving
bouts of volatility. Many industries encountered significant price rotation;
stocks that had been in favor before no longer performed well, and vice versa.
Because your fund began operations on July 1, 1994, after many stocks had
already experienced price declines, it was in a position to take advantage of
some timely opportunities presented by the types of stocks we were seeking for
its portfolio -- domestic value, domestic growth, and international. The
following is a discussion of how we've initially chosen to allocate the fund's
assets within these three investment sleeves.
- - VALUE: COMPANY-BY-COMPANY SELECTION
The fund's domestic value sleeve is dedicated to those stocks often considered
"bargains" because they are attractively priced in relation to earnings
potential. They may also offer a high dividend yield.
The stock market seems to be in a state of transition with no one sector
standing out as particularly undervalued. Therefore, we have been focusing more
on seeking out individual stock values, looking for select opportunities in
certain industries. We've uncovered multiple opportunities in mainframe
4
<PAGE> 5
computers, electric utilities, and tobacco. One company of particular interest
is International Business Machines (IBM), which appears poised to recapture
some of its fallen glory through corporate downsizing and the introduction of
its new microelectronic technology products.
- - GROWTH: FOUR KEY INDUSTRIES
The domestic growth sleeve emphasizes stocks of companies whose earnings per
share are expected to grow faster than the market average. In this sector,
we've leaned toward the retail, business services, health care, and
telecommunications industries.
TOP PORTFOLIO SECTOR HOLDINGS
TOP THREE VALUE STOCK HOLDINGS
Philip Morris Companies Inc.
Olin Corporation
Union Carbide Corporation
TOP THREE GROWTH STOCK HOLDINGS
Lin Broadcasting Corp.
Federal National Mortgage Association
American Online, Inc.
TOP THREE INTERNATIONAL STOCK HOLDINGS
Veba (Vereinigte Elektrizitaets Bergwerks)
Jungheinrich PR
Sony Corp.
These holdings represent 6.4% of the fund's net assets as of 8/31/94. Portfolio
holdings are subject to change.
5
<PAGE> 6
We have emphasized retail because it is an attractive growth area that
represents a large part of the economy. We favor business services because
companies in this sector tend not to be overly sensitive to economic shifts and
have historically shown an ability to withstand a slow-growth environment.
Should the economy slow down in the months ahead, we believe holdings in these
industries will serve the fund well.
We find health care appealing because it is a defensive growth industry --
people will always seek medical attention no matter what the economic
environment, and, in our opinion, the fears about radical reform have abated
for now. Our fourth key industry is telecommunications because it is on the
cutting edge of technology and stocks in this group appear destined for
appreciation, regardless of economic conditions.
Some of our retail choices already have proved fruitful. In light of future
demographic trends and a possible slowing of the economy, we have already begun
to trim back the fund's exposure to this area, redirecting assets toward more
defensive-type growth stocks. Technology companies will receive more emphasis
due to their relative insensitivity to the economic cycle.
We believe Putnam's past success in growth stock investing is due to our
dedication to finding companies that have the potential to grow in any economic
environment. We believe H&R Block which also owns CompuServe Inc., is a good
example of this.
- - INTERNATIONAL: JAPAN, CORE EUROPEAN MARKETS
Stocks issued by companies from countries outside the United States offer
exposure to both established and emerging economies in Europe, the Pacific Rim,
Latin America, and elsewhere overseas where opportunities may exist.
This summer, the relative stability of most foreign stock markets and a
weakened U.S. dollar combined to create a favorable environment for overseas
investments. We've chosen to put an important part of your money to work in
some of the
6
<PAGE> 7
major European markets, such as the United Kingdom, France, and the
Netherlands. On the whole, the Continent is starting to exhibit
stronger-than-anticipated earnings growth, significantly greater than our
original expectations. In our view, this increased corporate profitability has
the potential to remain robust well into 1995 and perhaps even into 1996.
We've also chosen to emphasize the stocks of high-quality companies in Japan.
The country's corporate earnings outlook is positive despite the yen's relative
strength against the dollar, given the ongoing restructurings and profitability
enhancement programs. Sony, a world leader in consumer and industrial
electronics, is just one Japanese company that, in our opinion, is
well-positioned for the future.
Should a setback occur in the Japanese market, we would most likely increase
the fund's exposure -- on a stock-by-stock basis -- rather than reduce the
portfolio position in this region. To protect the value of the Japanese
holdings against the possibility of a stronger dollar, we've partially hedged
the fund's yen exposure.
We're now seeing a bit of a recovery from this spring's correction in some of
the smaller southeast Asian markets whose economies continue to thrive. We're
on the lookout for opportunities to increase the fund's holdings in these
markets, should they encounter future setbacks.
- - OUTLOOK BRIGHT FOR FUND'S TRISECTOR STRATEGY
Your fund's tri-sector strategy -- value, growth, and international -- gives it
the flexibility to take advantage of varying market conditions and
opportunities. Throughout the remainder of fiscal 1995, we will continue taking
full advantage of this flexibility.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings are viewed
favorably as of August 31, 1994, there is no guarantee the fund will continue
to hold these securities in the future.
