Putnam
Diversified
Equity
Trust
ANNUAL REPORT
February 28, 1995
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
> "We believe Putnam Diversified Equity Trust's three-part structure offers
shareholders an extra level of diversification. A portfolio combining value
stocks (stocks of companies trading below their true worth), growth, and
international stocks may allow investors to pursue the growth potential of all
three markets while providing some insulation from the impact of major price
fluctuations."
- --David King, portfolio manager
> 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.
FISCAL 1995 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Class A Class B
Total return: NAV POP NAV CDSC
<S> <C> <C> <C> <C> <C>
.................................................................................................
(change in value
during period plus
reinvested distributions)
Life of fund
(since 7/1/94) 4.13% -0.55% 3.77% -1.23%
Share value: NAV POP NAV
..................................................................................................
7/1/94 $ 8.50 $ 8.90 $8.50
2/28/95 8.83 9.25 8.80
Distributions: Investment Short-term
No. income capital gains Total
...................................................................................................
Class A 1 -- $0.020 $ 0.020
Class B 1 -- $0.020 0.020
</TABLE>
Performance data represent past results and will differ for each class of
shares. For performance over longer periods, see page 9. POP assumes 4.50%
maximum sales charge. CDSC assumes 5% maximum contingent deferred sales
charge.
<PAGE>
From the Chairman
(Photo--George Putnam)
(c) Karsh, Ottawa
Dear Shareholder:
Putnam Diversified Equity Trust closed its initial eight- month fiscal period on
February 28, 1995, with positive results at net asset value, demonstrating the
effectiveness of a portfolio divided among value, growth, and international
stocks. Furthermore, the fund generated these returns in stock markets beset by
turbulence and uncertainty, both at home and abroad.
The results also speak well of your fund's management team. David King manages
the value portion of the portfolio, while Charles Swanberg oversees the growth
stocks, and John Storkerson, the international securities.
The idea behind diversifying the portfolio among these three market segments is
that the variations in performance among the sectors should help smooth out the
fund's overall performance, even if one or more of the sectors encounters
volatility.
Dave, Chuck, and John discuss the fund's results to date and their outlook
for the coming year in the following report.
Respectfully yours,
(Signature of George Putnam)
George Putnam
Chairman of the Trustees
April 19, 1995
<PAGE>
Report from the fund managers
David L. King, lead manager
John K. Storkerson
Charles H. Swanberg
Despite the impact of currency fluctuations, a Mexican financial crisis, and
rising interest rates, Putnam Diversified Equity Trust performed respectably
over its first, albeit abbreviated, fiscal year. The fund's three-part structure
has proven its ability to withstand volatility in one sector of the market while
benefiting from opportunities in others. Although fund performance for the eight
months ended February 28, 1995 lagged behind the broad-based Standard and Poor's
500((r)) Index, it finished well ahead of one of the better-known international
indexes -- the Morgan Stanley Capital International EAFE Index, which reflects
markets in Europe, Australia, and the Far East. Full performance details can be
found on page 9.
Your fund's management approach draws on the expertise of specialists in each of
the three market sectors represented in its portfolio -- value, growth, and
international stocks. Since each of these sectors is likely to respond
differently to changing market and economic conditions, we will discuss them in
the same way that we manage them -- one at a time and in depth.
> VALUE STOCKS FALTER, SHOW SIGNS OF RECOVERY
Holdings in the value sector, which includes stocks of companies currently
trading below what we believe is their true worth, were enjoying firm prices
when the fund was introduced in July 1994. Industrial, chemical, and metal
companies were reporting strong earnings, often pleasantly surprising analysts.
The prices of other stocks held in the value portion of the portfolio, such as
Union Carbide and Alumax, benefited from this earnings momentum.
The year-long weakness in bond prices, however, ultimately took its toll. As
investors began to fear that rising interest rates would eventually choke the
economy, they anticipated -- and consequently, contributed to -- a decline in
industrial stocks. Furthermore, while the stocks in this sector typically have
higher dividend yields than those of the average company represented in the S&P
500, this year's dramatically higher bond
<PAGE>
yields lured investors away from stocks altogether. Value stocks fell on this
negative sentiment, underperfoming the broader market for the second half of
calendar 1994.
We have seen signs of recovery in this sector during the first two months of
1995, but it appears that larger, growth-oriented companies are currently
driving the domestic market. Nevertheless, we remain optimistic about many of
the fund's value holdings. Tobacco stocks appear attractively valued; most
investors, dissuaded by the tobacco industry's domestic problems, have ignored
their robust overseas earnings. We believe IBM, after years of poor earnings and
subsequent restructuring, is poised to do well in the coming months. In
addition, we are emphasizing stocks of financial-sector concerns -- banks,
brokerages, and insurance companies -- which were beaten down by 1994's bond
market debacle. Even in a slower economy, we consider this sector to have strong
potential for a comeback.
