Putnam
Diversified
Equity
Trust
SEMIANNUAL REPORT
August 31, 1996
[LOGO * BOSTON * LONDON * TOKYO]
Fund highlights
*Putnam Diversified Equity Trust is a broadly diversified growth
fund that may invest up to 45% of its assets overseas. Because of
this, Lipper Analytical Services has placed the fund in its global
category. As of September 30, 1996, the fund's class A shares ranked
in the top 8% for 1-year performance and in the top 10% for 2 years
among its global fund counterparts, ranking 12 out of 151 funds and
11 out of 115, respectively.*
* "At Putnam, we take a 'truth-in-advertising' approach to defining
our funds. And Putnam Diversified Equity Trust is proof positive of
that approach. The original purpose of the fund was to provide
shareholders with a sound means of pursuing capital appreciation
while providing some insulation from the impact of broad economic
and market movements at home and abroad by investing in three
complementary stock sectors -- domestic growth, domestic value, and
international. I believe the fund has stayed true to its form quite
successfully, as evidenced by its performance since inception."
-- David L. King, Lead Portfolio Manager
CONTENTS
4 Report from Putnam Management
10 Fund performance summary
14 Portfolio holdings
25 Financial statements
*Lipper Analytical Services, an independent research organization,
ranks funds according to total return performance. Rankings vary
over time and do not reflect the effects of sales charges. The
fund's class B shares ranked 16 out of 151 and 12 out of 115 global
funds for the 1- and 2-year periods ended September 30, 1996, and
the fund's class M shares ranked 14 out of 151 for the 1-year
period. These shares were not ranked over longer periods. Past
performance is not indicative of future results.
From the Chairman
(copyright) Karsh, Ottawa
Dear Shareholder:
Since its introduction just over two years ago, Putnam Diversified
Equity Trust has grown steadily in both assets under management and
its shareholder base. Many investors, it would seem, are willing to
forgo the prospect of greater growth -- and sharper downswings
during market declines -- in favor of relative stability of net
asset value.
Your fund's diversification, which cuts across virtually the entire
spectrum of domestic and international stocks, is the cornerstone of
its strategy. Choosing from such a vast array of investments takes
skill and resources that your fund's management team, backed by
Putnam's extensive global equity research capability, is well
equipped to handle.
In the report that follows, your fund's managers discuss performance
during the first half of fiscal 1997 and provide their insights on
prospects for the second half.
Respectfully yours,
/S/ George Putnam
George Putnam
Chairman of the Trustees
October 16, 1996
Report from the Fund Managers
David L. King, Lead Manager
John K. Storkerson
Charles H. Swanberg
Putnam Diversified Equity Trust fared well during the six months
ended August 31, 1996, a period characterized by increasing investor
uncertainty and market volatility in the United States as well as
generally low short-term interest rates and the prospect of economic
recovery abroad. While market forces caused domestic growth,
domestic value, and foreign stocks to rotate in and out of favor
during the semiannual period, your fund's trisector strategy enabled
it to take advantage of the most promising opportunities in each
sector. As a result, the fund's class A shares produced a
respectable total return at net asset value. Full performance
details can be found on page 10 of this report.
Because we consider current volatility levels in the U.S. markets
likely to continue over the near term, we recently decided to
allocate all of the fund's new cash flow into the international
segment, or "sleeve." This has changed the portfolio's asset
allocation slightly; instead of its habitual one-third allocation to
each of the three portfolio sleeves, approximately 38.3% of assets
are now positioned in the international sleeve, with 32.5% and 29.2%
in value and growth, respectively.
*RETAIL AND REAL ESTATE PROVE THEIR WORTH IN VALUE SEGMENT
In the value sleeve, we focus on companies that we believe are
currently undervalued or misunderstood by the marketplace but appear
to offer potential for attractive earnings growth over time. We do
this on a stock-by-stock basis; yet it is not uncommon for themes to
emerge as a result. For example, with two years of weak price
performance behind them and significant positive change occurring
internally, many of the sleeve's retail stocks had their long-
awaited day in the sun during the six-month period. The most notable
performers included Kmart and Dayton Hudson Corporation.
Automotive-related issues turned in respectable performances as
well. Varity Corporation, a manufacturer of automotive brake
systems, recently completed a merger with Lucas Industries, another
brake manufacturer, based in the United Kingdom. Varity, which the
fund has held for some time, appreciated handsomely as a result.
While Varity and other stocks discussed in this report were viewed
favorably at period's end, all holdings are subject to review and
adjustment in accordance with the fund's investment strategy and may
vary in the future.
The real estate sector also presented attractive value early in the
period and has since proved its worth. Several real estate
investment trust (REIT) holdings performed exceptionally well,
particularly during the sharp correction in the stock market in
July. Meditrust, Equity Residential Properties Trust, and Nationwide
Health Properties were investments that enjoyed substantial
increases in total return.
Additionally, the consolidation and merger activity within the
banking industry has been generally positive for the sleeve's bank
stocks, with Fleet Financial Group and NationsBank contributing to
performance. Drug-related stocks also performed well. Warner-
Lambert, a broadly diversified company with a pharmaceutical branch,
stood out as a star performer, benefiting from its upcoming rollout
of an insulin-receptivity drug and a cholesterol-reducing agent.
Finally, it is important to note that by conducting comprehensive
research, we are able to find value in any sector of the market,
including technology, which is not traditionally thought of as value
driven. A fine example is Intel, a leader in the semiconductor
industry. We purchased shares last year when its price dipped as a
result of general concerns surrounding the technology sector. The
fund has since benefited from the stock's rebound.
[GRAPHIC OMITTED: worm chart]
ACTIVE TEAM MANAGEMENT HELPS FUND OUTPERFORM
Starting value (ending total)
Fund's class A shares at NAV 41,65%
Blended Putnam Index (1/3 growth, 1/3 value, 1/3 international) 40.70%
Fund's class A shares at POP 33.48%
(plot points for 10-year total return mountain chart)
Date/year Fund at POP Blended Index Fund at NAV
- --------- ------------ ------------------ ------------
7/1/94 0.00 0.00 0.00
9/30/94 -1.66 3.27 4.35
12/31/94 -3.54 2.92 2.36
3/31/95 0.35 10.33 6.48
6/30/95 8.46 17.90 15.09
9/30/96 18.46 25.99 25.71
12/31/95 24.29 32.88 31.90
3/31/96 31.50 39.06 39.55
6/30/96 37.43 44.31 45.84
8/31/96 33.48 40.70 41.65
Footnote reads:
*Performance is shown for the fund's class A shares at NAV and POP
as of August 31, 1996. Performance for other share classes will
differ. Performance represents past results and is not indicative of
future returns. The blended Putnam proprietary index combines, in
equal proportions, the S&P Barra Growth Index and Value Index (two
capitalization-weighted indexes of stocks in the S&P 500(registered
trademark) with high and low price-to-book ratios, respectively) and
the Europe, Australia, and Far East (EAFE) component of the Morgan
Stanley Capital International World Index (described on p. 12). All
three are unmanaged indexes used as a general gauge of market
performance. Securities in the indexes do not match those in the
fund and index performance will vary over time.