7
<PAGE> 8
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund#s performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: on a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
<TABLE>
TOTAL RETURN FOR PERIODS ENDED 8/31/94
<CAPTION>
Standard Morgan
Class A Class B & Poor's Stanley
NAV POP NAV CDSC 500 Index EAFE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Life of class
(since 7/1/94) 5.53% 0.79% 5.53% 0.53% 7.03% 3.35%
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
TOTAL RETURN FOR PERIODS ENDED 9/30/94
(most recent calendar quarter)
<CAPTION>
Class A Class B
NAV POP NAV CDSC
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of class
(since 7/1/94) 4.35% -0.34% 4.24% -0.76%
- ---------------------------------------------------------------------------
</TABLE>
The fund began operations on 7/1/94 offering class A and class B shares.
Fund performance data do not take into account any adjustment
for taxes payable on reinvested distributions. Performance data represent past
results and will differ for each class of shares. Investment returns and net
asset value will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost.
8
<PAGE> 9
TERMS AND DEFINITIONS
CLASS A shares are generally subject to an initial sales charge.
CLASS B shares may be subject to a sales charge upon 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 4.50% sales charge.
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. 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.
EUROPE, AUSTRALIA, AND FAR EAST (EAFE) component of the Morgan Stanley Capital
International (MSCI) World Index is an unmanaged list of approximately 1,045
equity securities originating in 18 countries listed on the stock exchanges of
Europe, Australia, and the Far East, with all values expressed in U.S. dollars.
Performance figures reflect changes in market prices and reinvestment of
distributions net of withholding taxes. Because the fund is a managed
portfolio investing in a wide variety of foreign securities, the securities it
owns will not match those in the index.
9
<PAGE> 10
Life cycle investing
As we move through life, our investment needs change. As these needs change, so
does the way we allocate our assets. Here are some basic rules for setting up
and maintaining an investment program and some examples of how assets might be
allocated. However, these illustrations are not intended as investment advice.
- - DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or retirement.
- - EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with longer timelines
and lower for older investors who may depend on their investment for current
income.
- - ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your investable
dollars should be allocated to each investment category.
- - CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam's free exchange privilege, you can adjust your own Putnam
portfolio of funds as your financial needs change - without a service fee.*
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Fund Selector[TM] can help you make your choices.
* Putnam reserves the right to change or terminate the exchange privilege. In
some cases, a sales charge may apply. See prospectus for details.
10
<PAGE> 11
FOUR WAYS TO ALLOCATE ASSETS
SEEKING MAXIMUM GROWTH
<TABLE>
<CAPTION>
Income or
Growth and Income Growth tax-free Income
<S> <C> <C> <C>
Risk tolerance: 30%-40% 40%-50% 5%-20%
Generally
investors with
a higher risk
tolerance (often [pie chart appears here]
in their 20s and
early 30s.)
</TABLE>
SEEKING GROWTH AND SOME INCOME
<TABLE>
<CAPTION>
Income or
Growth and Income Growth tax-free Income
<S> <C> <C> <C>
Risk tolerance: 40%-50% 30%-40% 10%-30%
Generally
investors with a
high to moderate
risk tolerance [pie chart appears here]
(often in their late
30s and early 40s.)
</TABLE>
SEEKING INCOME AND SOME GROWTH WITH PROTECTION AGAINST INFLATION
<TABLE>
<CAPTION>
Income or
Growth and Income Growth tax-free Income
<S> <C> <C> <C>
Risk tolerance: 30%-40% 10%-20% 25%-60%
Generally
investors with a
moderate risk
tolerance [pie chart appears here]
(often in their late
40s and 50s.)
</TABLE>
SEEKING HIGH CURRENT INCOME AND PROTECTION AGAINST INFLATION
<TABLE>
<CAPTION>
Income or
Growth and Income Growth tax-free Income
<S> <C> <C> <C>
Risk tolerance: 20%-30% 5%-10% 40%-70%
Generally
investors with
a moderate to
low risk tolerance [pie chart appears here]
(often over 60
and retired.)
</TABLE>
11
<PAGE> 12
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.
RISK/REWARD
PUTNAM
GROWTH
FUNDS
PUTNAM GROWTH
AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE
INCOME FUNDS
MOST CONSERVATIVE INVESTMENTS
12
<PAGE> 13
<TABLE>
<CAPTION>
PUTNAM TAX-FREE
PUTNAM GROWTH FUNDS INCOME FUNDS
<S> <C>
Asia Pacific Growth Fund Intermediate Tax Exempt Fund
Diversified Equity Trust Municipal Income Fund
Europe Growth Fund Tax Exempt Income Fund
Global Growth Fund Tax-Free High Yield Fund
Health Sciences Trust Tax-Free Insured Fund
Investors Fund
STATE TAX-FREE INCOME FUNDS+:
Natural Resources Fund*
Arizona, California, Florida, Massachusetts,
New Opportunities Fund Michigan, Minnesota, New Jersey, New
York, Ohio, and Pennsylvania
OTC Emerging Growth Fund
LIFESTAGE(SM) FUNDS
Overseas Growth Fund
Putnam Asset Allocation Funds -- three
Vista Fund investment portfolios that spread your
money across a variety of stocks, bonds,
Voyager Fund and money market investments to help
maximize your return and reduce your risk.
PUTNAM GROWTH AND The three portfolios:
INCOME FUNDS
Putnam Asset Allocation:
Convertible Income-Growth Trust Balanced Portfolio
Dividend Growth Putnam Asset Allocation:
Conservative Portfolio
Fund
Putnam Asset Allocation:
Equity Income Fund Growth Portfolio
The George Putnam Fund of Boston MOST CONSERVATIVE
INVESTMENTS++
The Putnam Fund for Growth and Income
PUTNAM MONEY MARKET FUNDS:
Managed Income Trust
Money Market Fund (Sec.)
