Putnam
Diversified
Equity
Trust
[P H O T O]
SEMIANNUAL REPORT
August 31, 1995
[L O G O]
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
> According to Lipper Analytical Services, the fund's 20.46% total return for
class A shares at net asset value for the 12 months ended September 30,
1995, ranked in the top 8% of 115 global funds rated over the same period.*
SEMIANNUAL 1995 RESULTS AT A GLANCE
Class A Class B
Total return: NAV POP NAV CDSC
(change in value during
period plus reinvested
distributions)
6 months ended 8/31/95 17.10% 10.35% 16.82% 11.82%
Class
Class A B Class M
Share value: NAV POP NAV NAV POP
2/28/95 $ 8.83 $ 9.25 $ 8.80 -- --
7/3/95 (inception
of class M shares) -- -- -- $ 9.76 $10.11
8/31/95 10.34 10.97 10.28 10.33 10.70
The fund pays distributions annually in December.
Data above represent past results and are not indicative of future
performance. For performance over longer periods, see pages 8 and 9.
Effective 7/3/95, the fund began offering class M shares. Performance for
class M shares is not shown because of the brevity of the reporting period.
For class A shares, POP assumes 4.50% maximum sales charge on 2/28/95, and
5.75% maximum sales charge on 8/31/95. For class M shares, POP assumes 3.50%
sales charge. CDSC assumes 5% maximum contingent deferred sales charge.
* Lipper Analytical Services, an independent research organization, ranks
funds according to total return performance. Their rankings vary over time
and do not reflect the effects of sales charges. For periods ended 9/30/95,
the fund's class A and class B shares ranked 9 and 10, respectively, out of
115 global funds for 1-year performance, and 5 and 6, respectively, out of
108 global funds for performance since inception. Past performance is not
indicative of future results. Rankings for other share classes will vary.
<PAGE>
From the Chairman
[P H O T O]
(c) Karsh, Ottawa
Dear Shareholder:
Putnam Management's forecast for this year called for continued improvement
in the U.S. and international stock markets, but did not anticipate the vigor
of the advance of the domestic market during the year's first half. Looking
ahead, it appears unlikely that the U.S. market can remain as exuberant as it
has been over the first three quarters of calendar 1995, but we do not
believe the advance has entirely run its course.
During the six months ended August 31, 1995, the flexibility afforded by
Putnam Diversified Equity Trust's investment strategy allowed your fund to
capture gains in all three market sectors in which it invests. The value
sleeve benefited from mergers and the recent strength of financial stocks and
the growth sleeve from strength in technology. Even the international sleeve,
in which markets were still gathering momentum for recovery, provided
moderate gains.
In the following report, your fund's management team explains the fund's
unique strategy and comments on performance during the first half of its
fiscal year.
Respectfully yours,
/s/ George Putnam
Chairman of the Trustees
October 18, 1995
<PAGE>
Report from the Fund Managers
David L. King, lead manager
John K. Storkerson
Charles H. Swanberg
The first six months of Putnam Diversified Equity Trust's fiscal year were
characterized by a gradual slowdown in U.S. economic growth and a robust
domestic stock market. The U.S. dollar declined steadily against major
foreign currencies through June, and then rebounded convincingly in the
remainder of the fiscal period.
During the semiannual period ended August 31, 1995, your fund's three-sector
investment strategy--comprising domestic value, domestic growth, and
international stocks--again enabled us to capitalize on fluctuating market
and economic conditions. As a result, the fund's class A and class B shares
generated total returns of 17.10% and 16.82%, respectively, at net asset
value during the period, outpacing the 16.77% return of the Standard and
Poor's 500 Index(R) and the Morgan Stanley Capital International EAFE Index's
9.33% advance.
> MERGERS AND FINANCIAL STOCKS DRIVE VALUE SLEEVE
Your fund's value-investing strategy is based on a "bottom-up" approach. This
means we identify individual companies trading at depressed prices rather
than focusing on familiar mainstream companies. While it is true that
attractive companies often cluster in particular industries, our focus for
this portion of the portfolio is on specific stocks.
Although the recent slowdown in economic growth suppressed portions of the
value sector, your fund realized hardy performance from its value holdings.
Among the most notable contributors were three holdings that were involved in
mergers. The first merger, in early August, took place between Southern
Pacific Rail Corp. and Union Pacific Corp., two railroad stocks. Later that
month, Upjohn Company, a holding with a significant market share in the
United States, merged with Pharmacia, a Swedish drug company with a large
presence in Europe. Investors anticipated that the former merger would reduce
operating costs and the latter would lead to
<PAGE>
increased revenues through global cross-selling. In both cases, the fund
gained from the resulting stock appreciation.
Value-oriented investments in the financial sector also contributed
substantially to the fund's performance. In particular, the fund's position
in Sallie Mae, a buyer of student loans, proved especially beneficial. After
dissident shareholders challenged the existing board, devaluing the company's
stock, Sallie Mae underwent internal restructuring and its stock rebounded.
The stocks of Bear Stearns (securities brokerage and investment banking) and
Bankers Trust (commercial banking) also showed improved performance over the
period.
Recently, electric utility stocks have become increasingly attractive. These
stocks were largely neglected by investors over the past several months and
the industry has begun to capitalize on recent deregulation. Therefore, we
have begun to invest more heavily in this sector. In addition, the retail
industry, which has languished as the economy has slowed, may offer inviting
opportunities if these stocks are overly discounted by short-term pessimism
regarding economic growth.
> GROWTH STOCKS ADVANCE AS THE ECONOMY SLOWS
Growth stocks tend to maintain healthy rates of growth whether the economy is
growing rapidly or slowly. As a result, these securities typically become more
attractive to investors when economic growth is slow. Consequently, the recent
slowdown in economic growth bolstered the performance of your fund's
growth-stock holdings.