NICHE PLAYERS, DEFENSIVE HOLDINGS HELP GROWTH SECTOR WEATHER
SUMMER'S VOLATILITY
The dramatic drop in the U.S. stock market during July adversely
affected many stocks, particularly those of the fast-growing
companies in which your fund's growth sleeve typically invests.
Nevertheless, timely profit taking enabled many growth holdings to
make substantial contributions to the fund's total return.
Networking stocks and software technology companies played key
roles, with Cisco Systems and Cascade Communications among the most
attractive holdings. Others included Microsoft, Rational Software,
Ascend Communications, and Parametric Technology. Some of the stocks
we highlighted in the February annual report, such as America On
line and U.S. Robotics, were sold at considerable profit, just prior
to their price declines this summer. We've also had success with
select companies in the financial, specialty retailing, and office
products sectors.
In response to growing economic uncertainty, we've taken on a
slightly more defensive tone, building the sleeve's exposure to
health-care and consumer growth companies. We believe many medical
device makers and industry-leading pharmaceutical giants stand to
benefit from continued strong demand as investors migrate toward
companies exhibiting the potential for predictable earnings growth.
Medtronic, Johnson & Johnson, and Pfizer have been solid performers
and possess further appreciation potential. Additionally, we've
added a few large consumer nondurable names, such as Gillette,
Newell Co., and PepsiCo.
*ON INTERNATIONAL FRONT, EUROPEAN STRENGTH CONTINUES AS JAPANESE
RECOVERY GETS UNDER WAY
The backdrop for investing overseas remained generally favorable
throughout the period. As we had anticipated, European markets
performed well. Economic growth is clearly improving in some areas,
such as Germany and the Netherlands, while showing hopeful signs of
recovery in others, such as France. The trend toward corporate
restructuring and reducing costs has taken hold across the
Continent, setting the stage for solid profit growth and an enhanced
ability to compete worldwide in the years ahead. Furthermore, the
percolating demand for European stocks among institutional investors
is gradually becoming a dynamic force in the markets.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Thermo Electron Corp.
Energy-related
Intel Corp.
Semiconductors
Melville Corp.
Retailing
Magna International Class A
Automotive
Microsoft Corp.
Computer software
Dayton Hudson Corp.
Retailing
Computer Associates International Inc.
Computer software
General Signal Corp.
Basic industrial production
Times Mirror Co. Class A
Publishing
Varity Corp.
Automotive brake manufacturing
Footnote reads:
These holdings represent 9.7% of the fund's assets as of 8/31/96.
Portfolio holdings will vary over time.
We have maintained a high weighting in European stocks, with major
commitments to companies in the Netherlands, Sweden, Switzerland,
Ireland, and Germany. We have slightly increased the fund's exposure
to the United Kingdom, buying stocks when prices have dipped because
of uncertainty about next year's elections. In France, we have held
fairly steady; should we see some profit improvement and renewed
investor confidence, we would consider adding positions in that
market.
Because we search primarily for companies that offer attractive
underlying values, we have been able to take advantage of promising
opportunities among both growth- and value-oriented stocks.
Noteworthy European holdings in the growth arena include Gucci, a
high-end retailing organization, and Getronics, a computer software
integration company. Some top-performing value stocks, on the other
hand, included Bayer (Germany), a broad-based
chemical/pharmaceutical firm, and ABN AMRO (the Netherlands), a
prospering Dutch bank with growing representation in the United
States.
In Japan, official policy to achieve a much weaker currency seems to
have been successful thus far, and the continued recovery took the
Japanese stock market to levels not seen in more than two years. The
persistent weakness of the yen relative to the dollar has provided a
significant boost to many of the fund's Japanese holdings having an
international presence, including Sharp, a leading manufacturer of
consumer electronic products, and Ito Yokado, a broadly diversified
retailer and parent company of the 7-Eleven store chain. With 24% of
the international segment invested in Japan, it remains the sleeve's
largest single-country weighting.
We remain positive on Hong Kong because we believe it retains appeal
on a valuation basis and continues to be one of the stronger growth
markets in the region. We maintain a fairly nominal position in the
overextended Singapore and Malaysian markets and have begun to
rebuild a stake in Latin American markets upon witnessing a
resumption of long-term capital investment and better bond market
performance.
In the currency arena, having anticipated the dollar's current
strength, we consequently maintained hedges against the Japanese
yen, French franc, German deutschemark, and Dutch guilder. Employed
more as a means of protecting the fund's assets against adverse
fluctuations in currencies than as a speculative money-making
scheme, the hedges provided solid support to the international
sleeve's performance during the period.
*OUTLOOK: ATTRACTIVE POTENTIAL FOR EQUITIES CONTINUES IN ALL THREE
SECTORS
In managing your fund, we work together with Putnam's highly trained
research analysts and traders in our efforts to identify the most
promising investments in each sector. We expect increasing global
competition to keep a tight rein on inflation and interest rates
around the world, although we may experience bouts of volatility
suggesting the contrary. The restructuring and efficiency moves
undertaken by corporate America over the past decade have clearly
become global initiatives, creating what we believe to be a positive
backdrop for your fund's complementary styles of investing.
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 8/31/96, there is no guarantee
the fund will continue to hold these securities in the future.
Investing in non-U.S. securities may be subject to certain risks
associated with currency fluctuations, economic instability, and
political developments.