Utilities Growth and Income Fund California Tax Exempt
Money Market 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 (Sec.) Formerly Putnam Daily Dividend Trust.
Federal Income Trust ** Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be
Global Governmental Income Trust insured, up to certain limits, by federal/state agencies.
Savings accounts may also be insured up to certain
High Yield Advantage Fund limits.
High Yield Trust Please call your financial advisor or Putnam
to obtain a prospectus for any Putnam fund.
Income Fund It contains more complete information,
including charges and expenses. Read it
U.S. Government Income Trust carefully before you invest or send money.
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS OWNED
August 31, 1994 (Unaudited)
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
RETAIL (5.7%)
- -----------------------------------------------------------------------
6,600 Albertsons, Inc. $ 190,575
5,400 Bed Bath & Beyond, Inc. (b) 158,625
10,000 Cycle & Carriage Ltd. (Singapore) 79,349
3,100 Gap, Inc. 133,300
11,200 Gymboree Corp. (b) 285,600
6,200 Heilig-Meyers Co. 166,625
7,300 Home Depot, Inc. (The) 330,325
4,000 Ito-Yokado Co., Ltd (Japan) (c) 211,787
14,400 Kroger Co. 365,400
6,200 Lowes Cos., Inc. 223,975
19,300 Sears Ordinary (United Kingdom) 35,983
6,900 Sysco Corp. 176,813
6,600 Talbots, Inc. (b) 235,125
19,000 Woolworth Corp. 308,750
__________
2,902,232
ELECTRIC UTILITIES (4.6%)
- -----------------------------------------------------------------------
12,200 Entergy Corp. 303,475
5,700 Hidrolectrica del Cantabrico, S.A. (Spain) 172,371
1,000 Hirose Electric Co. Ltd. (Japan) 64,635
10,800 Houston Industries Inc. 375,300
15,200 Northeast Utilities 353,400
4,900 Northern Electric PLC (United Kingdom) 64,213
12,200 Public Service Co. of Colorado 330,925
7,300 South Wales Electricity PLC (United Kingdom) 92,752
9,500 Texas Utilities Electric Co. 318,250
820 Veba (Vereinigte Elektrizitaets
Bergwerks) AG (Germany) 288,634
__________
2,363,955
BUSINESS SERVICES (4.5%)
- -----------------------------------------------------------------------
7,300 Block (H & R), Inc. 319,375
8,500 Interpublic Group of Cos. Inc. 293,250
4,000 Komori Printing Machinery Co., Ltd. (Japan) 108,691
10,400 Loewen Group, Inc. 261,300
12,800 Manpower, Inc. 339,200
17,600 Moore Corp. Ltd. 336,600
7,300 Olsten Corp. (The) 262,800
6,200 Paychex, Inc. 203,050
1,300 Societe Generale de Surveillance
Holdings S.A. (Switzerland) (c) 199,099
__________
2,323,365
14
<PAGE> 15
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
BANKS (4.5%)