> GROWTH STOCKS MAINTAIN THEIR VIGOR
Holdings in the fund's growth sector -- reserved for stocks of companies whose
earnings per share are expected to grow significantly faster than the market
average -- were also affected by rising interest rates. Their healthy earnings
helped support their prices, but until relatively recently, were not sufficient
to spark any dramatic moves upward. In January 1995, the Federal
TOP FIVE INDUSTRY SECTORS (2/28/95)
Finance 5.7%
Retail 4.5%
Banks 4.3%
Business Services 4.3%
Insurance 4.2%
<PAGE>
Reserve Board appeared to reach a stopping point in its series of interest-rate
increases. Market attention turned to stocks with the potential to do well in a
slowing economy -- prompting a rally in this sector.
We believe investors will continue to favor quality stocks with records of
consistent earnings growth. Among our holdings of this type are Pfizer,
McDonald's, and Coca-Cola. Indeed, Coca- Cola is a quintessential growth stock.
It has a record of 20% annual earnings growth, steady and high cash flow, low
capital requirements, a strong balance sheet, and one of the world's most widely
recognized brand names.
Among other holdings in the growth sector are Department 56, a leading maker of
collectible ceramic toy villages now enjoying substantial increases in sales and
earnings; Maxim Integrated Products, a manufacturer of semiconductors, currently
witnessing a global explosion in demand for its products; and Medtronic, a
medical-devices firm which produces a widely used heart pacemaker.
> INTERNATIONAL STOCKS, BUFFETED BY EVENTS, REMAIN UNDERVALUED
When your fund began operations, the combination of high bond yields around the
globe and interest-rate uncertainties in the United States was effectively
holding down international equity prices. December's Mexican financial crisis
hurt some emerging markets in Latin America and even Asia, but fortunately, this
had little impact on the fund. Putnam had identified Mexico as a potential
problem in the summer of 1994; consequently, your fund had no exposure to Mexico
and little exposure to Latin America. We believe these markets could rebound
eventually, but consider them too volatile for investment now.
In spite of these difficulties, however, there are encouraging signs around the
globe for investors. We are particularly optimistic about our European holdings.
French equities appear dramatically undervalued, even as corporate earnings
there are growing. However,
<PAGE>
TOP THREE VALUE STOCK HOLDINGS
Bear Stearns Companies, Inc.
Securities brokerage and investment bank.
...............................................................................
Lincoln National Corp.
Insurance services provider.
...............................................................................
Aetna Life & Casualty Co.
Provides insurance and financial services.
TOP THREE GROWTH STOCK HOLDINGS
Pfizer, Inc.
Produces ethical drugs and hospital products.
...............................................................................
Boston Scientific Corp.
Develops medical devices.
...............................................................................
H&R Block, Inc.
Income tax preparation and on-line services.
TOP THREE INTERNATIONAL STOCK HOLDINGS
Getronics N.V. (Netherlands)
Installation and maintenance of computers and computer systems.
...............................................................................
Credit Locale de France (France) Specialized banking services to public
institutions.
...............................................................................
BASF AG Co. (Germany)
Manufactures chemical, industrial, and consumer products.
These holdings represent 6.87% of the fund's net assets as of 2/28/95.
Portfolio holdings will vary over time.
high unemployment and political uncertainty might delay a recovery in French
stocks. Irish companies are thriving within the European Community, and
Ireland's economy continues to post strong GDP numbers. The United Kingdom also
looks positive for investors in the coming months, as corporate earnings and
industrial production continue to rise.
In Asia, we are upbeat about Singapore, where a ready supply of well-educated,
inexpensive workers continues to bolster the dynamic economy. The near-term
outlook for Japan is somewhat more difficult to assess. Japan was recovering,
albeit slowly, from a deep recession when the Kobe earthquake struck. Then came
the devaluation of the dollar, which has posed some difficulties for Japan's
markets. Ultimately, though, Japanese companies are extremely competitive
internationally. We believe Japanese stocks to be capable of moves upward in the
months ahead.
<PAGE>
> A STRATEGY FOR ANY MARKET
We believe your fund's positive performance since inception, while not dramatic,
is a good indication that its three-part strategy has been successful. The mix
of growth, value, and international stocks -- each accounting for approximately
one third of the portfolio -- was designed to do well in many different types of
markets. And in a year of international crises and domestic uncertainty, we
believe the new fund has proved its worth.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of February 28, 1995, there is no guarantee the fund will continue
to hold these securities in the future. International investing involves certain
risks such as political instability and currency fluctuations.
<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. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 2/28/95
<TABLE>
<CAPTION>
Class A Class B Standard & Morgan
Poor's 500 Stanley
NAV POP NAV CDSC Index EAFE
<S> <C> <C> <C> <C> <C> <C>
Life of fund
(since 7/1/94) 4.13% -0.55% 3.77% -1.23% 11.77% -5.00%
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 3/31/95 (most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
Life of fund
(since 7/1/94) 6.48% 1.70% 6.13% 1.13%
</TABLE>
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.