Performance summary
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.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 8/31/96
Class A Class B Class M
(inception date) (7/1/94) (7/1/94) (7/3/95)
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------
6 months 4.17% -1.80% 3.92% -1.08% 4.00% 0.35%
- ---------------------------------------------------------------
1 year 16.17 9.50 15.69 10.69 15.89 11.88
- ---------------------------------------------------------------
Life of class 41.64 33.48 40.24 37.24 22.66 18.41
Annual average 17.40 14.23 16.87 15.71 19.07 15.54
- ---------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/96
Standard
& Poor's MSCI
500 Index EAFE
- ----------------------------------------------------------------
6 months 2.92% 0.93%
- ----------------------------------------------------------------
1 year 18.70 7.87
- ----------------------------------------------------------------
Life of class A and class B 54.25 12.04
Annual average 22.11 5.37
- ----------------------------------------------------------------
Life of class M 22.43 10.21
Annual average 18.88 8.65
- ----------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take
into account any adjustment for taxes payable on reinvested
distributions. Investment returns and net asset value will fluctuate
so that an investor's shares, when sold, may be worth more or less
than their original cost. POP assumes 5.75% maximum sales charge for
class A shares and 3.50% for class M shares. CDSC for class B shares
assumes the applicable sales charge, with the maximum being 5%.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most current calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------------
6 months 7.07% 0.92% 6.84% 1.84% 6.90% 3.16%
- -------------------------------------------------------------------
1 year 18.86 12.03 18.30 13.30 18.59 14.40
- -------------------------------------------------------------------
Life of class 49.42 40.80 47.87 44.87 29.41 24.93
Annual average 19.54 16.43 18.99 17.91 22.90 19.49
- -------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment
returns and net asset value will fluctuate so that an investor's
shares, when sold, may be worth more or less than their original
cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 8/31/96
Class A Class B Class M
- --------------------------------------------------------------------
Distributions (number) -- -- --
- --------------------------------------------------------------------
The fund pays distributions
annually, in December.
- --------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------
2/29/96 $11.02 $11.69 $10.97 $11.01 $11.41
- --------------------------------------------------------------------
8/31/96 11.48 12.18 11.40 11.45 11.87
- --------------------------------------------------------------------
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
whose performance assumes reinvestment of all distributions. It is
frequently used as a general measure of stock market performance
MSCI Europe, Australia, and Far East (EAFE) component of 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.
* Securities indexes assume reinvestment of all distributions and
interest payments and do not take in account brokerage fees or
taxes. Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest
directly in an index.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [DOUBLE CROSS]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments to help maximize your return and reduce your
risk.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS [SECTION START]
Putnam money market funds: **
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts ++
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
++ Not available in all states.
[SECTION START] Relative to above.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed
to maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
[DOUBLE CROSS] Not offered by Putnam Investments. Certificates of deposit
offer a fixed rate of return and may be insured up to
certain limits by federal/state agencies. Savings accounts
may also be insured up to certain limits. Please call your
financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Please read it
carefully before you invest or send money.
<TABLE>
<CAPTION>
Portfolio of investments owned
August 31, 1996 (Unaudited)
<S> <C> <C> <C>
COMMON STOCKS (98.3%) *
NUMBER OF SHARES VALUE
Advertising (0.4%)
- ------------------------------------------------------------------------------------------------
32,186 Omnicom Group, Inc. 1,460,426
1,200 Outdoor Systems, Inc. + 50,700
------------
1,511,126
Aerospace and Defense (1.7%)
- ------------------------------------------------------------------------------------------------
35,600 Lockheed Martin Corp. 2,994,850
41,100 Northrop Grumman Corp. 2,948,925
------------
5,943,775
Airlines (0.5%)
- ------------------------------------------------------------------------------------------------
24,150 K.L.M.-Royal Dutch Airlines (Netherlands) 664,452
55,000 Singapore Airlines Ltd. (Singapore) 582,859
92,000 Swire Pacific Ltd. Class A (Hong Kong) 818,029
------------
2,065,340
Apparel (0.4%)
- ------------------------------------------------------------------------------------------------
21,400 Gucci Group (Netherlands) 1,423,100
Appliances (1.0%)
- ------------------------------------------------------------------------------------------------
18,660 Electrolux AB (Sweden) 1,084,114
50,500 Whirlpool Corp. 2,474,500
------------
3,558,614
Automobiles (0.5%)
- ------------------------------------------------------------------------------------------------
2,800 Bayerische Motoren Werke (BMW) AG (Germany) 1,621,053
Automotive (3.1%)
- ------------------------------------------------------------------------------------------------
15,500 Autoliv AB (Sweden) 511,076
49,600 General Motors Corp. 2,467,600
71,700 Magna International, Inc. Class A (Canada) 3,459,525
137,000 Mitsubishi Motors Corp. (Japan) 1,114,721
6,000 Peugeot Citroen S.A. (France) + 686,363
61,700 Varity Corp. + 3,100,425
------------
11,339,710
Banks (5.4%)
- ------------------------------------------------------------------------------------------------
107,000 Ahmanson (H.F.) & Co. 2,701,750
207,829 Allied Irish Banks PLC (Ireland) 1,166,487
800 Baer Holdings AG (Switzerland) 886,818
14,590 Banco de Bilbao Vizcaya (Spain) 612,771
57,296 Bank of Ireland (Ireland) 417,041
39,000 Bankers Trust New York Corp. (cus) 3,032,250
72,761 Barclays Bank PLC (United Kingdom) 1,032,111
71,700 Commonwealth Bank of Australia (Australia) 617,409