- -----------------------------------------------------------------------
43,400 Allied Irish Banks PLC (Ireland) $ 169,134
2,100 Argentaria (Spain) (b) 88,041
10,800 Banc One Corp. 375,300
12,600 Barclays Bank PLC (United Kingdom) 113,107
30,500 Christiania Bank & Trust (Norway) 59,835
1,200 Cie Finance Paribas (France) 82,181
400 Credit Locale de France (France) 31,201
23,000 Guoco Group Ltd. (Hong Kong) 116,083
4,800 HSBC Holdings PLC (Hong Kong) 56,527
13,600 National City Corp. 365,500
11,000 Southern Bank (Malaysia) 27,726
200 Swiss Bank Corp.
(Registered Shares) (Switzerland) 28,078
17,000 United Overseas Bank Ltd. (Singapore) 168,900
2,700 Wells Fargo & Co. 431,325
11,000 Yamaguchi Bank Ltd. (Japan) 204,395
__________
2,317,333
FINANCE (3.7%)
- -----------------------------------------------------------------------
8,700 Beneficial Corp. 374,100
500 Cetelem 113,494
11,000 Daiwa Securities Co. Ltd. (Japan) 172,527
6,200 Federal Home Loan Mortgage Corp. 385,175
6,200 Federal National Mortgage Association 551,025
12,200 Jardine Matheson Holdings Ltd. (Hong Kong) 114,861
6,800 MBNA Corp. (b) 171,700
__________
1,882,882
CHEMICALS (3.2%)
- -----------------------------------------------------------------------
1,100 Akzo N.V. (Netherlands) 136,205
740 BASF AG (Germany) 154,459
2,400 DSM N.V. (Netherlands) 197,575
8,100 Olin Corp. 465,750
7,200 Schulman (A.), Inc. 190,800
13,600 Union Carbide Corp. 467,500
__________
1,612,289
CELLULAR BROADCASTING (2.8%)
- -----------------------------------------------------------------------
6,200 DSC Communications Corp. 177,475
5,000 LIN Broadcasting Corp. (b) 670,000
6,200 Paging Network, Inc. (b) 173,600
6,550 Vanguard Cellular Systems, Inc. 183,400
61,800 Vodafone Group PLC (United Kingdom) 198,675
__________
1,403,150
PHARMACEUTICALS (2.7%)
- -----------------------------------------------------------------------
6,100 Bristol-Myers Squibb Co. 350,750
2,700 Genentech Inc. 138,713
6,800 Lilly (Eli) & Co. 386,750
6,200 Pfizer, Inc. 423,150
3,300 SmithKline Beecham PLC ADS
(United Kingdom) (d) 102,713
__________
1,402,076
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
TOBACCO (2.5%)
- -----------------------------------------------------------------------
9,500 American Brands, Inc. 342,000
21,700 Dibrell Bros., Inc. 379,750
8,700 Philip Morris Cos., Inc. 530,700
__________
1,252,450
BUSINESS EQUIPMENT AND SERVICES (2.2%)
- -----------------------------------------------------------------------
6,200 Antec Corp. $ 234,050
8,300 Brambles Industries, Ltd. (Australia) 92,357
10,000 Dai Nippon Printing Co., Ltd.(Japan) 189,810
6,200 Dun & Bradstreet Corp. 357,275
10,000 Office Depot, Inc. 237,500
__________
1,110,992
ELECTRONICS AND ELECTRICAL EQUIPMENT (2.0%)
- -----------------------------------------------------------------------
4,800 Analog Devices Inc. 154,800
1,450 BBC Brown Boveri AG (Bearer Shares)(Germany) 131,393
3,000 Best Denki Co. Ltd. (Japan) 53,347
24,400 General Electric Co. PLC (United Kingdom) 115,322
10,000 Nippondenso Co., Ltd. (Japan) (c) 202,797
4,000 Sony Corp. (Japan) (c) 244,156
3,100 Xilinx 137,175
__________
1,038,990
METALS AND MINING (2.0%)
- -----------------------------------------------------------------------
13,600 Alumax, Inc. 416,500
3,000 CRA Ltd. (Australia) 44,093
21,700 Freeport-McMoRan, Inc. 374,325
38,600 MIM Holdings Ltd. (Australia) 86,993
14,500 Western Mining Holdings, Ltd. 86,713
__________
1,008,624
INSURANCE (1.9%)
- -----------------------------------------------------------------------
6,800 Aetna Life & Casualty Co. $ 335,750
1,000 Internationale Nederlanden (Netherlands) 45,672
15,000 Royal Insurance Holdings PLC
(United Kingdom) 68,132
13,000 Tokio Marine & Fire Insurance Co. Ltd.
(The) (Japan) 161,039
27,100 USF&G Corp. 365,850
__________
976,443
OIL (1.8%)
- -----------------------------------------------------------------------
8,600 Burmah Oil 120,750
8,100 Kerr-McGee Corp. 393,863
7,000 Repsol S.A. (Spain) 224,513
500 Royal Dutch Petroleum Co. (Netherlands) 56,386
3,100 Shell Transportation & Trading
(United Kingdom) 35,677
1,400 Societe Nationale Elf Aquitaine (France) 107,652
__________
938,841
PAPER (1.8%)
- -----------------------------------------------------------------------
12,200 Champion International Corp. 439,200
17,000 Rengo Co. Ltd. (Japan) 151,999
9,200 Repola (Finland) 199,925
8,600 Svenska Cellulosa Ser. B (Sweden) 132,187
__________
923,311
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
COMPUTERS (1.7%)
- -----------------------------------------------------------------------
12,000 Fujitsu Ltd. (Japan) 130,669
5,600 IBM Corp. 384,300
32,500 Unisys Corp. 320,937
__________
835,906
COMPUTER SERVICES (1.6%)
- -----------------------------------------------------------------------
6,200 America Online, Inc. (b) 461,900
6,200 First Data Corp. 302,250
2,000 Getronics N.V. (Netherlands) 60,784
__________
824,934
AUTOMOTIVE (1.6%)
- -----------------------------------------------------------------------
4,500 Autoliv AB ( Sweden) 130,780
6,100 General Motors Corp. 306,525
2,380 Michelin (CGDE) Ser. B (France) 104,394
16,000 Mitsubishi Motors Corp. (Japan) 149,291
800 Peugeot Citroen S A (France) 128,355
__________
819,345
SEMICONDUCTORS (1.6%)
- -----------------------------------------------------------------------
2,600 Austria Mikro Systeme International
(Austria) 161,549
6,200 Linear Technology Corp. 275,900
6,200 Maxim Integrated Products Inc. 376,650
__________
814,099
RESTAURANTS (1.5%)
- -----------------------------------------------------------------------
2,850 Brinker International, Inc. (b) 69,113
12,800 Buffets, Inc. (b) 252,800
7,300 McDonald's Corp. 206,225
8,400 Outback Steakhouse, Inc. (b) 255,150
__________
783,288
ELECTRICAL EQUIPMENT (1.5%)
- -----------------------------------------------------------------------
4,000 Draka Holding 95,856
2,000 Futaba Corp. Ord.(Japan) 108,691
10,000 Leader Universal (Malaysia) 58,617
4,000 Murata Manufacturing Co. Ltd. (Japan) 173,426
24,400 Westinghouse Electric Corp. 344,650
__________
781,240
