Putnam
Diversified
Equity
Trust
ANNUAL REPORT
February 28, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "With one of the broadest charters of any Putnam stock fund, Putnam
Diversified Equity Trust can invest anywhere in the world, in any type of
stock. So when concerns arise in one market, we are able to maneuver into
other areas we believe are more attractive -- as we did this fiscal year when
valuations appeared more appealing overseas. Investors who don't have the time
or inclination to preoccupy themselves with the daily ups and downs of stock
markets can take comfort in the fund's actively managed trisector strategy."
-- David L. King, lead manager
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
24 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Putnam Diversified Equity Trust again demonstrated the merits of a portfolio
invested in virtually every sector of the global equity markets during the
fiscal year ended February 28, 1997. While the fund's performance did not
match that of the fastest-growing stocks, neither did it parallel that of the
slowest-growing market sectors. This diversified strategy is designed to
provide solid returns over the long term without the volatility often
associated with more aggressive portfolios.
I am pleased to announce that after the close of the period Omid Kamshad was
named to head the international equity portion of the fund's portfolio. He
replaces John Storkerson, who has assumed other duties within the group.
Justin Scott had been supervising the sector on an interim basis.
Before joining Putnam in 1996, Omid held investment management positions with
Lombard Odier International Investment Managers, Baring International
Investment, Ltd., Enskilda Asset Management, and Swiss Bank Corp. He has 11
years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 16, 1997
Report from the Fund Managers
David L. King, lead manager
Justin M. Scott
Charles H. Swanberg
The effectiveness of a trisector portfolio proved itself for the third year in
a row as Putnam Diversified Equity Trust closed the books on fiscal 1997 with
solid gains. Market forces caused domestic growth, domestic value, and foreign
stocks to rotate in and out of favor during the first half of the fiscal year,
but by period's end the fund's value segment -- buoyed by investors'
preference for large-company stocks -- had provided the lion's share of
performance.
We believe our decision this past summer to allocate all of the fund's new
cash flow into the international segment, or sleeve, helped boost performance
as the growth sector lagged the market. At period's end, the fund's asset
allocation stood at 39.3% in foreign stocks and 60.7% in domestic stocks. On
page 9 and 10 of this report, you'll find full performance details for all
share classes.
* REAL ESTATE, FINANCIAL, AND TECHNOLOGY STOCKS LEAD CHARGE IN VALUE SEGMENT
Our mission in the value segment is to find stocks whose current prices do not
seem to reflect the inherent value of a company's assets and future earnings
potential. Often many of the holdings are experiencing positive internal
change. Certain issues also may benefit from broader trends influencing an
industry. Such was the case with several real estate investment trust (REIT)
holdings. Institutional and individual investors' quest for attractive yield
and liquidity has created a renaissance in real estate investing, positively
affecting holdings such as Meditrust and Equity Residential Properties Trust.
We sold the fund's position in Simon DeBartolo at a considerable profit after
the merger between Simon Properties and DeBartolo Inc. made the newly formed
company the largest retail real estate firm in the United States. While these
stocks and others discussed in the report were viewed favorably at the end of
the fiscal period, all holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may well vary in the
future.
The consolidation and merger activity within the banking and insurance
industries played a part in the performance of several financial holdings,
including H. F. Ahmanson & Company, a savings and loan that is currently
making a bid for Great Western Financial. The merger between Dean Witter and
Morgan Stanley lifted the stock prices of similar investment banking and
financial services firms, including Salomon, Inc. -- a holding we acquired in
the second half of the fiscal year.
Although technology stocks are not traditionally thought of as value driven,
our research uncovered several that met our criteria for a value stock. Intel
is one example. We purchased Intel in 1995, when its price dipped as a result
of general concerns surrounding semiconductor stocks. Once the market began to
recognize the stock's true worth and its price rebounded, the security began
to behave more along the lines of a growth stock and was also purchased for
the fund's growth sleeve. Upon meeting the performance objectives set by each
sleeve, it was sold at a significant profit.
Two recent purchases worth highlighting include NCR (formerly National Cash
Register) and Unisource, the largest paper distributor in the United States.
Both are undergoing positive change as they gain their footing in the
marketplace after being spun off from parent companies AT&T and Alco Standard,
respectively. As more conglomerates re-engineer in order to stay competitive,
further spinoff activity may occur and create worthwhile investments, and we
will be watching for opportunities.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banks 6.8%
Finance 6.1%
Retail 5.8%
Computer software 4.3%
Pharmaceuticals and biotechnology 4.2%
Electronics and electrical equipment 4.2%
Footnote reads:
*Based on net assets as of 2/28/97. Holdings will vary over time.
* INTERNATIONAL SECTOR BENEFITS FROM STRENGTH IN WESTERN EUROPE AND HONG KONG
Throughout Western Europe, many markets have remained in fairly strong shape
despite the drag on economic growth that the European Monetary Union (EMU)
convergence process is creating. In order to meet the economic standards set
by the EMU by 1999, governments have to get their fiscal houses in order,
reining in spending and cutting inflation. The positive side to this has been
relatively low interest rates, which are compensating for decreased government
spending and higher taxes. Sweden, the Netherlands, France, Switzerland,
Ireland, and Germany are several countries whose markets have performed
extremely well and in which the fund has substantial exposure.
The growth of a European equity culture across these markets has also
contributed to their strength. Identifying a number of top-performing
companies exemplifying the trend toward corporate efficiency significantly
helped boost the fund's returns. Bayer, a German chemical company, is a
successful shareholder-friendly firm. Elf Aquitaine SA, a French oil company
now largely privatized, has implemented an ambitious restructuring program.