44,000 Commonwealth Bank of Australia (Installment Shares)(Australia) 238,106
36,000 Development Bank of Singapore Ltd. (Singapore) 422,475
62,200 Fleet Financial Group, Inc. 2,596,850
156,300 Guoco Group Ltd. (Hong Kong) 741,879
73,814 HSBC Holdings PLC (Hong Kong) 1,274,466
45,000 Malayan Banking BHD (Malaysia) 427,798
62,100 Mitsubishi Bank Ltd. (Japan) 1,260,364
56,000 United Overseas Bank Ltd. (Singapore) 537,696
290,000 Westpac Banking Corp. (Australia) 1,422,711
------------
19,388,982
Basic Industrial Products (1.5%)
- ------------------------------------------------------------------------------------------------
113 Asahi Diamond Industrial Co., Ltd. (Japan) 1,308
77,900 General Signal Corp. 3,125,738
132,000 Mitsui Fudoscan Co. (Japan) 1,111,617
2,300 Rieter Holding AG (Switzerland) 583,805
400,000 Varitronix International Ltd. (Hong Kong) 755,303
------------
5,577,771
Broadcasting (0.8%)
- ------------------------------------------------------------------------------------------------
24,500 Clear Channel Communications, Inc. + 2,018,188
10,050 Infinity Broadcasting Corp. Class A + 275,119
48,500 Mediaset SPA (Italy)+ 227,832
21,700 Paxson Communications Corp. + 227,850
------------
2,748,989
Building and Construction (0.3%)
- ------------------------------------------------------------------------------------------------
400 JGC Corp. (Japan) 4,775
112,000 Shimizu Corp. (Japan) 1,038,847
770 Taihei Dengyo Corp. Ltd. (Japan) 11,031
------------
1,054,653
Building Products (1.0%)
- ------------------------------------------------------------------------------------------------
181,748 CRH PLC (Ireland) 1,793,262
26,000 Sungei Way Holdings Berhad (Malaysia) 131,408
29,500 Tarkett AG (Germany) + 598,161
34,000 Tostem Corp. (Japan) 967,949
------------
3,490,780
Business Services (3.9%)
- ------------------------------------------------------------------------------------------------
50,400 Airgas, Inc. + 1,134,000
35,300 Alco Standard Corp. 1,539,963
58,150 Corporate Express, Inc. + 2,180,625
78,000 Dai Nippon Printing Co., Ltd. (Japan) 1,368,170
34,216 Input/Output, Inc. + 1,210,391
32,375 Interpublic Group Cos. Inc. 1,464,969
22,000 Komori Corp. (Japan) 486,913
20,800 Metromedia International Group, Inc. + 234,000
30,722 Paychex, Inc. 1,643,627
42,836 Robert Half International, Inc. + 1,413,588
600 Societe Generale de Surveillance Holdings S.A. (Switzerland) 1,400,632
------------
14,076,878
Chemicals (2.0%)
- ------------------------------------------------------------------------------------------------
7,900 Akzo-Nobel N.V. (Netherlands) 917,465
68,500 Bayer AG ADR (Germany) 2,445,108
5,000 Dutch States Mines N.V. (Netherlands) 460,566
101,000 KAO Corp. (Japan) 1,196,529
104,000 Sekisui Chemical Co., Ltd. (Japan) 1,127,009
1,500 Solvay S.A. (Belgium) 876,323
------------
7,023,000
Combined Utilities (0.6%)
- ------------------------------------------------------------------------------------------------
38,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) + 1,991,026
Computers (1.1%)
- ------------------------------------------------------------------------------------------------
49,200 EMC Corp. + 947,100
25,000 IBM Corp. 2,859,375
------------
3,806,475
Computer Services (1.1%)
- ------------------------------------------------------------------------------------------------
5,600 Axime (France) + 653,860
25,050 First Data Corp. 1,953,900
45,592 Getronics Electric N.V. (Netherlands) 1,108,920
11,300 Sterling Commerce, Inc. + 350,300
------------
4,066,980
Computer Software (4.6%)
- ------------------------------------------------------------------------------------------------
30,000 Baan Co., N.V. (Netherlands) + 956,250
61,197 Computer Associates Intl., Inc. 3,212,843
40,212 Electronic Arts, Inc. + 1,241,546
22,600 Electronics for Imaging, Inc. + 1,429,450
190,000 JBA Holdings PLC (United Kingdom) 1,452,826
27,890 Microsoft Corp. + 3,416,525
18,622 Netscape Communications Corp. + 658,753
55,750 Parametric Technology Corp. + 2,524,430
8,500 SAP AG (Germany) 1,413,799
7,110 Rational Software Corp. + 378,608
------------
16,685,030
Conglomerates (1.8%)
- ------------------------------------------------------------------------------------------------
44,100 General Motors Corp. Class H 2,464,088
97,000 Hutchison Whampoa, Ltd. (Hong Kong) 587,118
130,600 Ogden Corp. 2,563,025
3,600 Preussag AG (Germany) 850,202
------------
6,464,433
Consumer Products (1.9%)
- ------------------------------------------------------------------------------------------------
30,195 Gillette Co. 1,924,931
80,371 Lowe's Cos., Inc. 2,903,402
33,655 Newell Co. 1,047,512
7,305 Unilever N.V. (Netherlands) 1,048,912
------------
6,924,757
Containers (0.6%)
- ------------------------------------------------------------------------------------------------
85,100 Ball Corp. 2,010,488
Cosmetics (0.5%)
- ------------------------------------------------------------------------------------------------
73,203 Thermolase Corp. + 1,683,669
Data Communications (0.1%)
- ------------------------------------------------------------------------------------------------
9,900 MFS Communications, Inc. + 419,513
Electric Utilities (2.5%)
- ------------------------------------------------------------------------------------------------
17,000 Calenergy, Inc. + 514,250
50,000 Chubu Electric Power, Inc. (Japan) 1,102,030
120,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 358,510
24,000 Kyushu Electric Power Inc. (Japan) 513,546
130,700 Long Island Lighting Co. 2,254,575
206,000 Northeast Utilities Co. 2,626,500
318,606 Scottish Power PLC (United Kingdom) 1,523,871
------------
8,893,282
Electronics and Electrical Equipment (3.8%)
- ------------------------------------------------------------------------------------------------
685 BBC Brown Boveri & Cie AG (Switzerland) 843,138
15,000 Futaba Corp. (Japan) 624,024
259,400 General Electric Co. PLC (United Kingdom) 1,560,480
20,600 Hirose Electric Co., Ltd. (Japan) 1,237,249
7,000 Mabuchi Motor (Japan) 383,139
42,500 Murata Manufacturing Co. (Japan) 1,506,566
58,000 Nippondenso Co., Ltd. (Japan) 1,193,131
70,000 Omron Corp. (Japan) 1,279,273
30,500 Philips Electronics N.V. (Netherlands) 1,030,132
85,000 SAES Getters S.P.A. ADR (Italy) + 1,190,000
105,000 Sharp Corp. (Japan) 1,658,555
31,126 Thermo Instrument Systems, Inc. + 1,206,133
------------
13,711,820
Energy-Related (2.0%)
- ------------------------------------------------------------------------------------------------
26,480 IHC Caland N.V. (Netherlands) 1,434,798