CONSUMER SERVICES (1.4%)
- -----------------------------------------------------------------------
7,300 CUC International, Inc. 250,025
16,500 Pearson PLC (United Kingdom) 167,614
4,200 Royal PTT N.V. (Netherlands) 128,356
400 Zodiac (France) 170,055
_________
716,050
COMPUTER SOFTWARE (1.4%)
- -----------------------------------------------------------------------
13,300 American Power Conversion Corp. 259,350
7,100 Cisco Systems, Inc. 176,169
6,200 Lotus Development Corp. 253,425
450 Sybase, Inc. (b) 19,575
_________
708,519
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
HEALTH CARE (1.4%)
- -----------------------------------------------------------------------
2,700 Lincare Holdings, Inc. 66,825
5,400 United Healthcare Corp. (b) 282,150
7,200 Value Health, Inc. (b) 354,600
__________
703,575
STEEL (1.3%)
- -----------------------------------------------------------------------
69,000 British Steel PLC 171,527
10,900 CBI Industries, Inc. 328,363
32,000 Nisshin Steel Co., Ltd. (Japan) (c) 148,970
500 Ugine 36,414
__________
685,274
RAILROADS (1.3%)
- -----------------------------------------------------------------------
10,800 Illinois Central Corp. $ 340,200
16,300 Southern Pacific Rail Corp. 330,075
___________
670,275
MACHINERY (1.3%)
- -----------------------------------------------------------------------
1,200 Jungheinrich (Germany) 279,317
16,000 Komatsu, Ltd. (Japan) (c) 144,656
18,100 Siebe PLC (United Kingdom) 160,259
4,000 Takuma Co. Ltd. (Japan) 74,725
__________
658,957
REIT'S (1.3%)
- -----------------------------------------------------------------------
10,800 Meditrust Corp. SBI 356,400
8,100 Nationwide Health Properties, Inc. 292,613
__________
649,013
CABLE TELEVISION (1.2%)
- -----------------------------------------------------------------------
7,300 TCA Cable TV, Inc. 178,850
15,876 Tele-Communications Class A (b) 358,202
3,000 Viacom, Inc. Class B (b) 99,000
_________
636,052
AEROSPACE (1.2%)
- -----------------------------------------------------------------------
13,600 Ball Corp. 379,100
6,200 FlightSafety International, Inc. 242,575
_________
621,675
TELEPHONE SERVICES (1.2%)
- -----------------------------------------------------------------------
7,300 ALC Communications Corp. (b) 260,975
7,300 Century Telephone Enterprises, Inc. 219,913
5,600 Tele Danmark A/S ADS (Denmark) (d) 151,900
_________
632,788
MEDICAL EQUIPMENT AND SUPPLIES (1.2%)
- -----------------------------------------------------------------------
16,600 Boston Scientific Corp. 275,975
200 Essilor International ADP (France) 19,630
3,000 Medtronic, Inc. 296,250
_________
591,855
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
FOOD (1.1%)
- -----------------------------------------------------------------------
13,600 IBP, Inc. 428,400
19,100 Tate & Lyle PLC (United Kingdom) 131,597
_________
559,997
BUILDING PRODUCTS (1.1%)
- -----------------------------------------------------------------------
23,000 CRH PLC (Ireland) $ 135,493
2,200 Lafarge Coppee (Bearer Shares) (France) 181,775
7,000 Marui Co. Ltd. (Japan) 130,070
26,000 Sungei Way Holdings (Berhad) (Singapore) 100,586
___________
547,924
ELECTRONICS (0.9%)
- -----------------------------------------------------------------------
11,000 Matsushita Electric Industrial Co., Ltd.
(Japan) 193,406
9,000 Omron Tateisi Electronics Co. (Japan) 156,443
2,000 Secom Co. (Japan) 133,267
___________
483,116
BROADCASTING (0.9%)
- -----------------------------------------------------------------------
5,600 Clear Channel Communications, Inc. (b) 257,600
6,200 Infinity Broadcasting Corp. Class A (b) 195,300
___________
452,900
ENVIRONMENTAL CONTROL (0.9%)
- -----------------------------------------------------------------------
14,900 Waste Management Technologies, Inc. 447,000
COSMETICS (0.9%)
- -----------------------------------------------------------------------
7,500 Avon Products, Inc. 443,437
PUBLISHING (0.8%)
- -----------------------------------------------------------------------
700 Elsevier N.V. (Netherlands) 67,573
6,200 Marvel Entertainment Group, Inc. 130,200
3,000 Singapore Press 52,811
2,300 Wolters Kluwer N.V. (Netherlands) 158,348
___________
408,932
METAL FABRICATION (0.8%)
- -----------------------------------------------------------------------
200 Fischer (George) (Bearer Shares)
(Switzerland) (c) 242,493
180 N.V. Bekaert S.A. (Belgium) 148,616
___________
391,109
FOOD AND BEVERAGES (0.8%)
- -----------------------------------------------------------------------
33,700 Argyll Group PLC (United Kingdom) 152,553
23,300 Greencore PLC (Ireland) 139,019
100 Nestle S.A. (Registered Shares)
(Switerland) (c) 92,117
__________
383,689
PHOTOGRAPHY (0.7%)
- -----------------------------------------------------------------------
7,500 Eastman Kodak Co. 373,125
TELEPHONE UTILITIES (0.7%)
- -----------------------------------------------------------------------
9,500 NYNEX Corp. $ 366,938
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
OIL SERVICES (0.7%)
- -----------------------------------------------------------------------
13,600 McDermott International, Inc. 355,300
REAL ESTATE (0.7%)
- -----------------------------------------------------------------------
11,000 City Developments Ltd. (Singapore) 53,544
20,300 Debartolo Realty Corp. 296,887
___________
350,431
PHARMACEUTICALS AND BIOTECHNOLOGY (0.6%)
- -----------------------------------------------------------------------
6,000 Biogen, Inc. 302,250
RECREATION (0.6%)
- -----------------------------------------------------------------------
7,300 Blockbuster Entertainment Corp. 188,887
12,000 Genting Berhad Co. (Malaysia) 112,544
___________
301,431
SPECIALTY CONSUMER PRODUCTS (0.5%)
- -----------------------------------------------------------------------
7,300 Department 56, Inc. 278,313
HEALTH CARE INFORMATION SYSTEMS (0.5%)
- -----------------------------------------------------------------------
7,900 HBO & Co. 258,725
BASIC INDUSTRIAL PRODUCTS (0.5%)
- -----------------------------------------------------------------------
8,000 Asahi Diamond Industrial Co., Ltd.