[BAR CHART]
TOP INDUSTRY SECTORS*
Banks 5.4%
Business services 5.2%
Pharmaceuticals and biotechnology 5.1%
Semiconductors 4.3%
Electric utilities 3.9%
Retail 3.9%
*Based on net assets as of 8/31/95. Sectors will vary over time.
<PAGE>
Just as we do in the fund's value segment, we look at growth stocks from the
bottom up, although attractive opportunities often accumulate in booming
industries. Over the six-month fiscal period, your fund benefited
significantly from investments in the semiconductor industry, especially
Maxim Integrated Products (140% total return) and Xilinx Inc. (92%). Outside
this market, the fund prospered from its holdings in Boston Scientific
(medical devices), Blyth Industries (candle manufacturing), and America
Online.
One sector where we expect to find attractive stocks in the remainder of the
fund's fiscal year is technology. At the very least, the sector should be
sustained by burgeoning participation in the Internet. Another industry
worthy of note is health care, where the portfolio's current allocation is
small. Shortly after the government's health-care initiative gained momentum,
these stocks plummeted as investors were driven away by the industry's
uncertain future. When the government's initiative lost steam, health-care
stocks recovered temporarily, only to lose ground again as the industry began
to correct its own excesses. We may increase the portfolio's allocation to
the health-care industry as its future becomes better defined and the
potential for price appreciation improves.
> INTERNATIONAL MARKETS HINT AT RECOVERY
At the outset of the fund's fiscal year, international stock markets posted
largely negative returns in local currency terms, but the potency of foreign
currencies transformed these performances into moderate gains when measured
in U.S. dollars. Among the strongest international markets at that time were
those of France and the United Kingdom, which were overweighted in your
fund's portfolio.
After declining in local currency terms through the first four months of the
period, Japan's stock market rebounded in July and August. The reasons for
this recovery were twofold: the decline of the yen versus the dollar
revitalized Japanese exports, and the Japanese government's support for
struggling domestic banks boosted the economy. Elsewhere in the Pacific
Basin, markets generally began the period with bland returns and then
modestly improved, led by Hong Kong and Australia. European markets, many of
which posted negative returns early on, improved temporarily before again
declining in August.
<PAGE>
TOP 3 VALUE STOCK HOLDINGS
Philip Morris Companies, Inc.
Producer of consumer goods including tobacco, food, and beer
Eli Lilly & Company
Manufacturer of pharmaceuticals and medical instruments
Bankers Trust New York Corporation
Commercial banker and financial advisor
TOP 3 GROWTH STOCK HOLDINGS
Maxim Integrated Products, Inc.
Manufacturer and marketer of specialized semiconductors
Hospitality Franchise Systems, Inc.
Advertising, reservations, and training services for hotel chains
Cisco Systems, Inc.
Developer of computer networking systems
TOP 3 INTERNATIONAL STOCK HOLDINGS
Austria Mikro Systeme International (Austria)
Manufacturer of specialized semiconductors
Rohm Company Ltd. (Japan)
International manufacturer of semiconductors
Murata Manufacturing Company Ltd. (Japan)
Producer of super-high frequency electrical equipment
These holdings represent 6.84% of the fund's assets as of 8/31/95. Portfolio
holdings are subject to change.
While there can be no guarantees, we believe the U.S. dollar may continue to
strengthen relative to major foreign currencies. This trend could, in turn,
enhance the performance of international stock markets as foreign economies
benefit from increased exports.
> A STRATEGY FOR ANY MARKET
Your fund's strategy of dividing the portfolio among growth, value, and
international stocks was designed to bolster performance in many different
market and economic environments. Since inception, this strategy has
uncovered lucrative investment opportunities and has produced sound returns.
While past performance cannot ensure future gains, your fund is well equipped
to continue to make the most of future market opportunities.
The views expressed in this report are exclusively those of Putnam Management
and are not meant as investment advice. Although the described holdings were
viewed favorably as of 8/31/95, there is no guarantee the fund will continue
to hold these securities in the future. Investments in non-U.S. securities
may be subject to certain risks associated with currency fluctuations and
political developments.
<PAGE>
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.
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.
TOTAL RETURN FOR PERIODS ENDED 8/31/95
Standard
Class A Class B & Poor's Morgan
500 Stanley
NAV POP NAV CDSC Index EAFE
6 months 17.10% 10.35% 16.82% 11.82% 16.77% 9.33%
1 year 15.54 8.87 14.87 9.87 21.42 0.49
Life of fund
(since 7/1/94) 21.93 14.90 21.22 17.22 29.96 3.86
average annualized 18.47 12.61 17.88 14.55 25.10 3.30
TOTAL RETURN FOR PERIODS ENDED 9/30/95
(most recent calendar quarter)
Class A Class B
NAV POP NAV CDSC
6 months 18.05% 11.27% 17.78% 12.78%
1 year 20.46 13.55 19.92 14.92
Life of fund
(since 7/1/94) 25.71 18.46 25.00 21.00
average annualized 20.08 14.51 19.54 16.47
Performance data represent past results and will differ for each class of
shares. Performance for class M shares, which became effective 7/3/95, is not
shown because of the brevity of the reporting period. 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.
<PAGE>
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.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 5.75% sales charge for class A shares and 3.50%
for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year to
1% during the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance. 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.
<PAGE>
Relative risk/reward potential of Putnam funds
These illustrations provide a simplified guide to the risk/reward potential for
funds within each category of the Putnam Family of Funds and are not intended
as investment advice. Your investment advisor can help you evaluate your risk
tolerance.