107,995 Thermo Electron Corp. 4,279,302
10,254 VA Technolgies AG (Austria) 1,309,649
------------
7,023,749
Finance (5.1%)
- ------------------------------------------------------------------------------------------------
22,000 ABN AMRO Holding N.V. (Netherlands) 1,201,325
17,795 American Express Co. 778,531
45,600 Beneficial Corp. 2,570,700
4,500 Cetelem Group (France) + 939,016
16,500 Credit Locale de France S.A. (France) 1,357,047
99,000 Daiwa Securities Co. Ltd. (Japan) 1,118,284
34,786 Federal Home Loan Mortgage Corp. 3,074,213
98,800 Federal National Mortgage Association 3,062,800
1,700 Household International, Inc. 134,725
79,389 MBNA Corp. 2,411,441
99,675 Mercury Finance Co. 1,158,722
19,375 TCF Financial Corp. 724,141
------------
18,530,945
Financial Services (0.9%)
- ------------------------------------------------------------------------------------------------
5,124 Compagnie Bancaire S.A. (France) 506,316
46,100 Franklin Resources, Inc. 2,742,950
------------
3,249,266
Food and Beverages (4.2%)
- ------------------------------------------------------------------------------------------------
146,235 Archer Daniels Midland Co. 2,595,671
17,500 Danisco A/S (Denmark) 986,027
65,800 Dole Food Co. 2,722,475
611,000 Goodman Fielder Ltd. ADR (Australia) 632,324
218,000 Greencore Group PLC (Ireland) + 1,093,107
93,000 Guinness PLC (United Kingdom) 694,430
1,730 Nestle S.A. (Switzerland) 2,022,845
6,300 Panamerican Beverages, Inc. Class A 266,175
60,088 PepsiCo, Inc. 1,727,530
108,300 Whitman Corp. 2,423,213
------------
15,163,797
Forest Products (0.1%)
- ------------------------------------------------------------------------------------------------
9,100 Mayr-Melnhof Karton AG (Austria) + 426,685
Gas Pipelines (0.3%)
- ------------------------------------------------------------------------------------------------
26,966 Enron Corp. 1,082,011
Health Care (0.3%)
- ------------------------------------------------------------------------------------------------
4,350 Cardinal Health, Inc. 319,181
30,000 Santen Pharmaceutical (Japan) 650,197
------------
969,378
Health Care Information Systems (0.5%)
- ------------------------------------------------------------------------------------------------
34,900 HBO & Co. 1,906,413
Health Care Services (0.5%)
- ------------------------------------------------------------------------------------------------
33,375 Healthsouth Rehabilitation Corp. + 1,080,516
15,600 Lincare Holdings, Inc. + 582,075
------------
1,662,591
Home Building (0.5%)
- ------------------------------------------------------------------------------------------------
22,033 Castle & Cooke, Inc. + 336,003
81,125 Clayton Homes, Inc. 1,632,641
------------
1,968,644
Hospital Management (0.4%)
- ------------------------------------------------------------------------------------------------
40,974 Health Management Assoc., Inc. + 932,159
33,679 Physician Reliance Network, Inc. + 479,926
------------
1,412,085
Household Products (0.6%)
- ------------------------------------------------------------------------------------------------
46,325 Blyth Industries, Inc. + 2,130,950
Insurance (3.3%)
- ------------------------------------------------------------------------------------------------
20,427 Aegon N.V. (Netherlands) 996,139
24,848 Amerin Corp. + 565,292
32,300 Internationale Nederlanden Groep (Netherlands) 1,005,364
93,600 Jardine Matheson Holdings Ltd. (Singapore) 589,680
140,000 Malaysian Assurance Alliance (Malaysia) 769,354
15,000 Mapfre Vida Seguros (Spain) 898,275
385 Munich Re (Germany) + 883,785
47,000 Skandia Forsakrings AB (Sweden) 1,102,887
1,330 Swiss Reinsurance Co. (Switzerland) 1,435,594
98,000 Tokio Marine & Fire Insurance Co., Ltd. (The) (Japan) 1,115,989
166,900 USF&G Corp. 2,691,263
------------
12,053,622
Leisure (0.9%)
- ------------------------------------------------------------------------------------------------
34,000 Adidas AG 144A ADS (Germany) 1,453,500
6,500 Zodiac (France) 1,657,627
------------
3,111,127
Lodging (0.7%)
- ------------------------------------------------------------------------------------------------
40,245 HFS, Inc. + 2,409,669
Machinery (0.3%)
- ------------------------------------------------------------------------------------------------
60,000 Daikin Industries Ltd. (Japan) 589,586
6,050 Sandvik AB Class B (Sweden) 137,859
100,869 Weir Group PLC (The) (United Kingdom) 377,775
------------
1,105,220
Medical Management Services (0.7%)
- ------------------------------------------------------------------------------------------------
24,770 Pediatrix Medical Group, Inc. + 1,114,650
39,937 Phycor, Inc. + 1,307,937
------------
2,422,587
Medical Supplies and Devices (2.9%)
- ------------------------------------------------------------------------------------------------
47,483 Johnson & Johnson 2,338,538
18,160 Medtronic, Inc. 944,320
16,750 Shared Medical Systems Corp. 914,969
47,793 St. Jude Medical Inc. + 1,714,574
35,400 Sola International, Inc. + 1,239,000
75,683 Stryker Corp. 1,849,503
32,187 Thermo Cardiosystems, Inc. + 1,098,381
10,700 Thermotrex Corp. + 402,588
880 Trex Medical Corp. + 20,240
------------
10,522,113
Metals and Mining (2.0%)
- ------------------------------------------------------------------------------------------------
85,000 Alumax, Inc. + 2,805,000
83,144 Freeport-McMoRan Copper & Gold Co., Inc. Class B 2,442,355
655 N.V. Bekaert S.A. (Belgium) 494,830
11,200 SGL Carbon AG (Germany) + 1,364,858
------------
7,107,043
Networking Equipment (0.9%)
- ------------------------------------------------------------------------------------------------
22,945 Cabletron Systems, Inc. + 1,399,645
11,100 Cascade Communications Corp. + 756,188
19,800 Cisco Systems, Inc. + 1,044,450
------------
3,200,283
Office Equipment (0.5%)
- ------------------------------------------------------------------------------------------------
64,274 Viking Office Products, Inc. + 1,663,090
Oil and Gas (2.6%)
- ------------------------------------------------------------------------------------------------
101,900 Burmah Oil PLC (United Kingdom) 1,667,272
89,000 Cosmo Oil Co., Ltd. (Japan) 514,923
146,000 Far East Levingston Shipbuilding Ltd. (Singapore) 700,924
112,200 Occidental Petroleum Corp. 2,608,650
30,000 Repsol S.A. (Spain) 973,731
11,000 Repsol S.A. ADS (Spain) 358,875
15,600 Societe Nationale Elf Aquitaine (France) 1,134,724
19,000 Total S.A. Class B (France) 1,395,902
------------
9,355,001
Paper (0.8%)
- ------------------------------------------------------------------------------------------------