(Japan) (b) 142,258
600 Rieter Holding AG (Registered Shares)
(Switzerland) (c) 75,676
100 Sommer Allibert (France) 40,573
__________
258,507
ENERGY-RELATED (0.5%)
- -----------------------------------------------------------------------
3,400 IHC Caland N.V. (Netherlands) (c) 83,011
1,600 VA Technolgie AG (Austria) 167,132
__________
250,143
TRANSPORTATION (0.5%)
- -----------------------------------------------------------------------
9,000 Jurong Shipyard Ltd. (Singapore) 86,417
12,000 Yamato Transport Co. Ltd. (Japan) 155,844
__________
242,261
SOFT DRINKS (0.4%)
- -----------------------------------------------------------------------
4,800 Coca-Cola Co. 220,800
LODGING (0.4%)
- -----------------------------------------------------------------------
7,300 Hospitality Franchise System, Inc. 214,437
CELLULAR COMMUNICATIONS (0.4%)
- -----------------------------------------------------------------------
7,300 Airtouch Communications, Inc. 206,225
CONGLOMERATES (0.4%)
- -----------------------------------------------------------------------
16,000 Mitsui Co. (Japan) 137,782
20,000 Sime Darby (Berhad) (Malaysia) 62,524
___________
200,306
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
COMMON STOCKS (87.9%)(a)
NUMBER OF SHARES VALUE
<S> <C>
AIRLINES (0.4%)
- -----------------------------------------------------------------------
12,000 Singapore Airlines Ltd. (Singapore) $ 112,823
9,500 Swire Pacific Ltd. Class A (Hong Kong) 79,912
____________
192,735
CONSTRUCTION (0.4%)
- -----------------------------------------------------------------------
4,000 Taihei Corp. (Japan) (c) 121,878
12,000 United Engineers 62,368
____________
184,246
TIRE AND RUBBER (0.3%)
- -----------------------------------------------------------------------
10,000 Bridgestone Corp. (Japan) 159,840
TEXTILES (0.3%)
- -----------------------------------------------------------------------
20,000 Toray Industries Inc. (Japan) 154,846
SHIPPING (0.2%)
- -----------------------------------------------------------------------
24,400 Associated British Ports
(United Kingdom) (c) 108,956
- -----------------------------------------------------------------------
CONTAINERS (0.2%)
- -----------------------------------------------------------------------
3,000 Toya Seikan Kaisha (Japan) 99,201
WATER UTILITIES (0.2%)
- -----------------------------------------------------------------------
8,700 North West Water Group PLC
(United Kingdom) 79,033
- -----------------------------------------------------------------------
Total Common Stocks (cost $43,284,109) $44,865,931
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS (23.4%)(a) Value
PRINCIPAL AMOUNT
$ 2,250,000 Federal National Mortgage Assn.
4.68s, September 16, 1994 $ 2,245,622
9,708,000 Interest in $300,000,000 joint
repurchase agreement dated
August 31, 1994 with Bankers
Trust New York Corp. due
September 1, 1994 with respect
to various U.S. Treasury
obligations-maturity value of
$9,709,292, for an effective
yield of 4.79% 9,709,292
- -----------------------------------------------------------------------
Total Short-Term Investments
(cost $11,954,914) $11,954,914
- -----------------------------------------------------------------------
Total Investments
(cost $55,239,023) (e) $56,820,845
</TABLE>
21
<PAGE> 22
NOTES
-----------------------------------------------------------------------
(a) Percentages indicated are based on total net assets of $51,067,972,
which correspond to a net asset value per class A and class B share of
$8.97.
(b) Non-income-producing security.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers. At August 31,
1994, these securities were valued at $1,875,596 or 3.7% of net assets.
(d) ADR or ADS after the name of a foreign security stands for American
Depository Receipt or American Depository Shares, respectively,
representing ownership of foreign securities on deposit with a domestic
custodian bank.
(e) The aggregate identified cost on a tax basis is $55,239,695, resulting
in gross unrealized appreciation and depreciation of $1,888,056 and
$306,906, respectively, or net unrealized appreciation of $1,581,150.