These rankings are relative only to Putnam funds and should not be compared to
other investments. There is no guarantee that one Putnam fund will be less
volatile than another, since each fund has its own investment risks. That's why
it is essential to read the fund's prospectus before investing.
PUTNAM GROWTH FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Asia Pacific Growth (1)
OTC Emerging Growth (2)
Int'l New Opportunities (1),(2)
New Opportunities (2)
Europe Growth (1)
Overseas Growth (1)
Voyager
Voyager II
Health Sciences
Natural Resources
Vista
Global Growth (1)
Diversified Equity (1)
Investors
Lower Risk Lower Reward Potential
PUTNAM GROWTH AND INCOME FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Putnam Growth and Income Fund II
Fund for Growth and Income
Equity Income
Convertible Income-Growth
George Putnam
Utilities Growth and Income
Balanced Retirement
Lower Risk Lower Reward Potential
PUTNAM GROWTH FUNDS
(1) Foreign investments are subject to certain risks, such as currency
fluctuations and political developments, that are not present with
domestic investments.
(2) This fund invests all or a portion of its assets in small to medium-sized
companies, which increases the risk of price fluctuations.
(3) While U.S. government backing of individual securities does not insure
your principal, which will fluctuate, it does guarantee that the fund's
government-backed holdings will make timely payments of interest and
principal.
<PAGE>
PUTNAM INCOME FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
High Yield Advantage(5)
High Yield(5)
Global Gov't.(1),(5)
Preferred Income
Income
Diversified Income(1),(3),(5)
Federal Income(3)
American Gov't. Income(3)
U.S. Gov't. Income(3)
Intermediate U.S. Gov't. Income(3)
Adjustable Rate U.S. Gov't.(3)
Money Market(4)
Lower Risk Lower Reward Potential
PUTNAM TAX-FREE FUNDS(6)
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Tax-Free High Yield(5)
Municipal Income
Single-state tax-free funds*
Tax Exempt Income
Tax-Free Insured(7)
Intermediate Tax Exempt
Tax Exempt Money Market(4)
Lower Risk Lower Reward Potential
*State tax-free funds available for Arizona, California, Florida,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and
Pennsylvania. Not available in all states.
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments. The
three portfolios are:
> Putnam Asset Allocation: Balanced Portfolio
> Putnam Asset Allocation: Conservative Portfolio
> Putnam Asset Allocation: Growth Portfolio
Please call your financial advisor -- or Putnam at 1-800-225-1581 -- to
obtain a prospectus for any Putnam fund. The prospectus contains more
complete information, including risk considerations, charges, and expenses.
Read it carefully before you invest or send money.
(4) The fund is managed to maintain a steady price of $1.00 per share,
although there is no assurance this price can be maintained in the
future.
(5) The lower credit ratings of high-yield corporate and municipal bonds
reflect a greater possibility that adverse changes in the economy or
their issuers may affect their ability to pay principal and interest on
the bonds.
(6) Income may be subject to state and local taxes. Capital gains, if any,
are taxable for federal and, in most cases, state purposes.
(7) Bond insurance does not guarantee principal or protect against changes in
market price.
<PAGE>
Portfolio of investments owned
August 31, 1995 (Unaudited)
COMMON STOCKS (93.9%)*
NUMBER OF SHARES VALUE
Advertising (0.5%)
20,000 Omnicom Group, Inc. $ 1,255,000
Aerospace and Defense (0.9%)
29,700 Flight Safety International, Inc. 1,317,938
13,700 Lockheed Martin Corp. 833,988
2,151,926
Airlines (0.7%)
20,800 K.L.M.-Royal Dutch Airlines (Netherlands) 687,007
60,000 Singapore Airlines Ltd. (Registered)
(Singapore) 507,042
48,500 Swire Pacific Ltd. Class A (Hong Kong) 363,451
1,557,500
Automotive (2.4%)
10,500 Autoliv AB (Sweden) 634,593
35,300 General Motors Corp. 1,659,100
7,300 Magna International, Inc. Class A 326,675
61,000 Mitsubishi Motors Corp. (Japan) 530,926
5,000 Peugeot Citroen S.A. (France) 661,208
37,800 Varity Corp. 1,719,900
5,532,402
Banks (5.4%)
145,335 Allied Irish Banks PLC (Ireland) 675,880
400 Baer Holdings AG (Germany) 419,197
10,180 Banco de Bilbao Vizcaya (Spain) 308,300
28,600 Bankers Trust New York Corp.** 1,969,825
71,798 Barclays Bank PLC (United Kingdom) 803,310
70,000 Development Bank of Singapore Ltd.