72,400 Repola (Finland) 1,652,621
55,800 Svenska Cellulosa AB Class B (Sweden) 1,183,078
------------
2,835,699
Pharmaceuticals and Biotechnology (3.9%)
- ------------------------------------------------------------------------------------------------
1,000 Altana AG (Germany) 755,735
25,000 Astra B (Sweden) 1,033,697
1,600 Ciba-Geigy AG (Switzerland) 2,017,310
21,100 Guidant Corp. 1,073,363
16,477 Pfizer, Inc. 1,169,867
62,100 Pharmacia & Upjohn, Inc. 2,608,200
35,100 Pharmacia & Upjohn, Inc. (Sweden) 1,480,443
50,000 Warner-Lambert Co. 2,975,000
52,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 1,069,703
------------
14,183,318
Photography (0.7%)
- ------------------------------------------------------------------------------------------------
60,700 Polaroid Corp. 2,572,163
Publishing (1.0%)
- ------------------------------------------------------------------------------------------------
16,350 Providence Journal Co. Class A + 316,781
71,800 Times Mirror Co. Class A 3,114,325
------------
3,431,106
Railroads (0.6%)
- ------------------------------------------------------------------------------------------------
236 East Japan Railway Co. (Japan) 1,101,001
30,331 Wisconsin Central Transportation Corp. + 1,069,168
------------
2,170,169
Real Estate (4.2%)
- ------------------------------------------------------------------------------------------------
556,000 Amoy Properties Ltd. (Hong Kong) 647,181
250,000 Cheung Kong Holdings Ltd. (Hong Kong) 1,754,074
81,900 Equity Residential Properties Trust (R) 2,897,213
257,000 Hong Kong Land Holdings Ltd. (Hong Kong) 583,390
65,600 Meditrust Corp. (R) 2,246,800
126,200 Nationwide Health Properties, Inc. (R) 2,807,950
115,328 Simon DeBartolo Group, Inc. (R) 2,868,784
120,000 Sun Hung Kai Properties Ltd. (Hong Kong) 1,171,754
------------
14,977,146
Restaurants (0.9%)
- ------------------------------------------------------------------------------------------------
27,400 Lone Star Steakhouse & Saloon + 907,625
73,250 Starbucks Corp. + 2,398,938
------------
3,306,563
Retail (5.6%)
- ------------------------------------------------------------------------------------------------
19,790 Boise Cascade Office Products + 415,590
44,000 Cycle & Carriage Ltd. (Singapore) 422,475
97,800 Dayton Hudson Corp. 3,374,100
49,805 Home Depot, Inc. (The) 2,645,891
28,000 Ito-Yokado Co., Ltd. (Japan) 1,473,414
251,000 K mart Corp. 2,510,000
61,000 Marui Co., Ltd. (Japan) 1,193,223
85,100 Melville Corp. 3,595,475
52,300 Penney (J.C.) Co., Inc. 2,765,363
125,200 Sears PLC (United Kingdom) 188,536
40,500 Vendex International N.V. (Netherlands) 1,419,085
------------
20,003,152
Semiconductors (3.1%)
- ------------------------------------------------------------------------------------------------
50,925 Intel Corp. 4,064,452
38,632 Linear Technology Corp. 1,313,488
53,350 Maxim Integrated Products Inc. + 1,637,178
41,000 SGS-Thomson Microelectronics ADR (France) + 1,675,875
56,000 Texas Instruments, Inc. 2,618,000
------------
11,308,993
Specialty Consumer Services (--%)
- ------------------------------------------------------------------------------------------------
4,300 Central Garden & Pet Co. + 105,888
Telecommunication (0.3%)
- ------------------------------------------------------------------------------------------------
55,024 NEXTEL Communications, Inc. Class A + 901,018
Telecommunication Equipment (0.2%)
- ------------------------------------------------------------------------------------------------
13,700 Adtran, Inc. + 863,100
Telephone Services (1.2%)
- ------------------------------------------------------------------------------------------------
163 Nippon Telegraph and Telephone Corp. (Japan) 1,154,128
20,800 Royal PTT (United Kingdom) 728,814
172,850 Securior Group PLC (United Kingdom) 728,278
343,126 Vodafone Group PLC (United Kingdom) 1,293,107
24,250 WorldCom, Inc. + 509,250
------------
4,413,577
Telephone Utilities (1.2%)
- ------------------------------------------------------------------------------------------------
180,000 Hong Kong Telecommunications Ltd. (Hong Kong) 301,474
22,100 Telebras Co. ADR (Brazil) 1,643,688
86,000 US West, Inc. 2,537,000
------------
4,482,162
Textiles (0.6%)
- ------------------------------------------------------------------------------------------------
20,950 Designer Holdings Ltd. + 463,519
44,000 Onward Kashiyama Co., Ltd. (Japan) 606,116
166,000 Toray Industries Inc. (Japan) 1,032,069
------------
2,101,704
Tire and Rubber (0.6%)
- ------------------------------------------------------------------------------------------------
77,000 Bridgestone Corp. (Japan) 1,258,701
20,000 Michelin Corp. Class B (France) 933,297
------------
2,191,998
Tobacco (1.3%)
- ------------------------------------------------------------------------------------------------
153,309 B A T Industries PLC (United Kingdom) 1,029,923
148,000 Dimon Inc. 2,719,500
25,000 Tabacalera S.A. Ser. A (Spain) 1,018,045
------------
4,767,468
Transportation (0.3%)
- ------------------------------------------------------------------------------------------------
49,000 Kamigumi Co., Ltd. (Japan) 397,796
50,500 Yamato Transport Co., Ltd. (Japan) 547,250
------------
945,046
Water Utilities (0.4%)
- ------------------------------------------------------------------------------------------------
47,000 Kurita Water Industries Ltd. (Japan) 979,796
44,829 North West Water Group PLC (United Kingdom) 423,931
------------
1,403,727
Wireless Communications (0.1%)
- ------------------------------------------------------------------------------------------------
25,750 Paging Network, Inc. + 453,844
1,600 Western Wireless Corp. Class A + 28,000
------------
481,844
------------
Total Common Stocks (cost $314,828,737) $353,403,354
WARRANTS (--%)+ EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------------
2,300 Rieter Holdings (Switzerland) 2/28/97 $ 2,010
1,000 Southern Bank Berhad (Malaysia) 6/17/01 1,565
------------
Total Warrants (cost $--) $ 3,575
SHORT-TERM INVESTMENTS (1.9%) *(cost $6,984,040)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
$6,982,000 Interest in $883,204,000 joint repurchase agreement dated
August 30, 1996 with Goldman, Sachs & Co. due September 3, 1996
with respect to various U.S. Treasury obligations -- maturity
value of $6,986,081 for an effective yield of 5.26% $ 6,984,040
- ------------------------------------------------------------------------------------------------
Total Investments (cost $321,812,777)*** $360,390,969
- ------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $359,826,726.