Despite a difficult year for semiconductor stocks worldwide, SGS-Thomson is a
standout among French companies in part because its products are specially
designed to meet clients' needs.
The investment environment in Japan remained generally bleak throughout the
period. However, several companies surfaced as attractive targets for
investment, particularly multinationals with large exports that are benefiting
from the downward revaluation of the yen versus the dollar. Canon and TDK are
fine examples.
In marked contrast to Japan, favorable conditions existed in Hong Kong.
Attitudes toward the handover of power to China later this year are
surprisingly positive. Companies with close ties to the booming mainland are
in great demand. Cheung Kong Holdings and Amoy Properties, two residential
property holdings, appreciated sharply over the period.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Federal National Mortgage Association
Finance
Federal Home Loan Mortgage Corp.
Finance
SGS-Thomson Microelectronics ADR (France)
Semiconductors
Parametric Technology Corp.
Computer software
Officemax, Inc.
Specialty retailer
Thermo Electron Corp.
Energy-related
Starbucks Corp.
Specialty retailer
Magna International, Inc. Class A (Canada)
Automotive
USF&G Corp.
Insurance
Equity Residential Properties Trust
Real estate
Footnote reads:
These holdings represent 10.0% of the fund's net assets as of 2/28/97.
Portfolio holdings will vary over time.
Emerging market exposure remains limited, with representative holdings in
Mexico. Should Latin American economies get on more stable ground, we may
consider further investment in select markets there.
Lastly, we protected the value of the fund's foreign investments by
maintaining currency hedges on a sizable portion of the fund's European and
Japanese holdings. Doing so enabled us to lock in attractive exchange rates
between foreign currencies and the U.S. dollar.
* DEFENSIVE SHIFT OCCURS IN GROWTH SECTOR
Last July's stock market correction combined with concerns about a slowdown in
corporate profits and the possibility of an interest-rate increase by the
Federal Reserve Board. Investors reasoned that, given economic uncertainty and
the market's volatility, higher-quality large and midsize companies were
better positioned to deliver predictable earnings. This shift created a more
value-oriented market, drawing favor away from the growth-driven companies
that are the focus of the fund's growth sleeve.
Even then, we had already begun the process of repositioning assets into more
defensive issues and industries to compensate for this shift in market
sentiment. Weightings in health-care, financial, and consumer growth companies
were increased, while exposure in technology and retail stocks was reduced.
Among the sleeve's solid performers throughout the period were Johnson &
Johnson, Medtronic, and Pfizer in the health-care sector. Our position in
United Healthcare proved its potential by appreciating substantially a few
weeks following its purchase. Strong results were also realized from MBNA
Corporation, Federal National Mortgage Association, and American Express
Company in the financial sector.
* GENERALLY FAVORABLE CONDITIONS SHOULD CONTINUE WORLDWIDE
We enter fiscal 1998 with the fund's portfolio modestly overweighted in
foreign stocks, believing still that non-U.S. financial assets hold the most
relative appeal in terms of valuation and growth prospects.
Recently we have begun to allocate the fund's new cash flow into the growth
sleeve largely because valuations have come down from their lofty peaks of
years ago and growth stocks seem poised for greater relative strength in the
months ahead. As always, individual stock selection will be the key in the
quest for superior performance in all three of the fund's stock segments.
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 2/28/97, 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 2/28/97
Class A Class B Class M
(inception date) (7/1/94) (7/1/94) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 16.92% 10.21% 16.19% 11.19% 16.51% 12.43%
- ------------------------------------------------------------------------------
Life of class 58.97 49.80 56.80 53.80 37.42 32.67
Annual average 18.96 16.34 18.35 17.5 21.11 18.56
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/97
Standard
& Poor's MSCI
500 Index EAFE
- ------------------------------------------------------------------------------
1 year 26.15% 3.24%
- ------------------------------------------------------------------------------
Life of class A
and class B 89.86 14.60
Annual average 27.18 5.24
- ------------------------------------------------------------------------------
Life of class M 50.65 12.73
Annual average 27.86 7.45
- ------------------------------------------------------------------------------
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 principal 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%.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 7/1/94
Starting value (Insert ending Total)
$9,425 Fund's class A shares at POP $14,980
$10,000 S&P 500 Index $18,986
$10,000 Morgan Stanley EAFE Index $11,460
(plot points for total return mountain chart)
Morgan Stanley
S&P 500 EAFE
Date/year Fund at POP Index Index
06/30/94 To 12/31/94 9,646 10,486 9,908
12/31/94 To 12/31/95 12,429 14,421 11,018
12/31/95 To 12/31/96 14,487 17,731 11,685
12/31/96 To 02/28/97 14,980 18,986 11,460
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 7/1/94 would have been
valued at $15,680 on 2/28/97 ($15,380 with a redemption at the end of
the period). A $10,000 investment in the fund's class M shares at
inception on 7/3/95 would have been valued at $13,742 at net asset
value on 2/28/97 $13,267 at public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 2/28/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.173 $0.119 $0.169
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.602 0.602 0.602
- ------------------------------------------------------------------------------
Short-term 0.225 0.225 0.225
- ------------------------------------------------------------------------------
Total $1.000 $0.946 $0.996
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
2/29/96 $11.02 $11.69 $10.97 $11.01 $11.41
- ------------------------------------------------------------------------------
2/28/97 11.85 12.57 11.77 11.80 12.23
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (7/1/94) (7/1/94) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 10.55% 4.20% 9.93% 4.93% 10.16% 6.30%
- ------------------------------------------------------------------------------
Life of class 54.27 45.38 52.14 49.14 33.35 28.73
Annual average 17.08 14.58 16.48 15.64 17.87 15.52
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance,
and will differ for each share class. Investment returns and principal value
will fluctuate so that an investor's shares, when sold, may be worth more or
less than their original cost.