(Registered) (Singapore) 798,592
44,300 Fleet Financial Group, Inc. 1,639,100
28,300 Guoco Group Ltd. (Hong Kong) 134,558
54,600 HSBC Holdings PLC (Hong Kong) 733,672
59,000 Malayan Banking BHD (Malaysia) 484,964
32,000 Mitsubishi Bank Ltd. (Japan) 658,436
30,200 NationsBank Corp. 1,853,525
2,650 Societe Generale (France) 276,884
6,200 Southern Bank Berhad (Malaysia) 14,170
715 Union Bank of Switzerland
(Bearer) (Switzerland) 639,296
80,200 United Overseas Bank Ltd. (Registered)
(Singapore) 694,690
33,000 Yamaguchi Bank Ltd. (Japan) 577,161
12,681,560
Basic Industrial Products (0.7%)
110 Asahi Diamond Industrial Co., Ltd. (Japan) 1,415
60,000 Mitsui Fudoscan Co. Ltd. (Japan) 472,222
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Basic Industrial Products (continued)
2,300 Rieter Holding AG (Registered) (Switzerland) $ 627,464
1,600 Sommer Allibert (France) 544,669
1,645,770
Broadcasting (1.1%)
8,000 Capital Cities/ABC, Inc. 920,000
10,700 Clear Channel Communications, Inc. 798,488
23,700 Infinity Broadcasting Corp. Class A 850,238
2,568,726
Building and Construction (0.5%)
400 JGC Corp. (Japan) 4,774
62,000 Shimizu Corp. (Japan) 656,996
700 Taihei Dengyo Corp. Ltd. (Japan) 11,667
77,000 United Engineers Berhad Ltd. (Malaysia) 515,597
1,189,034
Building Products (1.7%)
127,200 CRH PLC (Ireland) 874,192
64,000 Hong Leong Industries (Malaysia) 343,865
10,120 Lafarge Coppee (Bearer) (France) 756,422
42,000 Marui Co. Ltd. (Japan) 743,210
26,000 Sungei Way Holdings Berhad (Malaysia) 97,995
15,500 Tarkett AG (Germany) 394,238
22,000 Tostem Corp. (Japan) 692,593
3,902,515
Business Services (5.2%)
14,000 Alco Standard Corp. 1,127,000
49,125 CUC International, Inc. 1,676,391
53,600 Corporate Express, Inc. 1,252,900
44,000 Dai Nippon Printing Co., Ltd. (Japan) 701,646
16,900 General Motors Corp. Class E 787,963
44,300 Interpublic Group Cos. Inc. 1,722,163
16,000 Komori Printing Machinery Co., Ltd. (Japan) 390,124
26,900 Officemax, Inc. 632,150
39,505 Paychex, Inc. 1,619,705
13,000 Randstad Holdings N.V. (Netherlands) 909,367
20,000 Securicor Group PLC Class A (United Kingdom) 341,396
25,000 Security Services PLC (United Kingdom) 391,054
400 Societe Generale de Surveillance Holdings
S.A. (Bearer) (Switzerland) 720,286
12,272,145
Cable Television (0.7%)
25,000 TCA Cable TV, Inc. 790,625
47,799 Tele-Communications Inc. Class A 884,282
1,674,907
Chemicals (3.0%)
7,000 Akzo-Nobel N.V. (Netherlands) 826,034
60,400 CBI Industries, Inc. 1,479,800
4,230 Dutch States Mines N.V. (Netherlands) 350,184
55,000 KAO Corp. (Japan) 639,404
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Chemicals (continued)
13,300 $
Schulman (A.), Inc. 352,450
70,000 Sekisui Chemical Co. Ltd. (Japan) 885,803
1,500 Solvay S.A. (Belgium) 785,653
50,400 Union Carbide Corp. 1,789,200
7,108,528
Combined Utilities (0.4%)
22,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG
(Germany) 841,596
Computer Equipment (0.3%)
69,000 Fujitsu Ltd. (Japan) 752,469
Computer Services (1.5%)
17,600 America Online, Inc. 1,159,400
24,000 First Data Corp. 1,401,000
20,298 Getronics Electric N.V. (Netherlands) 870,443
3,430,843
Computer Software (2.1%)
25,600 Adobe Systems, Inc. 1,305,600
21,212 Electronic Arts, Inc. 806,056
1,200 HCIA, Inc. 33,600
12,150 Microsoft Corp. 1,123,875
29,900 Novell, Inc. 538,200
19,700 Parametric Technology Corp. 1,088,425
4,895,756
Conglomerates (1.0%)
97,000 Hutchison Whampoa, Ltd. (Hong Kong) 467,461
70,500 Ogden Corp. 1,639,125
1,195 Preussag AG (Germany) 361,800
2,468,386
Consumer Products (0.7%)
37,900 Newell Co. 947,500
5,850 Unilever N.V. (Netherlands) 721,642
1,669,142
Consumer Services (1.2%)
29,900 Block (H & R), Inc. 1,166,100
42,400 Loewen Group, Inc. 1,621,800
2,787,900
Containers (1.4%)
50,400 Ball Corp. 1,713,600
38,200 Bemis Inc. 1,107,800
6,000 Mayr-Melnhof Karton AG (Austria) 374,745
3,196,145
Cosmetics (1.0%)
20,600 Avon Products, Inc. 1,454,875
48,600 Thermolase Corp. 965,925
2,420,800
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Electric Utilities (3.9%)
60,400 Cinergy Corp. $ 1,547,750
13,000 Hidrolectrica del Cantabrico, S.A. (Spain) 404,597
120,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 416,295
98,000 Iberdrola S.A. (Spain) 753,124
100,700 Long Island Lighting Co. 1,711,900
73,000 Northeast Utilities Co. 1,669,875
80,600 Potomac Electric Power Co. 1,722,825
22,300 South Wales Electricity PLC (United Kingdom) 315,945
29,900 Southern Electric PLC (United Kingdom) 367,015
5,000 Tokyo Electric Power Co., Inc. (Japan) 134,259
9,043,585
Electronics and Electrical Equipment (3.5%)
685 BBC Brown Boveri & Cie AG (Bearer)
(Switzerland) 724,141
12,000 Futaba Corp. (Japan) 567,901
129,400 General Electric Co. PLC (United Kingdom) 626,505
12,000 Hirose Electric Co. Ltd. (Japan) 820,988
23,600 Input/Output, Inc. 879,100
4,000 Kyocera Corp. (Japan) 355,556
62,000 Leader Universal (Malaysia) 205,092
6,000 Mabuchi Motors Co. Ltd. (Japan) 409,259
46,000 Matsushita Electric Industrial Co., Ltd.