<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.
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 for class A 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>
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam Diversified Equity Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments owned, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Putnam Diversified Equity Trust at
February 28, 1995 and the results of its operations, the changes in its net
assets and the financial highlights for the period July 1, 1994 (commencement of
operations) to February 28, 1995, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of investments owned at February 28, 1995 by correspondence with
the custodian and brokers, and the application of alternative auditing
procedures where confirmations from brokers were not received, provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
April 13, 1995
<PAGE>
Portfolio of investments owned
February 28, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Common Stocks (91.6%)*
Number of Shares Value
Advertising (0.2%)
5,000 Omnicom Group, Inc. $ 265,625
Aerospace (0.6%)
21,200 Flight Safety International, Inc. 940,750
Airlines (0.4%)
6,310 K.L.M. Royal Dutch Airlines (Netherlands)+ 182,871
27,000 Singapore Airlines Ltd. (Singapore) 270,373
38,500 Swire Pacific Ltd. Class A (Hong Kong) 270,162
723,406
Automotive (1.5%)
10,500 Autoliv AB (Sweden)+ 386,098
30,000 General Motors Corp. 1,278,750
61,000 Mitsubishi Motors Corp. (Japan) 504,653
3,000 Peugeot Citroen S.A. (France) 409,118
2,578,619
Banks (4.3%)
130,335 Allied Irish Banks PLC (Ireland) 553,780
45,000 Asahi Bank Ltd. (Japan) 525,852
25,000 Bankers Trust New York Corp.S. 1,578,125
50,695 Barclays Bank PLC (United Kingdom) 486,378
130,500 Christiana Bank & Trust (Norway) 258,299
28,300 Guoco Group Ltd. (Hong Kong) 109,634
16,600 HSBC Holdings PLC (Hong Kong) 174,459
59,000 Malayan Banking BHD (Malaysia) 390,639
22,000 Mitsubishi Bank (Japan) 482,317
3,800 Societe Generale (France) 361,640
5,000 Southern Bank (Malaysia) 8,658
1,200 Southern Bank (New Class A) (Malaysia) 2,228
515 Union Bank of Switzerland (Bearer)
(Switzerland) 432,153
45,000 United Overseas Bank Ltd. (Singapore) 438,192
7,200 Wells Fargo & Co. 1,156,500
28,000 Yamaguchi Bank Ltd. (Japan) 463,288
7,422,142
Basic Industrial Products (1.2%)
37,000 Asahi Diamond Industrial Co., Ltd. (Japan) 505,069
54,000 Mitsui Fudoscan Co. Ltd. (Japan) 374,150
460 Rieter Holding AG (Registered) (Switzerland) 640,233
1,440 Sommer Allibert (France) 489,258
2,008,710
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Common Stocks
Number of Shares Value
Broadcasting (0.8%)
13,700 Clear Channel Communications, Inc.+ $ 779,188
15,800 Infinity Broadcasting Corp. Class A+ 556,950
1,336,138
Building and Construction (0.6%)
14,000 JGC Corp. (Japan) 225,854
40,000 Shimizu Corp. (Japan) 397,104
7,000 Taihei Dengyo Ltd. (Japan) 131,024
52,000 United Engineers (Malaysia) 289,286
1,043,268
Building Products (1.1%)
110,000 CRH PLC (Ireland) 622,006
70,000 Hong Leong Industries (Malaysia) 340,060
7,200 Lafarge Coppee (Bearer) (France) 464,290
23,000 Marui Co. Ltd. (Japan) 328,231
84 Meyer International PLC (United Kingdom) 415
26,000 Sungei Way Holdings Berhad (Malaysia) 105,934
1,860,936
Business Equipment and Services (0.6%)
28,000 Dai Nippon Printing Co., Ltd. (Japan) 414,064
28,200 Office Depot, Inc.+ 659,175
1,073,239
Business Services (4.3%)