*** The aggregate identified cost on a tax basis is
$321,812,777, resulting in gross unrealized appreciation and
depreciation of $46,545,970 and $7,967,778, respectively,
or net unrealized appreciation of $38,578,192.
+ Non-income-producing security.
(CUS) Bankers Trust New York Corp. provides subcustodian
services to the fund.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt
from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional
buyers.
ADR or ADS after the name of a foreign holding
stands for American Depository Receipts or American Depository
Shares, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
</TABLE>
<TABLE>
<CAPTION>
Forward Currency Contracts to Sell at August 31, 1996
(Aggregate Face Value $49,304,405)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $2,402,400 $2,336,488 11/12/96 $(65,912)
Deutschemarks 5,131,855 5,012,351 11/12/96 (119,504)
Dutch Guilders 5,447,975 5,350,706 11/12/96 (97,269)
French Francs 8,125,658 7,958,663 11/12/96 (166,995)
Japanese Yen 28,930,478 28,646,197 1/6/97 (284,281)
- ------------------------------------------------------------------------------------------
$(733,961)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1996 (Unaudited)
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $321,812,777) (Note 1) $360,390,969
- ----------------------------------------------------------------------------------------------------------------------------
Cash 320
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and other receivables 695,936
- ----------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,469,557
- ----------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 795,821
- ----------------------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 2,844
- ----------------------------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 58,335
- ----------------------------------------------------------------------------------------------------------------------------
Total assets 363,413,782
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 1,485,629
- ----------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 71,234
- ----------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 622,219
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 133,660
- ----------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 392
- ----------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,439
- ----------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 284,912
- ----------------------------------------------------------------------------------------------------------------------------
Payable for organization expense (Note 1) 98,304
- ----------------------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 736,805
- ----------------------------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 61,985
- ----------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 90,477
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,587,056
- ----------------------------------------------------------------------------------------------------------------------------
Net assets $359,826,726
Represented by
- ----------------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $297,503,868
- ----------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,555,025
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions (Note 1) 22,920,931
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 37,846,902
- ----------------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $359,826,726
Computation of net asset value and offering price
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($163,474,845 divided by 14,236,394 shares) $11.48
- ----------------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.48)* $12.18
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($187,670,572 divided by 16,463,545 shares)** $11.40
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($8,681,309 divided by 757,874 shares) $11.45
- ----------------------------------------------------------------------------------------------------------------------------
Offering price per share (100/96.5 of $11.45)* $11.87
- ----------------------------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended August 31, 1996 (Unaudited)
<S> <C>
Investment Income:
- -----------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $147,958) $3,470,055
- -----------------------------------------------------------------------------------------------------------------------------
Interest 258,689
- -----------------------------------------------------------------------------------------------------------------------------
Total investment income 3,728,744
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,193,540
- -----------------------------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 461,514
- -----------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 7,722
- -----------------------------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,330
- -----------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 342,363
- -----------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 878,565
- -----------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 23,592
- -----------------------------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 9,796
- -----------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 23,518
- -----------------------------------------------------------------------------------------------------------------------------
Registration fees 18,279
- -----------------------------------------------------------------------------------------------------------------------------
Auditing 20,069
- -----------------------------------------------------------------------------------------------------------------------------
Legal 7,227
- -----------------------------------------------------------------------------------------------------------------------------
Postage 40,296
- -----------------------------------------------------------------------------------------------------------------------------
Other 9,610
- -----------------------------------------------------------------------------------------------------------------------------
Total expenses 3,040,421
- -----------------------------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (68,689)
- -----------------------------------------------------------------------------------------------------------------------------
Net expenses 2,971,732
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 757,012
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 13,778,415
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain on forward currency contracts and foreign currency translation (Note 1) 1,685,789
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on forward currency contracts and foreign currency translation during the period (992,954)
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (3,575,885)
- -----------------------------------------------------------------------------------------------------------------------------
Net gain on investments 10,895,365
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $11,652,377
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
August 31 February 29
1996* 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $757,012 $765,771
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 15,464,204 18,560,324
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies (4,568,839) 40,491,651
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,652,377 59,817,746
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income
Class A -- (986,988)
- ------------------------------------------------------------------------------------------------------------------------------
Class B -- (601,270)
- ------------------------------------------------------------------------------------------------------------------------------
Class M -- (14,412)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ------------------------------------------------------------------------------------------------------------------------------
Class A -- (4,664,117)
- ------------------------------------------------------------------------------------------------------------------------------
Class B -- (4,643,058)
- ------------------------------------------------------------------------------------------------------------------------------
Class M -- (74,702)
- ------------------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 51,081,307 79,148,512
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 62,733,684 127,981,711
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 297,093,042 169,111,331
- ------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$1,555,025 and $798,013, respectively) $359,826,726 $297,093,042
- ------------------------------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the Period
July 3, 1995
Six months (commencement Six months
ended of operations) ended
August 31 to February 29 August 31
---------------------------------------------------------
1996+ 1996 1996+
---------------------------------------------------------
Class M
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.01 $9.76 $10.97
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .03 -- (d) .01
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .41 1.72 .42
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .44 1.72 .43
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income -- (.08) --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.39) --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.47) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.45 $11.01 $11.40
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 4.00(e) 17.95(e) 3.92(e)
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $8,681 $3,901 $187,671
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) .91(e) 1.23(e) 1.03(e)
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .18(e) .00(e) .09(e)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 34.18(e) 72.00 34.18(e)
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0452 $0.0452
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
July 1, 1994
(commencement Six months
Year ended of operations) ended
February 29 to February 28 August 31
-----------------------------------------------------------------
1996 1995 1996+
-----------------------------------------------------------------
Class B
-----------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.80 $8.50 $11.02
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .01 -- (d) .04
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.60 .32 .42
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.61 .32 .46
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.05) -- --
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.39) -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (.02) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.44) (.02) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.97 $8.80 $11.48
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 30.05 3.77(e) 4.17(e)
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $150,679 $75,998 $163,475
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) 2.09 1.45(e) .78(e)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .05 .05(e) .38(e)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 72.00 46.52(e) 34.18(e)
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0452
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
July 1, 1994
(commencement
Year ended of operations)
February 29 to February 28
--------------------------------------------
1996 1995
--------------------------------------------
Class A
--------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.83 $8.50
- --------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------
Net investment income .06 .03(d)
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.60 .32
- --------------------------------------------------------------------------------------------------------
Total from investment operations 2.66 .35
- --------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------
From net investment income (.08) --
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments (.39) --
- --------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (.02)
- --------------------------------------------------------------------------------------------------------
Total distributions (.47) (.02)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.02 $8.83
- --------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 30.58 4.13(e)
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $142,513 $93,144
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) 1.56 1.12(e)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .60 .37(e)
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 72.00 46.52(e)
- --------------------------------------------------------------------------------------------------------
Average commission rate paid (c)
- --------------------------------------------------------------------------------------------------------
+ Unaudited
(a) Total investment return assumes dividend reinvestment
and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended February 29,
1996 and thereafter includes amounts paid through brokerage service and expense offset
arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Average commission rate paid is required for fiscal periods beginning on
or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) Not annualized.