(Japan) 724,074
25,500 Murata Manufacturing Co. Ltd. (Japan) 1,023,149
30,000 Nichicon Corp. (Japan) 432,099
29,000 Nippondenso Co., Ltd. (Japan) 525,103
44,000 Omron Tateisi Electronics Co. (Japan) 973,251
8,266,218
Energy-Related (1.2%)
25,980 IHC Caland N.V. (Netherlands) 756,960
31,850 Thermo Electron Corp. 1,373,531
6,100 VA Technolgie AG (Bearer) (Austria) 674,425
2,804,916
Entertainment (0.3%)
13,500 Disney (Walt) Productions, Inc. 757,688
Environmental Control (1.5%)
25,000 Kurita Water Industries Ltd. (Japan) 679,013
99,900 WMX Technologies, Inc. 2,934,563
3,613,576
Finance (3.7%)
11,000 ABN AMRO Holding N.V. (Netherlands) 423,540
9,100 Argentaria Corp. (Spain) 347,849
60,000 Asahi Bank Ltd. (Japan) 629,630
35,300 Beneficial Corp. 1,734,113
4,500 Cetelem Group (France) 697,688
6,600 Credit Locale de France S.A. (France) 558,745
56,000 Daiwa Securities Co. Ltd. (Japan) 708,642
17,050 Federal Home Loan Mortgage. Corp. 1,095,463
14,700 Federal National Mortgage Assn. 1,402,013
28,859 MBNA Corp. 1,024,495
8,622,178
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Food and Beverages (3.9%)
101,500 Archer Daniels Midland Co. $ 1,687,438
132,694 Argyll Group PLC (United Kingdom) 724,819
11,300 Coca-Cola Co. 726,025
50,400 Dole Food Co. 1,650,600
95,128 Greencore Group PLC (Ireland) 714,169
50,000 Guinness PLC (United Kingdom) 380,967
24,000 IBP, Inc. 1,182,000
790 Nestle S.A. (Registered) (Switzerland) 800,973
20,000 Pioneer Hi-Bred International, Inc. 860,000
52,488 Tate & Lyle PLC (United Kingdom) 373,860
9,100,851
Home Building (0.6%)
58,900 Clayton Homes, Inc. 1,391,513
Household Products (0.5%)
23,000 Blyth Industries, Inc. 1,115,500
Insurance (3.4%)
20,427 Aegon N.V. (Netherlands) 687,113
25,200 Aetna Life & Casualty Co. 1,719,900
6,300 General RE Corp. 936,338
87,800 Jardine Matheson Holdings Ltd. (Singapore) 632,160
10,000 Mapfre Vida Seguros (Spain) 548,240
132,352 Royal Insurance Holdings PLC (United Kingdom) 690,090
450 Swiss Reinsurance Co. (Registered)
(Switzerland) 365,300
44,000 Tokio Marine & Fire Insurance Co. Ltd. (The)
(Japan) 525,103
100,700 USF&G Corp. 1,825,188
7,929,432
Leisure (0.3%)
5,264 Zodiac (France) 688,814
Lodging (0.8%)
42,080 Hospitality Franchise Systems, Inc. 1,972,500
Machinery (1.1%)
45,300 Harnischfeger Industries, Inc. 1,664,775
58,400 Siebe PLC (United Kingdom) 602,657
100,000 Weir Group PLC (The) (United Kingdom) 386,398
2,653,830
Medical Equipment and Supplies (2.6%)
45,300 Baxter International, Inc. 1,766,700
28,400 Boston Scientific Corp. 1,128,900
12,450 Medtronic, Inc. 1,174,969
32,100 Sola International, Inc. 734,288
5,700 Stryker Corp. 237,975
38,200 U.S. Surgical Corp. 969,325
6,012,157
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Metals and Mining (1.7%)
50,400 Alumax, Inc. $ 1,719,900
54,244 Freeport-McMoRan Copper & Gold Co., Inc.
Class B 1,267,954
77,300 Freeport-McMoRan Inc. 434,813
685 N.V. Bekaert S.A. (Belgium) 522,844
3,945,511
Networking Equipment (0.8%)
27,500 Cisco Systems, Inc. 1,804,688
Office Equipment (0.3%)
19,000 Viking Office Products, Inc. 684,000
Oil and Gas (3.2%)
35,300 Anadarko Petroleum Corp. 1,685,575
51,322 Burmah Oil PLC (United Kingdom) 760,576
47,800 Columbia Gas System, Inc. 1,684,950
70,500 Occidental Petroleum Corp. 1,533,375
30,000 Repsol S.A. (Spain) 942,064
4,600 Repsol S.A. ADS (Spain) 145,475
9,100 Shell Transportation & Trading (United
Kingdom) 103,863
9,000 Societe Nationale Elf Aquitaine (Bearer)
(France) 659,324
7,515,202
Paper (0.7%)
36,000 Cartiere Burgo S.P.A. (Italy) 244,284
42,400 Repola (Finland) 811,664
40,800 Svenska Cellulosa AB Ser. B (Sweden) 670,979
1,726,927
Pharmaceuticals and Biotechnology (5.1%)
25,000 Astra B Free (Sweden) 812,000
22,700 Bristol-Myers Squibb Co. 1,557,788
1,200 Ciba-Geigy AG (Registered) (Switzerland) 851,368
25,200 Lilly (Eli) & Co. 2,063,250
31,800 Pfizer, Inc. 1,570,125
5,100 Schering AG (Germany) 372,110
12,400 Thermo Cardiosystems, Inc. 488,250
42,800 Upjohn Co. 1,813,650
19,000 Warner-Lambert Co. 1,717,125
32,000 Yamanouchi Pharmaceutical Co. Ltd. (Japan) 681,482
11,927,148
Photography (1.5%)
27,700 Eastman Kodak Co. 1,596,213
42,800 Polaroid Corp. 1,867,150
3,463,363
Publishing (0.5%)
21,600 Singapore Press Holdings (Registered)