39,000 Block (H & R), Inc. 1,467,375
25,950 CUC International, Inc.+ 914,738
35,500 Interpublic Group Cos. Inc. 1,211,438
16,000 Komori Corp. (Japan) 342,502
62,000 Ogden Corp. 1,325,250
13,600 Olsten Corp. (The) 467,500
22,670 Paychex, Inc. 929,470
25,000 Security Services PLC (United Kingdom) 295,663
330 Societe Generale De Surveillance Holdings S.A.
(Bearer) (Switzerland) 480,927
7,434,863
Cable Television (0.8%)
22,800 TCA Cable TV, Inc. 595,650
31,776 Tele-Communications Inc. Class A+ 722,904
1,318,554
Cellular Communications (1.6%)
23,500 Airtouch Communications, Inc.+ 640,375
31,000 Paging Network, Inc.+ 1,030,750
38,050 Vanguard Cellular Systems, Inc.+ 989,300
2,660,425
<PAGE>
Chemicals (2.7%)
3,700 Akzo-Nobel N.V. (Netherlands) $ 432,306
2,940 BASF AG Company (Germany) 649,444
3,400 Dutch State Mines N.V. (Netherlands) 275,900
2,700 Olin Corp. 137,363
44,500 Schulman (A.), Inc. 1,268,250
1,000 Sekisui Chemical Co., Ltd. (Japan) 9,819
1,100 Solvay S.A. (Belgium) 567,755
45,000 Union Carbide Corp. 1,288,125
4,628,962
Combined Utilities (0.5%)
6,400 Pacific Gas & Electric Co. 164,000
1,750 Veba (Vereinigte Elektrizitaets Bergwerks) AG
(Germany) 632,314
796,314
Computer Equipment (0.3%)
54,000 Fujitsu Ltd. (Japan) 492,534
Computer Services (1.8%)
9,500 America Online, Inc.+ 674,500
10,000 CSK Corp. (Japan) 273,009
24,000 First Data Corp. 1,290,000
20,000 Getronics N.V. (Netherlands) 740,696
2,978,205
Computer Software (1.1%)
16,870 Lotus Development Corp.+ 704,323
53,800 Novell, Inc.+ 1,126,438
1,830,761
Computers (1.3%)
15,000 IBM Corp. 1,128,750
115,000 Unisys Corp.+ 1,020,625
2,149,375
Consumer Products (0.5%)
36,400 Newell Co. 869,050
Cosmetics (0.9%)
26,500 Avon Products, Inc. 1,490,625
Consumer Services (0.8%)
42,400 Loewen Group, Inc. 1,181,900
22,000 Pearson PLC (United Kingdom) 192,786
1,374,686
Containers (1.4%)
35,000 Ball Corp. 1,146,250
38,200 Bemis Inc. 1,036,175
4,000 Toyo Seikan Kaisha (Japan) 114,581
2,297,006
<PAGE>
Electric Utilities (4.0%)
10,700 Hidrolectrica del Cantabrico, S.A. (Spain) $ 285,166
7,000 Hirose Electric Co. Ltd. (Japan) 372,803
40,000 Houston Industries Inc. 1,530,000
61,000 Iberdrola S.A. (Spain) 381,396
55,400 Northeast Utilities 1,260,350
47,500 Public Service Co. of Colorado 1,454,688
22,300 South Wales Electricity PLC
(United Kingdom) 287,387
29,900 Southern Electric PLC
(United Kingdom) 347,931
25,200 Texas Utilities Co. 828,450
6,748,171
Electronics and Electrical Equipment (4.0%)
585 BBC Brown Boveri & Cie, Ltd. (Switzerland) 509,828
4,000 Draka Holding (Netherlands) 107,138
8,000 Futaba Corp. (Japan) 328,438
84,400 General Electric Co. PLC (United Kingdom) 387,506
110,000 Leader Universal (Malaysia)+ 385,704
20,000 Leader Universal (New Class A) (Malaysia)+ 66,600
33,000 Matsushita Electric Industrial Co., Ltd.
(Japan) 477,767
14,500 Murata Manufacturing Co. Ltd. (Japan) 478,335
30,000 Nichicon Corp. (Japan) 390,900
17,000 Nippondenso Co., Ltd. (Japan) 300,621
22,000 Omron Tateisi Electronics Co. (Japan) 373,113
9,000 Secom Co. (Japan) 476,526
7,000 Sony Corp. (Japan) 304,033
80,000 Westinghouse Electric Corp. 1,240,000
13,000 Xilinx Inc.+ 869,375
6,695,884
Energy-Related (0.5%)
16,500 IHC Caland N.V. (Netherlands) 402,684
4,600 VA Technologie AG (Bearer) (Austria) 494,581
897,265
Entertainment (--%)
2,680 National Gaming Corp.+ 25,460
Environmental Control (0.7%)
45,000 WMX Technologies, Inc. 1,186,875
Finance (5.7%)
11,000 ABN AMRO Holding N.V. (Netherlands) 399,329
9,100 Argentaria Corp. (Spain) 294,087
91,200 Bear Stearns Companies, Inc. 1,710,000
30,200 Beneficial Corp. 1,121,175