<TABLE>
FORWARD CURRENCY CONTRACTS OUTSTANDING
(AT AUGUST 31, 1994)
<CAPTION>
Aggregate
Face Delivery Unrealized
Market Value Value Date Appreciation
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen (Sell) $ 567,039 $ 574,182 2/22/95 $ 7,143
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1994 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (identified cost $55,239,023) (Note 1) $56,820,845
Cash 917
Dividends, interest and other receivables 58,956
Receivable for shares of the fund sold 3,639,135
Receivable for securities sold 481,122
Receivable for open forward contracts 7,143
Unamortized Organization Expense 94,965
-----------
TOTAL ASSETS $61,103,083
===========
LIABILITIES
Payable for securities purchased $9,829,719
Payable for shares of the fund repurchased 34,443
Payable for compensation of Manager (Note 3) 25,639
Payable for investor servicing and custodian fees (Note 3) 10,251
Payable for distribution fees (Note 3) 24,694
Payable for organization expenses 98,304
Other accrued expenses 12,061
-----------
TOTAL LIABILITIES $10,035,111
-----------
NET ASSETS $51,067,972
-----------
REPRESENTED BY
Paid-in capital (Notes 2 and 5) $49,460,300
Accumulated net investment loss (4,909
Accumulated net realized gain on investment transactions 23,616
Net unrealized appreciation of investments and options 1,588,965
-----------
TOTAL - REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES OUTSTANDING $51,067,972
===========
COMPUTATION OF NET ASSET VALUE
Net asset value and redemption price per class A share
($28,989,184 divided by 3,233,502 shares) $8.97
Offering price per class A shares (100/95.50 of $8.97)* $9.39
Net asset value and offering price per class B share
($22,078,788 divided by 2,462,723 shares)+ $8.97
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 24
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
August 31, 1994 (Unaudited)
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign tax of $1,941) $ 63,606
Interest 7,560
---------
Total investment income 71,166
=========
EXPENSES:
Compensation of Manager (Note 3) $ 25,639
Investor servicing and custodian fees (Note 3) 10,309
Distribution fees -- class A (Note 3) 9,077
Distribution fees -- class B (Note 3) 15,617
Reports to shareholders 4,000
Auditing 2,284
Legal 1,500
Postage 485
Registration fees 2,843
Administrative services (Note 3) 970
Amortization of organization expenses (Note 2) 3,339
Other 12
---------
TOTAL EXPENSES 76,075
=========
NET INVESTMENT LOSS (4,909)
=========
Net realized gain on investments (Notes 1 and 4) 23,616
Net unrealized appreciation of investments during the period 1,588,965
---------
NET GAIN ON INVESTMENTS 1,612,581
=========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,607,672
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
July 1, 1994
(commencement of
operations) to
August 31
----------------
1994*
-----------
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment loss $ (4,909)
Net realized gain on investments 23,616
Net unrealized appreciation of investments 1,588,965
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,607,672
-----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income --
From net realized gain on investments --
Increase from capital share transactions (Notes 2 and 5) 49,360,300
TOTAL INCREASE IN NET ASSETS 50,967,972
Beginning of period 100,000
-----------
END OF PERIOD (including accumulated net investment loss of $4,909) $51,067,972
===========
<FN>
* Unaudited.
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
July 1, 1994 July 1, 1994
(commencement of (commencement of
operations) to operations) to
August 31 August 31
---------------- ----------------
1994* 1994*
Class A Class B
---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.50 $ 8.50
Investment operations:
Net investment income (loss) -- (.01)(a)
Net realized and unrealized gain (loss)
on investments .47 .48
Total from investment operations .47 .47
LESS DISTRIBUTIONS
From net investment income -- --
From net realized gain on investments -- --
------- -------
TOTAL DISTRIBUTIONS -- --
------- -------
NET ASSET VALUE, END OF PERIOD $8.97 $8.97
------- -------
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE (%) (b) 5.53%(c) 5.53%(c)
NET ASSETS, END OF PERIOD (IN THOUSANDS) $28,989 $22,079
------- -------
Ratio of expenses to average
net assets (%) .29(c) .40(c)
------- -------
Ratio of net investment income (loss) to
average net assets (%) .01(b) (.06)(b)
Portfolio turnover (%) 11.49(c) 11.49(c)
------- -------
<FN>
* Unaudited.
(a) Per share net investment income for the period ended August 31,
1994 has been determined on the basis of the weighted average number of
shares outstanding for the period.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(c) Not annualized.
</TABLE>
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
August 31, 1994 (Unaudited)
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 offers both class A and class B shares. The fund commenced its public
offering of class A and class B shares on July 1, 1994. Class A shares are sold
with a maximum front-end sales charge of 4.50%. 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. Expenses of the fund are
borne pro-rata by the holders of both classes of shares, except that each class
bears expenses unique to that class including the distribution fees applicable
to such class. Each 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 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 determined using the last
reported sale price, or, if no sales are reported as in the case of some
securities traded over the counter-the last reported bid price, except that
certain U.S. government obligations are stated at the mean between the bid and
asked prices. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by the
Trustees.
B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the fund may transfer uninvested cash balances into a
joint trading account, along with the cash of other registered investment
companies managed by Putnam Investment Management, Inc. (Putnam Management),
the fund Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and
certain other accounts. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
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
27
<PAGE> 28
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.
E FEDERAL TAXES It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code 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.
F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex- dividend date.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the Fund in connection
with its organization, its registration with the Securities Exchange Commission
and with various state and the initial public offering of its shares
aggregated $98,304. These expenses are being amortized by the Fund on a
straight-line basis over a five-year period.