(Singapore) 298,141
9,363 Wolters Kluwer N.V. (Netherlands) 825,812
1,123,953
Railroads (0.7%)
26,600 Union Pacific Corp. 1,742,300
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Real Estate (2.3%)
79,000 Cheung Kong Holdings Ltd. (Hong Kong) $ 391,953
100,700 Debartolo Realty Corp. 1,422,388
111,000 Hong Kong Land Holdings Ltd. (Hong Kong) 202,020
51,300 Meditrust Corp. 1,686,488
40,300 Nationwide Health Properties, Inc. 1,576,738
5,279,587
Recreation (0.2%)
43,000 Genting Berhad Co. (Malaysia) 381,034
Restaurants (1.3%)
27,600 Lone Star Steakhouse & Saloon 1,107,450
18,400 McDonald's Corp. 671,600
39,200 Outback Steakhouse, Inc. 1,264,200
3,043,250
Retail (3.9%)
32,000 CompUSA, Inc. 1,184,000
50,000 Cycle & Carriage Ltd. (Singapore) 457,747
30,700 Gymboree Corp. 913,325
29,100 Heilig-Meyers Co. 640,200
17,000 Ito-Yokado Co., Ltd. (Japan) 911,214
120,900 K mart Corp. 1,647,263
53,400 Kroger Co. 1,742,175
20,500 Office Depot, Inc. 638,063
234,800 Sears PLC (United Kingdom) 408,086
13,950 Sunglass Hut International 592,875
9,134,948
Semiconductors (4.3%)
40,300 Analog Devices Inc. 1,395,388
7,600 Austria Mikro Systeme International (Austria) 1,334,846
8,300 Lam Research Corp. 500,075
16,400 Linear Technology Corp. 1,328,400
35,900 Maxim Integrated Products Inc. 2,737,375
17,000 Rohm Co. Ltd. (Japan) 1,054,630
18,000 SGS-Thomson Microelectronics ADR (France) 866,250
21,900 Xilinx, Inc. 938,963
10,155,927
Specialty Consumer Products (0.5%)
28,100 Department 56, Inc. 1,243,425
Steel (0.8%)
30,000 Danieli & Co. (Italy) 188,152
46,000 Nisshin Steel Co., Ltd. (Japan) 187,407
24,100 Nucor Corp. 1,180,900
4,000 Ugine S.A. (Bearer) (France) 254,570
1,811,029
Telephone Services (1.6%)
35,300 NYNEX Corp. 1,588,500
65 Nippon Telegraph and Telephone Corp. (Japan) 591,153
11,200 Royal PTT (United Kingdom) 386,277
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Telephone Services (continued)
21,600 Tele Danmark A/S ADS (Denmark) $ 575,100
163,126 Vodafone Group PLC (United Kingdom) 670,818
3,811,848
Textiles (0.5%)
60,000 IRO AB (Sweden) 637,266
65,000 Toray Industries Inc. (Japan) 425,978
1,063,244
Tire and Rubber (0.5%)
40,000 Bridgestone Corp. (Japan) 592,593
15,380 Michelin Corp. Class B (Registered) (France) 667,794
1,260,387
Tobacco (1.9%)
95,694 BAT Industries PLC (United Kingdom) 748,430
95,700 Dimon Inc. 1,674,750
27,700 Philip Morris Cos., Inc. 2,067,113
4,490,293
Transportation (0.2%)
34,000 Jurong Shipyard Ltd. (Singapore) 237,042
24,500 Yamato Transport Co. Ltd. (Japan) 257,099
494,141
Water Utilities (0.3%)
34,000 Anglian Water PLC (United Kingdom) 287,549
43,193 North West Water Group PLC (United Kingdom) 421,599
709,148
Wireless Communications (1.4%)
30,700 Airtouch Communications, Inc. 997,750
31,000 Paging Network, Inc. 1,224,500
38,050 Vanguard Cellular Systems, Inc. 1,032,106
3,254,356
Total Common Stocks (cost $193,673,023) $220,041,517
PREFERRED STOCKS (0.4%)*
NUMBER OF SHARES VALUE
2,000 Essilor International FRF 12.3 pfd.
(France) $ 245,846
3,600 Jungheinrich Prior DEM 6 pfd. (Germany) 802,728
Total Preferred Stocks (cost $993,426) $ 1,048,574
WARRANTS (--%)*+ (cost $--)
NUMBER OF WARRANTS EXPIRATION DATE VALUE
2,300 Rieter Holding 3/13/96 $ 5,739
<PAGE>
SHORT-TERM INVESTMENTS (6.5%)*
PRINCIPAL AMOUNT VALUE
$10,000,000 Federal National Mortgage Assn. 5.66s,
September 8, 1995 $ 9,988,994
5,306,000 Interest in $517,279,000 joint repurchase
agreement dated August 31, 1995 with Morgan
Stanley & Co. Inc., due September 1, 1995
with respect to various U.S. Treasury
obligations--maturity value of $5,306,850
for an effective yield of 5.77% 5,306,850
Total Short-Term Investments (cost
$15,295,844) $ 15,295,844
Total Investments (cost $209,962,293)*** $236,391,674
* Percentages indicated are based on total net assets of $234,283,915,
which correspond to a net asset value per Class A, Class B and Class M
share of $10.34, $10.28 and $10.33, respectively.
+ Non-income-producing security.
** Bankers Trust New York Corp. provides sub-custodian services to the fund.
*** The aggregate identified cost on a tax basis is $209,996,198, resulting
in gross unrealized appreciation and depreciation of $31,797,306 and
$5,401,830, respectively, or net unrealized appreciation of $26,395,476.