1,000 Cetelem Group (France) 177,089
8,900 Credit Locale de France (France) 707,423
<PAGE>
Finance (Continued)
42,000 Daiwa Securities Co. Ltd. (Japan) $ 469,081
20,200 Federal Home Loan Mortgage Corp. 1,171,600
16,100 Federal National Mortgage Association 1,241,713
45,400 MBNA Corp. 1,197,425
32,000 Student Loan Marketing Assn. 1,180,000
9,668,922
Food (1.5%)
69,535 Argyll Group PLC (United Kingdom) 296,685
94,271 Greencore Group PLC (Ireland) 637,300
36,000 IBP, Inc. 1,147,500
500 Nestle A.G. (Registered) (Switzerland) 483,088
2,564,573
Forest Products (0.1%)
19,000 Rengo Co. Ltd. (Japan) 131,054
Health Care (0.8%)
18,265 Lincare Holdings, Inc.+ 511,420
23,700 Value Health, Inc.+ 882,825
1,394,245
Household Products (0.6%)
18,400 Blyth Industries, Inc.+ 522,100
83,221 Tate & Lyle PLC (United Kingdom) 573,135
1,095,235
Insurance (4.2%)
30,000 Aetna Life & Casualty Co. 1,612,500
8,800 General RE Corp. 1,146,200
7,025 Internationale Nederlanden (Netherlands) 343,321
40,000 Lincoln National Corp. 1,615,050
8,420 Mapfre Vida Seguros (Spain) 362,596
80,000 Royal Insurance Holdings PLC (United Kingdom) 353,368
28,000 Tokio Marine & Fire Insurance Co. Ltd. (The)
(Japan) 292,452
72,000 USF&G Corp. 1,026,000
400 Zurich Versicherungs (Bearer) (Switzerland) 382,586
7,134,073
Leisure (0.3%)
1,116 Zodiac (France) 467,446
Lodging (0.6%)
34,080 Hospitality Franchise System, Inc. 967,020
<PAGE>
Machinery (1.5%)
28,200 Harnischfeger Industries, Inc. $ 786,075
2,000 Jungheinrich Prior (Germany), Preferred 461,233
55,000 Komatsu, Ltd. (Japan) 403,260
68,100 Siebe PLC (United Kingdom) 566,034
20,000 Takuma Co. Ltd. (Japan) 295,760
2,512,362
Medical Equipment and Supplies (2.3%)
40,000 Baxter International, Inc. 1,245,000
70,900 Boston Scientific Corp.+ 1,533,213
2,000 Essilor International (France), Preferred 208,455
13,300 Medtronic, Inc. 798,000
8,900 Sola International, Inc.+ 151,300
3,935,968
Metals and Mining (1.8%)
40,000 Alumax, Inc.+ 1,145,000
330 Fischer (Georg) (Bearer) (Switzerland) 419,243
1,333 Freeport-McMoRan Copper & Gold Co., Inc. 27,993
57,600 Freeport-McMoRan, Inc. 1,036,800
580 N.V. Bekaert S.A. (Belgium) 378,420
3,007,456
Oil and Gas (2.7%)
30,000 Anadarko Petroleum Corp. 1,316,250
40,848 Burmah Oil PLC (United Kingdom) 539,998
5,300 McDermott International, Inc. 148,400
65,000 Occidental Petroleum Corp. 1,291,875
20,000 Repsol S.A. (Spain) 567,410
9,100 Shell Transportation & Trading (United
Kingdom) 101,210
7,800 Societe Nationale Elf Aquitaine (France) 559,661
4,524,804
Paper (1.2%)
12,700 Alco Standard Corp. 863,600
33,200 Repola (Finland) 586,365
35,600 Svenska Cellulosa Ser. B (Sweden) 630,287
2,080,252
Pharmaceuticals and Biotechnology (3.5%)
20,000 Astra B Free (Sweden) 494,368
25,000 Bristol-Myers Squibb Co. 1,550,000
18,000 Lilly (Eli) & Co. 1,206,000
19,100 Pfizer, Inc. 1,580,575
810 Schering AG (Germany) 620,263
28,000 Yamanouchi Pharmaceutical Co. (Japan)+ 547,260
5,998,466
<PAGE>
Photography (0.8%)
25,000 Eastman Kodak Co. $ 1,275,000
Publishing (1.2%)
27,500 Dun & Bradstreet Corp. 1,419,688
18,000 Singapore Press (Singapore)+ 309,530
4,300 Wolters Kluwer N.V. (Netherlands) 322,959
2,052,177
Railroads (1.5%)
4,200 Illinois Central Corp. 142,275
70,000 Southern Pacific Rail Corp.+ 1,251,250
21,500 Union Pacific Corp. 1,123,375
2,516,900
Real Estate (2.5%)
35,000 Cheung Kong Holdings Ltd. (Hong Kong) 152,569
72,000 Debartolo Realty Corp. 1,008,000
50,000 Meditrust Corp. 1,600,000
39,600 Nationwide Health Properties, Inc. 1,425,600
4,186,169
Recreation (0.2%)
43,000 Genting Berhad Co. (Malaysia) 372,303
Restaurants (1.4%)