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
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.
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 (the "fund") at February 28, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at February 28, 1997 by correspondence with
the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
April 14, 1997
<TABLE>
<CAPTION>
Portfolio of investments owned
February 28, 1997
COMMON STOCKS (93.9%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (0.4%)
- ---------------------------------------------------------------------------------------------------------
41,025 Omnicom Group, Inc. $ 2,035,866
Aerospace and Defense (0.7%)
- ---------------------------------------------------------------------------------------------------------
39,200 Northrop Grumman Corp. 2,846,900
18,800 Smiths Industries PLC (United Kingdom) 235,895
--------------
3,082,795
Airlines (1.1%)
- ---------------------------------------------------------------------------------------------------------
39,200 Delta Air Lines, Inc. 3,155,590
24,150 K.L.M.-Royal Dutch Airlines (Netherlands) 739,908
55,000 Singapore Airlines Ltd. (Singapore) 486,486
92,000 Swire Pacific Ltd. Class A (Hong Kong) 790,133
--------------
5,172,117
Apparel (0.3%)
- ---------------------------------------------------------------------------------------------------------
21,400 Gucci Group (Netherlands) 1,382,975
Appliances (1.1%)
- ---------------------------------------------------------------------------------------------------------
25,660 Electrolux AB (Sweden) 1,603,323
65,300 Whirlpool Corp. 3,297,650
--------------
4,900,973
Automotive (2.4%)
- ---------------------------------------------------------------------------------------------------------
15,500 Autoliv AB (Sweden) 704,170
3,600 Bayerische Motoren Werke (BMW) AG (Germany) 2,421,745
53,600 General Motors Corp. 3,102,100
71,700 Magna International, Inc. Class A (Canada) 3,764,250
5,000 Peugeot Citroen S.A. (France) 552,196
--------------
10,544,461
Banks (6.8%)
- ---------------------------------------------------------------------------------------------------------
72,600 Ahmanson (H.F.) & Co. 2,985,675
307,829 Allied Irish Banks PLC (Ireland) 2,200,757
810 Baer Holdings AG (Switzerland) 886,332
23,990 Banco de Bilbao Vizcaya (Spain) 1,414,624
144,296 Bank of Ireland (Ireland) 1,467,535
39,200 Bankers Trust New York Corp. [UPSIDE DOWN DELTA] 3,557,400
72,761 Barclays Bank PLC (United Kingdom) 1,314,068
76,100 Commonwealth Bank of Australia (Australia) 759,213
44,000 Commonwealth Bank of Australia
Installment Shares (Australia) 291,047
179,000 Dao Heng Bank Group Ltd. (Hong Kong) 920,083
40,000 Development Bank of Singapore Ltd. (Singapore) 530,713
57,200 Fleet Financial Group, Inc. 3,489,200
206,300 Guoco Group Ltd. (Hong Kong) 1,156,324
114,779 HSBC Holdings PLC (Hong Kong) 2,801,657
45,000 Malayan Banking Berhad (Malaysia) 535,067
63,300 Summit Bancorp 3,022,575
56,000 United Overseas Bank Ltd. (Singapore) 636,855
11,000 Washington Mutual, Inc. 581,625
325,000 Westpac Banking Corp. (Australia) 1,846,280
--------------
30,397,030
Basic Industrial Products (0.6%)
- ---------------------------------------------------------------------------------------------------------
113 Asahi Diamond Industrial Co., Ltd. (Japan) 960
132,000 Mitsui Fudoscan Co., Ltd. (Japan) 983,154
2,300 Rieter Holding AG (Switzerland) 678,305
19,106 Sommer Allibert (France) 579,426
400,000 Varitronix International Ltd. (Hong Kong) 661,242
--------------
2,903,087
Broadcasting (0.5%)
- ---------------------------------------------------------------------------------------------------------
39,600 Clear Channel Communications, Inc. + 1,895,850
12,200 Evergreen Media Corp. Class A + 366,000
1,600 Univision Communications Inc. Class A + 52,800
--------------
2,314,650
Building and Construction (0.1%)
- ---------------------------------------------------------------------------------------------------------
22,033 Castle & Cooke, Inc. + 352,528
400 JGC Corp. (Japan) 2,296
770 Taihei Dengyo Corp. Ltd. (Japan) 5,883
--------------
360,707
Building Products (1.3%)
- ---------------------------------------------------------------------------------------------------------
224,667 CRH PLC (Ireland) 2,320,473
33,800 Lafarge Coppee (France) 2,115,277
305,900 Pioneer International Ltd. (Australia) 911,737
57,200 Sungei Way Holdings Berhad (Malaysia) 165,998
29,500 Tarkett AG (Germany) + 524,072
--------------
6,037,557
Business Services (3.4%)
- ---------------------------------------------------------------------------------------------------------
62,460 Airgas, Inc. + 1,202,355
2,400 APAC Teleservices, Inc. + 71,400
15,903 Corestaff, Inc. + 375,708
93,175 Corporate Express, Inc. + 1,747,031
78,000 Dai Nippon Printing Co., Ltd. (Japan) 1,306,173
37,735 Gartner Group Inc. Class A + 999,978
45,455 Interpublic Group Cos. Inc. 2,278,432
22,400 Metromedia International Group, Inc. + 222,600
46,136 Robert Half International, Inc. + 1,920,411
172,850 Securicor PLC (United Kingdom) 879,644
500 Societe Generale de Surveillance Holdings S.A. (Switzerland) 1,135,593
142,852 Unisource Worldwide, Inc. 3,071,318
--------------
15,210,643
Chemicals (2.9%)