ADR or ADS after the name of a holding stands for American Depository
Receipt or American Depository Shares, respectively, representing
ownership of foreign securities on deposit with a domestic custodian
bank.
Forward Currency Contracts to Sell at August 31, 1995
Unrealized
Market Aggregate Delivery Appreciation/
Value Face Value Date (Depreciation)
British Pounds $ 4,165,330 $ 4,165,465 11/30/95 $ 135
Japanese Yen 13,734,811 13,793,394 2/20/96 58,583
Netherland
Guilders 2,273,561 2,326,600 11/30/95 53,039
Swiss Francs 1,919,048 1,880,595 11/30/95 (38,453)
$22,092,750 $22,166,054 $ 73,304
Diversification by Country
Percentage of net assets invested in foreign countries at August 31, 1995:
Austria 1.0% Japan 8.9%
Belgium 0.6 Malaysia 0.9
Denmark 0.2 Netherlands 3.0
Finland 0.3 Singapore 1.5
France 2.9 Spain 1.5
Germany 1.4 Sweden 1.2
Hong Kong 1.2 Switzerland 2.0
Ireland 1.0 United Kingdom 4.2
Italy 0.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of assets and liabilities
August 31, 1995 (Unaudited)
Assets
Investments in securities, at value (identified cost
$209,962,293) (Note 1) $236,391,674
Cash 773
Dividends, interest and other receivables 439,274
Receivable for shares of the fund sold 732,405
Receivable for securities sold 1,513,307
Receivable for open forward currency contracts 111,757
Unamortized organization expense (Note 1) 77,136
Total assets 239,266,326
Liabilities
Payable for securities purchased 3,788,216
Payable for shares of the fund repurchased 345,868
Payable for compensation of Manager (Note 2) 387,354
Payable for compensation of Trustees (Note 2) 324
Payable for investor servicing and custodian fees (Note 2) 85,488
Payable for distribution fees (Note 2) 188,840
Payable for organization expenses (Note 1) 98,304
Payable for open forward currency contracts 38,453
Other accrued expenses 49,564
Total liabilities 4,982,411
Net assets $234,283,915
Represented by
Paid-in capital (Notes 1 and 4) $201,263,778
Undistributed net investment income (Note 1) 727,343
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 5,790,109
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 26,502,685
Total--Representing net assets applicable to capital shares
outstanding $234,283,915
Computation of net asset value and offering price
Net asset value and redemption price per class A share
($120,648,730 divided by 11,672,250 shares) $10.34
Offering price per class A share (100/94.25 of $10.34)* $10.97
Net asset value and offering price per class B share
($112,804,140 divided by 10,969,935 shares)** $10.28
Net asset value and redemption price per class M share
($831,045 divided by 80,443 shares) $10.33
Offering price per class M share (100/96.5 of $10.33)* $10.70
* 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.
<PAGE>
Statement of operations
Six months ended August 31, 1995 (Unaudited)
Investment income:
Dividends (net of foreign tax of $126,549) $ 2,125,028
Interest 385,158
Total investment income 2,510,186
Expenses:
Compensation of Manager (Note 2) 710,769
Compensation of Trustees (Note 2) 4,939
Investor servicing and custodian fees (Note 2) 222,245
Distribution fees--class A (Note 2) 265,271
Distribution fees--class B (Note 2) 474,681
Distribution fees--class M (Note 2) 675
Reports to shareholders 54,192
Auditing 18,764
Legal 5,306
Postage 26,020
Registration fees 24,481
Administrative services (Note 2) 4,782
Amortization of organization expenses (Note 1) 9,104
Other 5,283
Total expenses 1,826,512
Net investment income 683,674
Net realized gain on investments (Notes 1 and 3) 5,893,847
Net realized gain on forward currency contracts and
translation of foreign currency (Notes 1 and 3) 259,826
Net unrealized appreciation of investments during the period 24,341,599
Net unrealized appreciation on forward currency contracts and
foreign currency translation during the period 236,996
Net gain on investments 30,732,268
Net increase in net assets resulting from operations $31,415,942
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
For the period
July 1, 1994
(commencement
Six months of operations)
ended to
August 31 February 28
1995* 1995
Increase in net assets
Operations:
Net investment income $683,674 $216,104
Net realized gain (loss) on investments
and foreign currency transactions 6,153,673 (349,641)
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 24,578,595 1,924,090
Net increase in net assets resulting from
operations 31,415,942 1,790,553
Distributions to shareholders from:
In excess of net realized gain on
investments:
Class A -- (176,618)
Class B -- (140,189)
Increase from capital share transactions
(Note 4) 33,756,642 167,537,585
Total increase in net assets 65,172,584 169,011,331
Beginning of period 169,111,331 100,000
End of period (including undistributed net
investment income of $727,343 and
$43,669, respectively) $234,283,915 $169,111,331
* Unaudited
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the
period
July 1, 1994
For the period (commencement For the period
July 3, 1995 Six of Six July 1, 1994
(commencement months operations) Months (commencement
of operations) ended to February ended of operations)
to August 31 August 31 28 August 31 to February 28
1995*+ 1995+ 1995* 1995+ 1995*
Class M Class B Class A
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.76 $ 8.80 $ 8.50 $ 8.83 $ 8.50
Investment operations:
Net investment income -- .02 -- .04 .03
Net realized and
unrealized gain on
investments .57 1.46 .32 1.47 .32
Total from investment
operations .57 1.48 .32 1.51 .35
Less distributions from:
Net realized gain on
investments -- -- (.02) -- (.02)
Total distributions -- -- (.02) -- (.02)
Net asset value, end of
period $10.33 $10.28 $ 8.80 $10.34 $ 8.83
Total investment return
at net asset value (%)
(a) (b) 5.84 16.82 3.77 17.10 4.13
Net assets, end of period
(in thousands) $831 $112,804 $75,998 $120,649 $93,114
Ratio of expenses to
average net assets (%)
(b) .34 1.04 1.45 .78 1.12
Ratio of net investment
income to average net
assets (%) (b) (.02) .20 .05 .46 .37
Portfolio Turnover (%)
(b) 37.38 37.38 46.52 37.38 46.52
</TABLE>
+ Unaudited
* Per share net investment income for the period ended February 28, 1995
for class A and class B and for the period ended August 31, 1995 for
class M has been determined on the basis of the weighted average number
of shares outstanding during the period.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Not annualized.