NOTE 2
INITIAL CAPITALIZATION AND OFFERING OF SHARES
The fund was established as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts on April 13, 1994.
During the period April 13, 1994 to June 30, 1994, the fund had no operations
other than those related to organizational matters, including the initial
contributions of $50,000 and the issuance of 5,882 shares for both class A and
B, to Putnam Mutual Funds Corp. on May 23, 1994.
NOTE 3
MANAGEMENT FEE, ADMINISTRATIVE SERVICE, 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,
under current law, to reduction in any year to the extent that expenses
(exclusive of brokerage, interest, distribution fees and taxes) 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 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. For the period ended August 31, 1994, the
fund paid $970 for these services.
Trustees of the fund receive an annual Trustee's fee of $100, and an additional
fee for each Trustees meeting attended. Trustees who are not interested persons
of 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. Fees paid for these investor servicing
28
<PAGE> 29
and custodial functions for the period ended August 31, 1994 amounted to
$10,309.
Investor servicing and custodian fees reported in the Statement of operations
for the period ended August 31, 1994 have been reduced by credits allowed by
PFTC.
Pursuant to the fund's underwriting agreement and a distribution plan adopted
under Rule 12b-1 of the Investment Company Act of 1940, the fund pays Putnam
Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc., a
monthly distribution fee at the annual rate of 0.25% of average net assets
represented by the class A shares of the fund. For the period ended August 31,
1994, the fund paid $9,077 in distribution fees for class A shares.
During the period ended August 31, 1994, Putnam Mutual Funds Corp., acting as
the underwriter, received net commissions of $775,614 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
period ended August 31, 1994, Putnam Mutual Funds Corp., acting as the
underwriter, received no monies on class A redemptions.
The fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-] under the Investment Company
Act of 1940. The purpose of 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 funds average net assets
attributable to class B shares. For the period ended August 31, 1994, the fund
paid Putnam Mutual Funds Corp. distribution fees of $15,617 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 period ended August 31, 1994, Putnam
Mutual Funds Corp., acting as the underwriter, received no monies in contingent
deferred sales charges from redemptions.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the period ended August 31, 1994, purchases and sales of investment
securities other than short- term investments aggregated $45,429,424 and
$2,168,928, 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 5
<TABLE>
CAPITAL SHARES
At August 31, 1994, there was an unlimited number of shares of beneficial
interest authorized, divided into two classes, class A and class B capital
shares. Transactions in capital shares were as follows:
July 1, 1994
(commencement of operations)
to August 31
1994
<CAPTION>
CLASS A SHARES AMOUNT
- -------------------------------------------------
<S> <C> <C>
Shares sold 3,259,600 $28,332,140
- -------------------------------------------------
Shares repurchased (31,980) (279,101)
- -------------------------------------------------
Net increase 3,227,620 $28,053,039
- -------------------------------------------------
</TABLE>
<TABLE>
July 1, 1994
(commencement of operations)
to August 31
1994
<CAPTION>
Class B Shares Amount
- -------------------------------------------------
<S> <C> <C>
Shares sold 2,509,068 $21,758,229
- -------------------------------------------------
Shares repurchased (52,227) (450,968)
- -------------------------------------------------
Net increase 2,456,841 $21,307,261
- -------------------------------------------------
</TABLE>
29
<PAGE> 30
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.
You can set up a regular program for investing with as little
as $25 a month from a Putnam money market fund or your own
bank 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 finan-
cial 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.
30
<PAGE> 31
FUND INFORMATION John R. Verani
Vice President
INVESTMENT MANAGER Lawrence J. Lasser
Putnam Investment Management, Vice President
Inc.One Post Office Square Gordon H. Silver
Boston, MA 02109 Vice President
Peter Carman
MARKETING SERVICES Vice President
Putnam Mutual Funds Corp. Brett C. Browchuk
One Post Office Square Vice President
Boston, MA 02109 Thomas V. Reilly
Vice President
CUSTODIAN David L. King
Putnam Fiduciary Trust Company Vice President
and Fund Manager
LEGAL COUNSEL John K. Storkerson
Ropes & Gray Vice President
and Fund Manager
TRUSTEES Charles H. Swanberg
George Putnam, Chairman Vice President
William F. Pounds, Vice Chairman and Fund Manager
Jameson Adkins Baxter William N. Shiebler
Hans H. EstinJohn A. Hill Vice President
Elizabeth T. Kennan Paul M. O'Neil
Lawrence J. Lasser Vice President
Robert E. Patterson John D. Hughes
Donald S. Perkins Vice President
George Putnam, III and Treasurer
A.J.C. Smith Beverly Marcus
W. Nicholas Thorndike Clerk and Assistant Treasurer
OFFICERS This report is for the information of
George Putnam shareholders of Putnam Diversified
President Equity Trust. It may also be used as
Charles E. Porter sales literature when preceded or
Executive Vice President accompanied by the current prospectus,
Patricia C. Flaherty which gives details of sales charges,
Senior Vice President investment objectives and operating
policies of the fund, and the most
recent copy of the Putnam Quarterly
Performance Summary.
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PUTNAM INVESTMENTS
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The Putnam Funds Bulk Rate
One Post Office Square U.S. Postage
Boston, Massachusetts 02109 PAID
Putnam Investments
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522/525-14150