- ---------------------------------------------------------------------------------------------------------
11,200 Akzo-Nobel N.V. (Netherlands) 1,612,550
74,000 Bayer AG ADR (Germany) 3,122,224
63,300 Hercules, Inc. 2,943,450
101,000 KAO Corp. (Japan) 1,110,722
35,000 Minnesota Mining & Manufacturing Co. 3,220,000
90,000 Sekisui Chemical Co. Ltd. (Japan) 937,266
--------------
12,946,212
Combined Utilities (0.5%)
- ---------------------------------------------------------------------------------------------------------
42,300 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) + 2,419,719
Computers (2.5%)
- ---------------------------------------------------------------------------------------------------------
52,900 EMC Corp. + 1,904,400
59,500 Hewlett-Packard Co. 3,332,000
21,600 IBM Corp. 3,105,000
86,500 NCR Corp. + 2,854,500
--------------
11,195,900
Computer Services (1.1%)
- ---------------------------------------------------------------------------------------------------------
19,945 America Online, Inc. + 747,938
45,592 Getronics Electric N.V. (Netherlands) 1,488,052
23,848 Keane, Inc. + 840,642
48,901 Sterling Commerce, Inc. + 1,418,129
19,492 Vanstar Corp. + 268,015
--------------
4,762,776
Computer Software (4.3%)
- ---------------------------------------------------------------------------------------------------------
28,519 BMC Software, Inc. + 1,220,970
12,900 Cadence Design Systems, Inc. + 475,688
75,797 Computer Associates Intl., Inc. 3,297,170
45,463 Electronic Arts, Inc. + 1,420,719
47,814 Electronics for Imaging, Inc. + 1,840,839
190,000 JBA Holdings PLC (United Kingdom) 2,258,730
33,174 Microsoft Corp. + 3,234,465
89,975 Parametric Technology Corp. + 5,072,341
15,320 Rational Software Corp. + 396,405
--------------
19,217,327
Conglomerates (2.3%)
- ---------------------------------------------------------------------------------------------------------
49,100 General Motors Corp. Class H 2,896,900
137,000 Hutchison Whampoa, Ltd. (Hong Kong) 1,043,911
155,600 Ogden Corp. 3,170,350
8,000 Preussag AG (Germany) 2,053,651
208,143 Tomkins PLC (United Kingdom) 960,954
--------------
10,125,766
Consumer Products (0.4%)
- ---------------------------------------------------------------------------------------------------------
8,205 Unilever N.V. (Netherlands) 1,562,734
Cosmetics (0.1%)
- ---------------------------------------------------------------------------------------------------------
22,705 Thermolase Corp. + 298,003
Education Services (0.2%)
- ---------------------------------------------------------------------------------------------------------
9,699 Apollo Group, Inc. Class A + 261,873
26,176 DeVRY, Inc. + 520,248
--------------
782,121
Electric Utilities (1.5%)
- ---------------------------------------------------------------------------------------------------------
23,300 Calenergy, Inc. + 777,638
107,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 370,347
140,700 Long Island Lighting Co. 3,236,100
38,100 Northeast Utilities Co. 395,288
318,606 Scottish Power PLC (United Kingdom) 1,821,163
--------------
6,600,536
Electronics and Electrical Equipment (4.2%)
- ---------------------------------------------------------------------------------------------------------
33,745 Applied Materials, Inc. + 1,708,341
985 BBC Brown Boveri & Cie AG (Switzerland) 1,119,227
15,000 Futaba Corp. (Japan) 612,347
319,400 General Electric Co. PLC (United Kingdom) 1,937,532
25,600 Hirose Electric Co. Ltd. (Japan) 1,441,773
20,500 Murata Manufacturing Co., Ltd. (Japan) 722,444
148,000 NEC Corp. (Japan) 1,726,235
58,000 Nippondenso Co., Ltd. (Japan) 1,121,053
44,000 Omron Corp. (Japan) 696,493
47,000 Philips Electronics N.V. (Netherlands) 2,120,394
95,000 SAES Getters S.P.A. ADR (Italy) + 1,056,875
81,000 Sharp Corp. (Japan) 1,018,995
31,000 TDK Corp. (Japan) 2,086,812
36,948 Thermo Instrument Systems, Inc. + 1,256,232
--------------
18,624,753
Energy-Related (1.7%)
- ---------------------------------------------------------------------------------------------------------
26,480 IHC Caland N.V. (Netherlands) 1,472,040
121,960 Thermo Electron Corp. + 4,161,885
13,754 VA Technologies AG (Austria) 2,076,366
--------------
7,710,291
Environmental Control (0.4%)
- ---------------------------------------------------------------------------------------------------------
53,029 Republic Industries, Inc. + 1,882,530
Finance (6.1%)
- ---------------------------------------------------------------------------------------------------------
32,900 ABN AMRO Holding N.V. (Netherlands) 2,360,639
29,290 American Express Co. 1,914,834
46,600 Beneficial Corp. 3,221,225
8,600 Cetelem Group (France) + 1,064,353
21,500 Credit Locale de France S.A. (France) 2,144,535
178,384 Federal Home Loan Mortgage Corp. 5,306,924
139,167 Federal National Mortgage Association 5,566,680
21,500 Household International, Inc. 2,082,813
77,387 MBNA Corp. 2,476,368
20,875 TCF Financial Corp. 947,203
--------------
27,085,574
Financial Services (1.1%)
- ---------------------------------------------------------------------------------------------------------
23,962 Countrywide Credit Industries, Inc. 697,893
7,600 Franklin Resources, Inc. 444,600
64,500 Salomon, Inc. 3,587,813