<PAGE>
Notes to financial statements
August 31, 1995 (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 seeks
capital appreciation primarily through a diversified portfolio consisting of
domestic growth, domestic value and international stocks.
The fund offers class A, class B, and class M shares. The fund commenced its
public offering of class M shares on July 3, 1995. 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 M shares are sold
with a maximum front-end sales charge of 3.50% and an ongoing distribution
fee that is higher than class A shares and lower than class B shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class including
the distribution fees applicable to such class. Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if
the fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
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's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc., and certain other accounts. These balances may be
invested in one or more repurchase agreements and/or short-term money market
instruments.
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. Putnam Management is responsible for determining
that the value of these underlying securities
<PAGE>
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.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, other assets and liabilities are recorded in the books and records
of the fund after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. The fund does not isolate that portion of
unrealized gains or losses resulting from changes in the foreign exchange
rate on investments from fluctuations arising from changes in the market
prices of the securities. Such fluctuations are included with the net
realized and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income and
foreign withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline in
value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The fund could be exposed to risk if the value of the currency changes
unfavorably. In addition, the fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their
contracts or if the fund is unable to enter into a closing position. The
maximum potential loss from forward currency contracts is the aggregate face
value in U.S. dollars at the time the contract was opened; however,
management believes the likelihood of such a loss to be remote.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986. 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.
H) 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
<PAGE>
distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
include the treatment of wash sales, realized gains and losses on foreign
exchange and timing for recognition of certain capital gains and losses.
Reclassifications are made to the fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offereing
of its shares were $98,304. These expenses are being amortized on a
straight-line basis over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund for
the quarter. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500 million,
0.55% of the next $500 million, 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 Putnam Management on the fund's portfolio transactions.
The fund also reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $910, and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee
meetings.
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.
Investor servicing and custodian fees reported in the Statement of operations
for the six months ended August 31, 1995 have been reduced by credits allowed
by PFTC.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments,
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.65%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund at an annual
rate of 0.50%, 1.00% and 0.75% of the average net assets attributable to
class A, class B and class M shares, respectively.
<PAGE>
For the six months ended August 31, 1995, Putnam Mutual Funds Corp., acting
as the underwriter, received net commissions of $83,376 from the sale of
class A shares and $984 for the sale of class M shares. There was $100,964 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of class
A shares purchased as part of an investment of $1 million or more. For the
six months ended August 31, 1995, Putnam Mutual Fnds Corp., acting as the
underwriter, received $460 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended August 31, 1995, purchases and sales of investment
securities other than short-term investments aggregated $106,209,886 and
$70,250,207 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 August 31, 1995, there was an unlimited number of shares of beneficial
interest authorized, divided into three classes, class A, class B and class M
capital shares. Transactions in capital shares were as follows:
For the period July 1, 1994
Six months (commencement of
ended operations) to
August 31 February 28
1995 1995
Class A Shares Amount Shares Amount
Shares sold 2,405,584 $ 22,831,922 12,088,511 $105,678,204
Shares issued
in connection
with
reinvestment
of
distributions 8 64 19,922 170,381
2,405,592 22,831,986 12,108,433 105,848,585
Shares
repurchased (1,282,676) (12,174,457) (1,564,981) (13,649,105)
Net increase 1,122,916 $ 10,657,529 10,543,452 $ 92,199,480
<PAGE>
For the period July 1, 1994
Six months (commencement of
ended operations) to
August 31 February 28
1995 1995
Class B Shares Amount Shares Amount
Shares sold 3,239,030 $30,834,045 9,165,191 $80,027,296
Shares issued in
connection with
reinvestment of
distributions -- -- 15,669 133,658
3,239,030 30,834,045 9,180,860 80,160,954
Shares
repurchased (902,566) (8,552,599) (553,271) (4,822,849)
Net increase 2,336,464 $22,281,446 8,627,589 $75,338,105
For the period July
3, 1995
(commencement of
operations) to
August 31
1995
Class M Shares Amount
Shares sold 81,034 $823,745
Shares issued in connection
with reinvestment of
distributions -- --
81,034 823,745
Shares repurchased (591) (6,078)
Net increase 80,443 $817,667
<PAGE>
Our commitment to quality service
> CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal for
the past five years. In 1994, over 80,000 tests of 55 shareholder service
components demonstrated that Putnam outperformed the industry standard in
every category.
> HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.*
> SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
> ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative.
> To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number: 1-800-225-1581.
* Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market.
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John R. Verani
Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
David L. King
Vice President and Fund Manager
John K. Storkerson
Vice President and Fund Manager
Charles H. Swanberg
Vice President and Fund Manager
William N. Shiebler
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Diversified
Equity Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives and operating policies of the fund, and the most recent
copy of the Putnam Quarterly Performance Summary.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other
agency, and involve risk, including the possible loss of principal amount
invested.
<PAGE>
[Putnam logo]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
20665-522/525/2AF
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM); Service Mark symbol is replaced
with (SM)