14,600 Brinker International, Inc.+ 290,175
12,800 Buffets, Inc.+ 136,000
30,500 McDonald's Corp. 1,014,125
33,700 Outback Steakhouse, Inc.+ 880,413
2,320,713
Retail (4.5%)
26,900 Albertsons, Inc. 827,175
50,000 Cycle & Carriage Ltd. (Singapore) 379,835
29,600 Gymboree Corp.+ 710,400
31,800 Heilig-Meyers Co. 751,275
25,900 Home Depot, Inc. (The) 1,162,263
9,000 Ito-Yokado Co., Ltd. (Japan) 409,514
15,000 Jardine Matheson Holdings (Singapore) 138,000
38,200 Kroger Co.+ 1,002,750
18,100 Lowe's Cos., Inc. 608,613
174,000 Sears (United Kingdom) 272,728
32,450 Sunglass Hut International+ 888,319
15,900 Tiffany & Co. New 500,850
7,651,722
<PAGE>
Semiconductors (2.7%)
44,100 Analog Devices Inc.+ $ 1,108,013
7,600 Austria Mikro Systeme International (Austria) 638,500
20,200 Linear Technology Corp. 1,100,900
36,100 Maxim Integrated Products Inc.+ 1,186,788
20,000 SGS-Thomson Microelectronics ADR (France)+ 500,000
4,534,201
Shipping (0.2%)
64,400 Associated British Ports (United Kingdom) 270,190
Soft Drinks (0.8%)
23,500 Coca-Cola Co. 1,292,500
Specialty Consumer Products (1.3%)
34,800 Department 56, Inc.+ 1,348,500
11,200 Gillette Co. (The) 886,200
2,234,700
Steel (2.0%)
238,000 British Steel PLC (United Kingdom) 600,998
43,200 CBI Industries, Inc. 1,047,600
120,000 Nisshin Steel Co., Ltd. (Japan) 502,584
14,400 Nucor Corp. 808,200
6,900 Ugine S.A. (Bearer) (France) 493,338
3,452,720
Telephone Services (2.9%)
30,500 ALC Communications Corp.+ 899,750
23,500 Century Telephone Enterprises, Inc. 731,438
25,200 NYNEX Corp. 989,100
11,200 Royal PTT (Netherlands) 394,972
21,600 Tele Danmark A/S ADS (Denmark)+ 542,700
17,700 Telephone & Data Systems, Inc. 807,563
163,126 Vodafone Group PLC (United Kingdom) 488,122
4,853,645
Textiles (0.2%)
65,000 Toray Industries Inc. (Japan) 407,342
Tire and Rubber (0.5%)
24,000 Bridgestone Corp. (Japan) 327,612
12,380 Michelin Corp. Class B (France)+ 494,669
822,281
Tobacco (3.0%)
37,200 American Brands, Inc. 1,390,350
75,000 BAT Industries PLC (United Kingdom)+ 493,958
70,000 Dibrell Bros., Inc. 1,312,500
<PAGE>
Tobacco (Continued)
19,800 Philip Morris Cos., Inc. $ 1,202,850
23,300 UST, Inc. 693,175
5,092,833
Transportation (0.3%)
34,000 Jurong Shipyard Ltd. (Singapore) 284,118
15,000 Yamato Transport Co. Ltd. (Japan) 155,120
439,238
Water Utilities (0.3%)
34,000 Anglian Water PLC (United Kingdom) 258,380
31,700 North West Water Group PLC
(United Kingdom) 257,965
516,345
Total Common Stocks
(cost $152,812,921) $154,900,703
Short-Term Investments (7.0%)*
Principal Amount Value
$5,000,000 Federal Home Loan Banks 5.85s,
March 23, 1995 $ 4,982,125
858,000 Federal Home Loan Mortgage Corp. 5.95s, March
1, 1995 858,000
6,000,000 Interest in $478,612,000 joint repurchase
agreement dated February 28, 1995 with
J. P. Morgan & Co., due March 1, 1995 with
respect to various U.S. Treasury obligations--
maturity value of $6,001,008 for an effective
yield of 6.05% 6,001,008
Total Short-Term Investments
(cost $11,841,133) $ 11,841,133
Total Investments
(cost $164,654,054)*** $166,741,836
</TABLE>
* Percentages indicated are based on total net assets of $169,111,331, which
correspond to a net asset value per class A and class B share of $8.83 and
$8.80, respectively.
+ Non-income-producing security.
S. Bankers Trust New York Corp. provides sub-custodian services to the fund.
*** The aggregate identified cost for federal income tax purposes is
$164,876,947, resulting in gross unrealized appreciation and depreciation of
$7,864,399 and $5,999,510, respectively, or net unrealized appreciation of
$1,864,889. 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.