--------------
4,730,306
Food and Beverages (3.7%)
- ---------------------------------------------------------------------------------------------------------
170,635 Archer Daniels Midland Co. 3,156,748
14,900 Danisco A/S (Denmark) 902,119
78,800 Dole Food Co. 3,014,100
1,211,000 Goodman Fielder Ltd. ADR (Australia) 1,470,144
220,658 Greencore Group PLC (Ireland) + 1,336,727
1,915 Nestle S.A. (Switzerland) 2,085,078
27,800 Panamerican Beverages, Inc. Class A (Mexico) 1,567,225
125,000 Whitman Corp. 2,937,500
--------------
16,469,641
HMOs (0.2%)
- ---------------------------------------------------------------------------------------------------------
18,513 United Healthcare Corp. 923,336
Health Care Services (0.8%)
- ---------------------------------------------------------------------------------------------------------
28,343 Cardinal Health, Inc. 1,743,095
45,675 Healthsouth Rehabilitation Corp. + 1,838,419
--------------
3,581,514
Household Products (0.4%)
- ---------------------------------------------------------------------------------------------------------
49,825 Blyth Industries, Inc. + 1,631,769
Insurance (3.3%)
- ---------------------------------------------------------------------------------------------------------
30,727 Aegon N.V. (Netherlands) 2,036,497
57,996 Internationale Nederlanden Groep (Netherlands) 2,244,002
70,600 Jardine Matheson Holdings Ltd. (Singapore) 427,130
140,000 Malaysian Assurance Alliance (Malaysia) 880,290
15,000 Mapfre Vida Seguros (Spain) 944,173
150,000 QBE Insurance Group Ltd. (Australia) 752,909
57,000 Skandia Forsakrings AB (Sweden) 1,731,415
1,750 Swiss Reinsurance Co. (Switzerland) 1,790,339
166,900 USF&G Corp. 3,755,250
--------------
14,562,005
Leisure (0.5%)
- ---------------------------------------------------------------------------------------------------------
46,118 Adidas AG 144A ADS (Germany) 2,196,370
Machinery (0.6%)
- ---------------------------------------------------------------------------------------------------------
60,000 Daikin Industries Ltd. (Japan) 472,882
76,850 Sandvik AB Class B, (Sweden) 1,878,760
101,795 Weir Group PLC (The) (United Kingdom) 347,295
--------------
2,698,937
Medical Management Services (0.4%)
- ---------------------------------------------------------------------------------------------------------
15,043 Pediatrix Medical Group, Inc. + 564,113
45,927 Phycor, Inc. + 1,395,033
--------------
1,959,146
Medical Supplies and Devices (2.7%)
- ---------------------------------------------------------------------------------------------------------
20,850 Boston Scientific Corp. + 1,381,313
61,891 Johnson & Johnson 3,566,469
14,058 Medtronic, Inc. 910,256
34,984 Shared Medical Systems Corp. 1,911,001
102,230 Stryker Corp. 2,964,670
34,587 Thermo Cardiosystems, Inc. + 968,436
11,500 Thermotrex Corp. + 307,625
980 Trex Medical Corp. + 12,373
--------------
12,022,143
Metals and Mining (1.0%)
- ---------------------------------------------------------------------------------------------------------
92,244 Freeport-McMoRan Copper & Gold Co., Inc. Class B 3,136,296
101,200 RTZ Corp. PLC (United Kingdom) 1,545,039
--------------
4,681,335
Networking Equipment (0.4%)
- ---------------------------------------------------------------------------------------------------------
59,088 Cabletron Systems, Inc. + 1,772,640
Office Equipment (0.7%)
- ---------------------------------------------------------------------------------------------------------
28,084 Ikon Office Solutions, Inc. 1,158,465
77,016 Viking Office Products, Inc. + 1,819,503
--------------
2,977,968
Oil and Gas (4.1%)
- ---------------------------------------------------------------------------------------------------------
38,000 Amoco Corp. 3,211,000
148,589 British Petroleum Co. PLC (United Kingdom) 1,644,235
3,500 British Petroleum Co. PLC ADR (United Kingdom) 463,313
101,900 Burmah Oil PLC (United Kingdom) 1,715,033
335,100 Ente Nazionale Idrocarburi SPA (ENI) (Italy) 1,652,734
125,000 Occidental Petroleum Corp. 3,187,500
103,500 Shell Transportation & Trading (United Kingdom) 1,757,131
25,129 Elf Aquitaine SA (France) 2,400,790
28,300 Total S.A. Class B (France) 2,254,773
--------------
18,286,509
Paper and Forest Products (0.4%)
- ---------------------------------------------------------------------------------------------------------
72,200 Svenska Cellulosa AB Class B (Sweden) 1,601,559
Pharmaceuticals and Biotechnology (4.2%)
- ---------------------------------------------------------------------------------------------------------
1,500 Altana AG (Germany) 1,270,208
40,000 Astra B (Sweden) 1,870,504
19,441 Merck & Co., Inc. 1,788,572
2,133 Novartis AG + (Switzerland) 2,438,127
2,133 Novartis AG Rights expiration date 3/12/97 + (Switzerland) 135,211
32,673 Pfizer, Inc. 2,993,664
75,100 Pharmacia & Upjohn, Inc. 2,769,313
55,600 Pharmacia & Upjohn, Inc. ADS (Sweden) 2,055,556
67,000 Sankyo Co., Ltd. (Japan) 1,875,530
30,000 Santen Pharmaceutical (Japan) 599,850
40,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 839,790
--------------
18,636,325
Photography (1.2%)
- ---------------------------------------------------------------------------------------------------------
120,000 Canon, Inc. (Japan) 2,519,370