</TABLE>
Notes to financial statements
August 31, 1996 (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. Class A shares
are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to Class A shares after approximately eight
years, shares do not pay a front-end sales charge, but pay a higher
ongoing distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed
within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and an ongoing distribution fee that
is lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class
of shares, except that each class bears expenses unique to that
class (including the distribution fees applicable to such class).
Each class votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required
by law or determined by the Trustees. Shares of each class would
receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its
financial statements. The preparation of financial statements is in
conformity with generally accepted accounting principles and
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price on its principal exchange, or, if
no sales are reported--as in the case of some securities traded over
the counter--the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved
by the Trustees. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
B) Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the fund may transfer
uninvested cash balances into a joint trading account along with the
cash of other registered investment companies and certain other
accounts managed by Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc. These balances may be invested in one or
more repurchase agreements and/or short-term money market
instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of
the ex-dividend date.
E) Foreign currency translation The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income
and withholding taxes are translated at prevailing exchange rates
when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such 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. Net unrealized gains
and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) 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 U.S. dollar value of
forward currency contracts is determined using forward currency
exchange rates supplied by a quotation service. 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, 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.
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
from net investment income are recorded by the fund on the ex-
dividend date. Capital gain distributions, if any, are recorded on
the ex-dividend date and paid annually. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations.
I) Unamortized organization expenses Expenses incurred by the fund
in connection with its organization, its registration with the
Securities and Exchange Commission and with various states and the
initial public offering of its shares were $98,304. These expenses
are being amortized on projected net asset levels over a five-year
period.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets
of the fund. Such fee is based on the following annual rates: 0.70%
of the first $500 million, 0.60% of the next $500 million, 0.55% of
the next $500 million, 0.50% of the next $5 billion, 0.475% of the
next $5 billion, 0.455% of the next $5 billion, 0.44% of the next $5
billion, and 0.43% thereafter, subject, under current law, to
reduction in any year by the amount of certain brokerage commissions
and fees (less expenses) received by affiliates of Putnam Management
on the fund's portfolio transactions. Prior to June 20, 1996, for
amounts over $1.5 billion, the fee was 0.50%.
The fund 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 Trustees fee of $960 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.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which
allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees
remain in the fund and are invested in the fund or in other Putnam
funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended August 31, 1996, fund expenses were reduced
by $68,689 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported
in the Statement of operations exclude these credits. The fund could
have invested a portion of the assets utilized in connection with
the expense offset arrangements in an income producing asset if it
had not entered into such arrangements.
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.
For the six months ended August 31, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $138,793 and
$15,349 from the sale of class A and class M shares, respectively
and $103,831 in contingent deferred sales charges from redemptions
of class B shares. A deferred sales charge of up to 1% is assessed
on certain redemptions of class A shares. For the six months ended
August 31, 1996, Putnam Mutual Funds Corp., acting as underwriter
received no monies on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended August 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$160,092,690 and $99,405,046, respectively. There were no purchases
and sales of U.S. government obligations. In determining the net
gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
Note 4
Capital shares
At August 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
Six months ended August 31
1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 2,842,260 $32,753,484
- ----------------------------------------------------
Shares
repurchased (1,537,499) (17,635,516)
- ----------------------------------------------------
Net increase 1,304,761 $15,117,968
- ----------------------------------------------------
Year ended February 29
1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 4,339,724 $43,452,672
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 527,586 5,444,673
- ----------------------------------------------------
4,867,310 48,897,345
Shares
repurchased (2,485,011) (24,993,405)
- ----------------------------------------------------
Net increase 2,382,299 $23,903,940
- ----------------------------------------------------
Six months ended August 31
1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 3,741,911 $42,855,143
- ----------------------------------------------------
Shares
repurchased (1,014,287) (11,559,957)
- ----------------------------------------------------
Net increase 2,727,624 $31,295,186
- ----------------------------------------------------
Year ended February 29
1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 6,296,911 $63,300,190
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 478,659 4,925,411
- ----------------------------------------------------
6,775,570 68,225,601
Shares
repurchased (1,673,120) (16,711,682)
- ----------------------------------------------------
Net increase 5,102,450 $51,513,919
- ----------------------------------------------------
Six months ended August 31
1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 427,253 $4,939,074
- ----------------------------------------------------
Shares
repurchased (23,560) (270,921)
- ----------------------------------------------------
Net increase 403,693 $4,668,153
- ----------------------------------------------------
For the period July 3, 1995
(commencement of
operations) to
February 29,
1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 355,970 $3,752,562
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,554 88,276
- ----------------------------------------------------
364,524 3,840,838
Shares
repurchased (10,343) (110,185)
- ----------------------------------------------------
Net increase 354,181 $3,730,653
- ----------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
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 D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Thomas V. Reilly
Vice President
David L. King
Vice President and Lead Fund Manager
John K. Storkerson
Vice President and Fund Manager
Charles H. Swanberg
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
Diversified Equity Trust Fund. It may also be used as sales
literature when preceded or accompanied by the current prospectus,
which gives details of sales charges, investment objectives, and
operating policies of the fund, and the most recent copy of Putnam's
Quarterly Performance Summary. For more information, or to request a
prospectus, call toll free: 1-800-225-1581.
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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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27672-522/525/2AF 10/96