<PAGE>
Forward Currency Contracts Outstanding at February 28, 1995
(Aggregate Face Value $16,545,517)
<TABLE>
<CAPTION>
Aggregate
Market Face Delivery Unrealized
Value Value Date Depreciation
<S> <C> <C> <C> <C>
British Pounds
(Sell) $ 854,010 $ 838,161 5/22/95 $ (15,849)
British Pounds
(Sell) 2,651,376 2,645,622 8/22/95 (5,754)
French Francs
(Sell) 617,199 590,317 5/22/95 (26,882)
French Francs
(Sell) 1,525,664 1,523,158 8/22/95 (2,506)
Japanese Yen
(Sell) 8,537,436 8,498,274 8/22/95 (39,162)
Netherland Guilders
(Sell) 489,200 459,823 5/22/95 (29,377)
Netherland Guilders
(Sell) 895,127 883,911 8/22/95 (11,216)
Swiss Francs
(Sell) 720,193 709,792 8/22/95 (10,401)
Swiss Francs
(Sell) 419,004 396,459 5/22/95 (22,545)
$(163,692)
</TABLE>
Percentage of net assets invested in foreign countries at February 28, 1995:
<TABLE>
<CAPTION>
<S> <C>
Japan 7.7%
United Kingdom 4.2%
France 3.2%
Netherlands 2.1%
Switzerland 2.0%
Germany 1.4%
Malaysia 1.2%
Spain 1.1%
Singapore 1.1%
Ireland 1.1%
Sweden 0.9%
Austria 0.7%
Belgium 0.6%
Hong Kong 0.4%
Finland 0.3%
Denmark 0.3%
Norway 0.2%
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of assets and liabilities
February 28, 1995
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at value (identified cost $164,654,054)
(Note 1) $166,741,836
Cash 984
Dividends, interest and other receivables 318,480
Receivable for shares of the fund sold 3,330,150
Receivable for securities sold 2,292,129
Unamortized organization expense (Note 1) 86,241
Total assets 172,769,820
Liabilities
Payable for securities purchased 2,701,288
Payable for shares of the fund repurchased 145,525
Payable for compensation of Manager (Note 3) 254,041
Payable for compensation of Trustees (Note 3) 1,904
Payable for investor servicing and custodian fees (Note 3) 79,709
Payable for administrative services (Note 3) 1,816
Payable for distribution fees (Note 3) 124,957
Payable for organization expenses (Note 1) 98,304
Payable for open forward currency contracts 163,692
Other accrued expenses 87,253
Total liabilities 3,658,489
Net assets $169,111,331
Represented by
Paid-in capital (Notes 1 and 5) $167,507,136
Undistributed net investment income (Note 1) 43,669
Distributions in excess of net realized loss on investments (Note 1) (363,564)
Net unrealized appreciation of investments and forward currency
contracts 1,924,090
Total--Representing net assets applicable to capital shares
outstanding $169,111,331
Computation of net asset value and offering price
Net asset value and redemption price per class A share
($93,113,601 divided by 10,549,334 shares) $8.83
Offering price per class A shares (100/95.50 of $8.83)* $9.25
Net asset value and offering price per class B share
($75,997,730 divided by 8,633,471 shares)** $8.80
</TABLE>
* 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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
For the period July 1, 1994 (commencement of operations) to February 28, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment income:
Dividends (net of foreign tax of $24,534) $1,155,858
Interest 250,795
Total investment income 1,406,653
Expenses:
Compensation of Manager (Note 3) 440,022
Compensation of Trustees (Note 3) 4,100
Investor servicing and custodian fees (Note 3) 170,069
Distribution fees--class A (Note 3) 175,207
Distribution fees--class B (Note 3) 277,728
Reports to shareholders 13,496
Auditing 17,477
Legal 11,623
Postage 5,603
Registration fees 57,707
Administrative services (Note 3) 4,252
Amortization of organization expenses (Note 1) 12,063
Other 1,202
Total expenses 1,190,549
Net investment income 216,104
Net realized loss on investments (Notes 1 and 4) (46,757)
Net realized loss on forward currency contracts and translation of
foreign currency (302,884)
Net unrealized appreciation of investments and forward currency
contracts during the period 1,924,090
Net gain on investments 1,574,449
Net increase in net assets resulting from operations $1,790,553
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes of net assets
<TABLE>
<CAPTION>
For the period
July 1, 1994
(commencement of
operations) to
February 28
1995
<S> <C>
Increase in net assets
Operations:
Net investment income $ 216,104
Net realized loss on investments, forward currency contracts, and
foreign currency translation (349,641)
Net unrealized appreciation of investments 1,924,090
Net increase in net assets resulting from operations 1,790,553
Distributions to shareholders:
In excess of net realized loss on investments:
Class A (176,618)
Class B (140,189)
Increase from capital share transactions (Note 5) 167,537,585
Total increase in net assets 169,011,331
Beginning of period 100,000
End of period (including undistributed net investment income of
$43,669) $ 169,111,331
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
July 1, 1994
(commencement July 1, 1994
of (commencement of
operations) to operations) to
February 28 February 28
1995* 1995*
Class A Class B
<S> <C> <C>
Net asset value,
beginning of period $8.50 $8.50
Investment operations
Net investment income .03 --
Net realized and
unrealized gain on
investments .32 .32
Total from investment
operations .35 .32
Less distributions:
In excess of net
realized loss
on investments (.02) (.02)
Total distributions (.02) (.02)
Net asset value, end of
period $8.83 $8.80
Total investment return
at net asset value (%)
(a) 4.13(b) 3.77(b)
Net assets, end of
period
(in thousands) $93,114 $75,998
Ratio of expenses to
average net assets (%) 1.12(b) 1.45(b)
Ratio of net investment
income to average net
assets (%) .37(b) .05(b) Portfolio Turnover (%) 46.52(b) 46.52(b)
</TABLE>
Per share net investment income for the period ended February 28, 1995 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
February 28, 1995Note 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 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 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 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. 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
<PAGE>
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 realized or
unrealized gains or losses resulting from changes in the foreign exchange rate
on investments from fluctuations arising from changes in the market prices of
the securities. Such fluctuations are included with the net realized and
unrealized gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and the difference between
the amount of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or paid.