67,600 Polaroid Corp. 2,856,100
--------------
5,375,470
Publishing (0.8%)
- ---------------------------------------------------------------------------------------------------------
65,800 Times Mirror Co. Class A 3,388,700
Railroads (0.6%)
- ---------------------------------------------------------------------------------------------------------
236 East Japan Railway Co. (Japan) 1,010,614
40,397 Wisconsin Central Transportation Corp. + 1,449,242
--------------
2,459,856
Real Estate (3.1%)
- ---------------------------------------------------------------------------------------------------------
556,000 Amoy Properties Ltd. (Hong Kong) 664,213
88,900 Beacon Properties Corp. 3,167,063
224,000 Cheung Kong Holdings Ltd. (Hong Kong) 2,140,772
81,900 Equity Residential Properties Trust (R) 3,705,975
257,000 Hong Kong Land Holdings Ltd. (Hong Kong) 732,450
83,300 Meditrust Corp. (R) 3,207,050
--------------
13,617,523
Retail (5.8%)
- ---------------------------------------------------------------------------------------------------------
1,640 Boise Cascade Office Products + 36,285
36,405 CompUSA, Inc. + 728,100
108,206 Costco Companies, Inc. + 2,772,779
44,000 Cycle & Carriage Ltd. (Singapore) 463,320
83,300 Dayton Hudson Corp. 3,498,600
28,000 Ito-Yokado Co., Ltd. (Japan) 1,278,347
273,400 Kmart Corp. 3,417,500
20,172 Kohls Corp. + 927,912
98,471 Lowe's Cos., Inc. 3,594,192
347,061 Officemax, Inc. + 4,164,732
116,923 Starbucks Corp. + 3,931,536
28,000 Vendex International N.V. (Netherlands) 1,292,693
--------------
26,105,996
Satellite Services (0.2%)
- ---------------------------------------------------------------------------------------------------------
28,550 PanAmSat Corp. + 827,950
Semiconductors (2.5%)
- ---------------------------------------------------------------------------------------------------------
32,605 Analog Devices Inc. + 758,066
52,892 Linear Technology Corp. 2,406,586
61,450 Maxim Integrated Products Inc. + 3,049,456
77,213 SGS-Thomson Microelectronics ADR (France) + 5,096,058
--------------
11,310,166
Specialty Consumer Products (0.1%)
- ---------------------------------------------------------------------------------------------------------
17,285 Fastenal Co. 626,581
Telecommunication (0.2%)
- ---------------------------------------------------------------------------------------------------------
72,064 NEXTEL Communications, Inc. Class A + 1,026,912
Telecommunication Equipment (1.0%)
- ---------------------------------------------------------------------------------------------------------
13,700 Northern Telecom Ltd. (Canada) 985,226
7,400 Nokia AB Class A + (Finland) 446,324
73,000 Telefonaktiebolaget LM Ericsson Class B (Sweden) 2,319,544
15,551 Tellabs, Inc. + 620,096
--------------
4,371,190
Telephone Services (2.8%)
- ---------------------------------------------------------------------------------------------------------
56,900 Deutsche Telekom AG (Germany) + 1,095,073
27,900 Deutsche Telekom AG ADR (Germany) + 540,563
163 Nippon Telegraph and Telephone Corp. (Japan) 1,166,517
64,100 Portugal Telecom S.A. + (Portugal) 2,248,029
47,000 Royal PTT (United Kingdom) 1,682,459
69,000 Sprint Corp. 3,139,500
571,926 Vodafone Group PLC (United Kingdom) 2,714,977
--------------
12,587,118
Telephone Utilities (0.8%)
- ---------------------------------------------------------------------------------------------------------
180,000 Hong Kong Telecommunications Ltd. (Hong Kong) 310,345
92,000 US West, Inc. 3,312,000
--------------
3,622,345
Textiles (0.1%)
- ---------------------------------------------------------------------------------------------------------
44,000 Onward Kashiyama Co., Ltd. (Japan) 542,531
Tire and Rubber (0.8%)
- ---------------------------------------------------------------------------------------------------------
86,000 Bridgestone Corp. (Japan) 1,547,613
34,900 Michelin Corp. Class B (France) 2,182,894
--------------
3,730,507
Tobacco (2.1%)
- ---------------------------------------------------------------------------------------------------------
282,409 B A T Industries PLC (United Kingdom) 2,469,679
148,000 Dimon Inc. 3,478,000
91,000 RJR Nabisco Holdings Corp. 3,332,875
--------------
9,280,554
Transportation (0.1%)
- ---------------------------------------------------------------------------------------------------------
50,500 Yamato Transport Co., Ltd. (Japan) 500,666
Water Utilities (0.3%)
- ---------------------------------------------------------------------------------------------------------
50,000 Kurita Water Industries Ltd. (Japan) 1,062,234
28,558 North West Water Group PLC (United Kingdom) 310,432
--------------
1,372,666
--------------
Total Common Stocks (cost $355,460,468) $ 419,035,337
SHORT-TERM INVESTMENTS (4.8%) * (cost $21,504,201)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$ 21,501,000 Interest in $594,385,000 joint repurchase agreement
dated February 28,1997 with Morgan (J.P.) & Co., Inc.
due March 3, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $21,510,604 for an
effective yield of 5.36% $ 21,504,201
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $376,964,669) *** $440,539,538
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $446,212,258.
*** The aggregate identified cost on a tax basis is $378,053,461, resulting in gross unrealized appreciation
and depreciation of $73,139,918 and $10,653,841, respectively, or net unrealized appreciation of
$62,486,077.
+ Non-income-producing security.
[UPSIDE DOWN DELTA] This entity 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.
Diversification by Country
Distribution of investments by country of issue at February 28, 1997:
(as percentage of Market Value)
Australia 1.7%
Canada 1.1
France 4.2
Germany 3.6
Hong Kong 2.6
Ireland 1.7
Japan 6.2
Netherlands 4.2
Sweden 3.1
Switzerland 2.3
United Kingdom 5.5
United States 60.7
Other 3.1
----------
Total 100.0%
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at February 28, 1997
(aggregate face value $48,618,696)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemarks $ 5,453,934 $ 6,153,743 5/12/97 $ 699,809
Dutch Guilders 11,709,533 12,693,111 5/12/97 983,578
French Francs 11,217,639 12,463,164 5/12/97 1,245,525
Japanese Yen 10,555,041 10,969,288 5/12/97 414,247
Swiss Francs 6,133,025 6,339,390 5/12/97 206,365
- ----------------------------------------------------------------------------------------
$3,549,524
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $376,964,669) (Note 1) $440,539,538
- ---------------------------------------------------------------------------------------------------
Cash 720,180
- ---------------------------------------------------------------------------------------------------
Foreign currency (cost $111,400) 113,263
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 671,922
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,288,665
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 3,223,400
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,549,524
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 48,586
- ---------------------------------------------------------------------------------------------------
Total assets 450,155,078
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 1,852,958
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 577,490
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 743,242
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 174,950
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,664
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,357
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 317,698
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 98,304
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 61,376
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 107,781
- ---------------------------------------------------------------------------------------------------
Total liabilities 3,942,820
- ---------------------------------------------------------------------------------------------------
Net assets $446,212,258
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $371,634,582
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,420,285)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 8,875,045
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 67,122,916
- ---------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $446,212,258
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($199,305,088 divided by 16,824,164 shares) $11.85
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.85)* $12.57
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($232,116,518 divided by 19,719,313 shares)** $11.77
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($14,790,652 divided by 1,253,464 shares) $11.80
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.80)* $12.23
- ---------------------------------------------------------------------------------------------------
* 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
Year ended February 28, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $243,944) $ 6,433,660
- --------------------------------------------------------------------------------------------------
Interest 519,068
- --------------------------------------------------------------------------------------------------
Total investment income 6,952,728
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,619,329
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 924,720
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 23,170
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,368
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 706,636
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,934,055
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 67,945
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 19,545
- --------------------------------------------------------------------------------------------------
Reports to shareholders 40,024
- --------------------------------------------------------------------------------------------------
Registration fees 38,518
- --------------------------------------------------------------------------------------------------
Auditing 39,381
- --------------------------------------------------------------------------------------------------
Legal 11,641
- --------------------------------------------------------------------------------------------------
Postage 65,110
- --------------------------------------------------------------------------------------------------
Other 22,331
- --------------------------------------------------------------------------------------------------
Total expenses 6,520,773
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (160,904)
- --------------------------------------------------------------------------------------------------
Net expenses 6,359,869
- --------------------------------------------------------------------------------------------------
Net investment income 592,859
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 28,885,567
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,532,104
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year (Note 1) 3,286,383
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 21,420,792
- --------------------------------------------------------------------------------------------------
Net gain on investments 56,124,846
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $56,717,705
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended Year ended
February 28 February 29
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 592,859 $ 765,771
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 31,417,671 18,560,324
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 24,707,175 40,491,651
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 56,717,705 59,817,746
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (1,842,478) (986,988)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,471,953) (601,270)
- ----------------------------------------------------------------------------------------------------------------------
Class M (117,302) (14,412)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (12,456,981) (4,664,117)
- ----------------------------------------------------------------------------------------------------------------------
Class B (14,387,126) (4,643,058)
- ----------------------------------------------------------------------------------------------------------------------
Class M (811,724) (74,702)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A (762,542) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (609,195) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (48,548) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 124,909,360 79,148,512
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 149,119,216 127,981,711
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 297,093,042 169,111,331
- ----------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income of $1,420,285 and undistributed
net investment income of $798,013) $446,212,258 $297,093,042
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- -----------------------------------------------------------------------------------------------------------
For the Period
Per-share Year ended Year ended July 1, 1994+
operating performance Feb. 28 Feb. 29 to Feb. 28
- -----------------------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.02 $8.83 $8.50
- -----------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------
Net investment income .06(d) .06 .03(d)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.77 2.60 .32
- -----------------------------------------------------------------------------------------------------------
Total from
investment operations 1.83 2.66 .35
- -----------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.08) --
- -----------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.39) --
- -----------------------------------------------------------------------------------------------------------
In excess of net
investment income (.05) -- --
- -----------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- (.02)
- -----------------------------------------------------------------------------------------------------------
Total distributions (1.00) (.47) (.02)
- -----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.85 $11.02 $8.83
- -----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.92 30.58 4.13*
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $199,305 $142,513 $93,144
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.43 1.56 1.12*
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .48 .60 .37*
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 82.07 72.00 46.52*