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 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 character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences include
the treatment of wash sales, realized gains and losses on foreign exchange and
timing for recognition of certain capital gains and losses. Reclassifications
are
<PAGE>
made to the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations.
For the period ended February 28, 1995, the Fund reclassified $172,435 to
decrease undistributed net investment income and $130,449 to decrease
paid-in-capital, with an increase to net realized gains and losses of $302,884.
The calculation of net investment income per share in the financial highlights
table excludes these adjustments.
I) Unamortized organization expenses Expenses incurred by the fund in connection
with its organization, its registration with the Securities and Exchange
Commission and with various states and the initial public offering of its shares
were $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
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 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 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.
Trustees of the fund receive an annual Trustee's fee of $850, 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.
Investor servicing and custodian fees reported in the Statement of operations
for the period ended February 28, 1995 have been reduced by credits allowed by
PFTC, which amounted to $162,249.
The fund has adopted distribution plans (the "Plans") with respect to its class
A shares and class B 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 Invest
<PAGE>
ments, 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 .65% and 1.00% of the average net assets
attributable to Class A and Class B shares, respectively. The Trustees have
approved payment by the fund at the annual rate of 0.50% and 1.00% of the
average net assets attributable to class A and class B shares, respectively.
For the period ended February 28, 1995, Putnam Mutual Funds Corp., acting as
underwriter, received net commissions of $864,383 from the sale of class A
shares and $46,068 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 period ended February 28, 1995, Putnam Mutual Funds Corp.,
acting as underwriter received no commissions on such redemptions.
Note 4
Purchases and sales of securities
During the period ended February 28, 1995, purchases and sales of investment
securities other than short-term investments aggregated $192,073,130 and
$39,213,453 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
Capital shares
At February 28, 1995, 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:
<TABLE>
<CAPTION>
For the period
July 1, 1994
(commencement
of operations) to
February 28, 1995
Class A Shares Amount
<S> <C> <C>
Shares sold 12,088,511 $105,678,204
Shares issued in
connection with
reinvestment of
distributions 19,922 170,381
12,108,433 105,848,585
Shares repurchased (1,564,981) (13,649,105)
Net increase 10,543,452 $ 92,199,480
</TABLE>
<TABLE>
<CAPTION>
For the period
July 1, 1994
(commencement
of operations) to
February 28, 1995
Class B Shares Amount
<S> <C> <C>
Shares sold 9,165,191 $80,027,296
Shares issued in
connection with
reinvestment of
distributions 15,669 133,658
9,180,860 80,160,954
Shares repurchased (553,271) (4,822,849)
Net increase 8,627,589 $ 75,338,105
</TABLE>
<PAGE>
Federal tax information
For federal income tax purposes, distributions from short-term capital gains
totaling $0.020 per share constitute "dividend income." The fund has designated
100% of the distributions of class A and class B, respectively as qualifying for
the dividends received deduction for corporations.
The Form 1099 you will receive in January 1996 will show you the tax status of
all distributions paid to your account in calendar 1995.
If you are a shareholder in an IRA or other tax-sheltered retirement plan, this
statement is for information only and will serve as a record of distributions
reinvested in your account during the fiscal year. Money invested in these plans
is not subject to federal income tax until you withdraw it.
As required by law, your Fund reports to the Internal Revenue Service the
amount of distributions paid to each shareholder.
<PAGE>
Fund informationINVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
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
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. For more information or to request a
prospectus, call toll free 1-800-225-1581. 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>
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
522/525-17498
<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)