- -----------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0439
- -----------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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
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
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ----------------------------------------------------------------------------------------------------------
For the Period
Per-share Year ended Year ended July 1, 1994+
operating performance Feb. 28 Feb. 29 to Feb. 28
- ----------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $10.97 $8.80 $8.50
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income (.01)(d) .01 --(d)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.76 2.60 .32
- ----------------------------------------------------------------------------------------------------------
Total from
investment operations 1.75 2.61 .32
- ----------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------
From net
investment income (loss) (.09) (.05) --
- ----------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.39) --
- ----------------------------------------------------------------------------------------------------------
In excess of net
investment income (.03) -- --
- ----------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- (.02)
- ----------------------------------------------------------------------------------------------------------
Total distributions (.95) (.44) (.02)
- ----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.77 $10.97 $8.80
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.19 30.05 3.77*
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $232,117 $150,679 $75,998
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.02 2.09 1.45*
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.12) .05 .05*
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 82.07 72.00 46.52*
- ----------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0439
- ----------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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
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
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- -------------------------------------------------------------------------------------------
For the Period
Per-share Year ended July 3, 1995+
operating performance Feb. 28 to Feb. 29
- -------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.01 $9.76
- -------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------
Net investment income .01(d) --(d)
- -------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.78 1.72
- -------------------------------------------------------------------------------------------
Total from
investment operations 1.79 1.72
- -------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------
From net
investment income (.12) (.08)
- -------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.39)
- -------------------------------------------------------------------------------------------
In excess of net
investment income (.05) --
- -------------------------------------------------------------------------------------------
Total distributions (1.00) (.47)
- -------------------------------------------------------------------------------------------
Net asset value,
end of period $11.80 $11.01
- -------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.51 17.95*
- -------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $14,791 $3,901
- -------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.77 1.23*
- -------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .05 .00*
- -------------------------------------------------------------------------------------------
Portfolio Turnover (%) 82.07 72.00
- -------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0439
- -------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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
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
number of shares outstanding during the period.
</TABLE>
Notes to financial statements
February 28, 1997
Note 1
Significant accounting policies
Putnam Diversified Equity Trust (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, 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 pay 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, 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.
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 appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and foreign denominated 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 nor 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 at
least 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.
These differences include treatment of losses on wash sale transactions,
realized and unrealized gains and losses on forward foreign currency
contracts, currency gains and losses on foreign bonds, non-taxable dividends,
and unrealized gains on passive foreign investment companies.
Reclassifications are made to the fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. For the year ended February 28, 1997, the fund
reclassified $2,040,861 to decrease distributions in excess of net investment
income and $302,661 to increase paid-in-capital, with a decrease to
accumulated net realized gain on investments of $2,343,522. 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
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 of
average net assets, 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, 0.43% of any excess
thereafter. Prior to June 20, 1996, Putnam Management was paid at a rate of
0.50% of any amount of the fund's assets over $1.5 billion.
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.
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 year ended February 28, 1997, fund expenses were reduced by $160,904
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.
Trustees of the fund receive an annual Trustees fee of $980 and an additional
fee for each Trustee's 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 certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
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 1.00% and
0.75% of the average net assets attributable to class B and class M shares
respectively. The Trustees have approved payment by the fund at an annual rate
of 0.50% of the average net assets attributable to class A for shares
outstanding as of July 1, 1995 (except for class A shares for which Putnam
Mutual Funds is dealer of record) and 0.25% of such average net asset value of
shares acquired after that date (including shares acquired through
reinvestment of distributions).
For the year ended February 28, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $251,672 and $29,248 from the sale of
class A and class M shares, respectively and $252,841 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 year
ended February 28, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $400 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended February 28, 1997, purchases and sales of investment
securities other than short-term investments aggregated $340,376,191 and
$254,389,412, 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 February 28, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
February 28, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 5,358,027 $62,540,590
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,268,867 14,540,984
- ------------------------------------------------------------
6,626,894 77,081,574
Shares
repurchased (2,734,363) (31,757,138)
- ------------------------------------------------------------
Net increase 3,892,531 $45,324,436
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
February 28, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 6,764,474 $78,344,350
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,350,363 15,407,635
- ------------------------------------------------------------
8,114,837 93,751,985
Shares
repurchased (2,131,445) (24,663,610)
- ------------------------------------------------------------
Net increase 5,983,392 $69,088,375
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
February 28, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 922,460 $10,783,946
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 83,934 959,329
- ------------------------------------------------------------
1,006,394 11,743,275
Shares
repurchased (107,111) (1,246,726)
- ------------------------------------------------------------
Net increase 899,283 $10,496,549
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $.602 per share (or if different, the amount necessary to
offset net capital gain earned by the Fund) for all classes of shares as
capital gain dividends for its taxable year ended February 28, 1997.
The fund has designated 30.47% of the distributions from net investment income
as qualifying for the dividends received deduction for corporations.
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
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
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
David L. King
Vice President and Fund Manager
Justin M. Scott
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. 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. You can also
learn more at Putnam Investments' website: http://www.putnaminv.com.
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Investmentns
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
32138-522/525/2AF 4/97
