Putnam
Asia Pacific
Growth
Fund
ANNUAL REPORT
September 30, 1995
(Graphic--Balance Scales)
B O S T O N (bullet) L O N D O N (bullet) T O K Y O
1
<PAGE>
Performance highlights
(bullet) Lipper Analytical Services, Inc., an industry research firm, ranked
Putnam Asia Pacific Growth Fund's class A shares in the top 7% of 15
Pacific Region funds for three-year performance as of September 30,
1995.*
(bullet) "As global growth champ, the [Asia Pacific] region is unrivaled. The
World Bank forecasts that for the next decade Asia's developing
economies will keep racing ahead by 8% a year, on average-- roughly
three times the pace of GDP growth in the US..." --Fortune Magazine,
October 30, 1995
<TABLE>
<CAPTION>
FISCAL RESULTS AT A GLANCE
Class A Class B Class M
Total return: NAV POP NAV CDSC NAV POP
..............................................................................................
<S> <C> <C> <C> <C> <C> <C>
(change in value
during period plus
reinvested
distributions)
12 months ended
9/30/95 -4.14% -9.63% -4.88% -9.48%
Life of class M 9.03% 5.21%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class M
Share value: NAV POP NAV NAV POP
..............................................................................................
<S> <C> <C> <C> <C> <C>
9/30/95 $14.64 $15.53 $14.53 -- --
2/1/95 (inception -- -- -- $12.41 $12.86
of class M shares)
9/30/95 13.58 14.41 13.37 13.53 14.02
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Distributions: Long- Short-
No. Income term term Total
...............................................................................................
<S> <C> <C> <C> <C> <C>
Class A 1 .0377 $0.034 $.3733 $0.445
Class B 1 .0377 0.034 .3733 0.445
Class M 0 -- -- -- --
</TABLE>
Data above represent past results and are not indicative of future
performance and will differ for each class. For performance over longer
periods, see pages 9-11. POP assumes 5.75% maximum sales charge for class A
shares and 3.50% for class M shares. CDSC assumes 5% maximum contingent
deferred sales charge.
* Lipper rankings vary over time and do not reflect the effects of sales
charges. The fund's class A shares ranked 1 out of 15 (top 7%) and 8 out of
32 (top 25%) for 3- and 1-year performance, respectively. Performance of
other share classes will vary. Past performance is not indicative of future
results.
2
<PAGE>
From the Chairman
(Photo of George Putnam)
(c) Karsh, Ottawa
Dear Shareholder:
Those who look no further than current economic events in the Asia Pacific
region in making their long-term investment decisions may fail to recognize
what Putnam Asia Pacific Growth Fund's manager calls, with some
understatement in my view, "attractive opportunities for investors."
As David Thomas writes in the fund's management report for the fiscal year
just ended, the region's countries currently appear to have exceptional
potential. Not surprisingly, Japan's continuing difficulties still dominate
the economic headlines in the region, and your fund's results for the 12
months ended September 30, 1995, reflect these challenges.
As you will see in the report that follows, David believes events in the
fiscal year's closing weeks provide a better idea of what may lie ahead. He
is convinced that shareholders with patience and a long-term perspective may
be well rewarded by their investment in this fund.
Respectfully yours,
(Signature of George Putnam)
George Putnam
Chairman of the Trustees
November 15, 1995
3
<PAGE>
Report from the Fund Manager
David K. Thomas
The dramatic economic ascendancy of the Asia Pacific region is one of the
most significant developments of this century. We believe Asia Pacific
countries have almost unbounded potential -- and offer correspondingly
attractive opportunities for investors. However, a long-term perspective is
vital when evaluating the performance of Asian markets: short-term events,
like those currently besetting Japan, often recede as time minimizes their
importance.
At present, however, an ailing Japan continues to dampen the performance of
Putnam Asia Pacific Growth Fund. Over its fiscal year ended September 30,
1995, the fund's class A shares returned -4.14% at net asset value (NAV),
while class B shares returned -4.88% at NAV. Your fund's results are in line
with those of Morgan Stanley Capital International's Pacific Index, which is
heavily weighted in Japan and returned -4.31% over the same time.
In spite of these subdued results, we believe we are justified in our
optimistic long-term outlook for the region. Indeed, the returns for your
fund over the intermediate term may give a better picture of Asia's
potential. The fund's class A shares gained 19.89% annualized at NAV for the
three years ended September 30, 1995; over the same period, U.S. equities, as
measured by the Standard & Poor's 500(R) index, rose 14.98% annualized.
(bullet) CONFRONTING JAPAN'S WOES; POSITIONING FOR AN UPSWING
Japan, supremely confident during the 1980s, has spent much of the 1990s
mired in recession. The country's gloom deepened in 1994 as major banks were
confronted with potentially troubling loan defaults, government response to
economic difficulties was deemed inadequate, and trade problems loomed with
the United States. However, it was the ongoing strength of the yen that most
threatened Japanese recovery by making Japanese exports globally
uncompetitive. In response to these mounting problems,
4
<PAGE>
we moderately trimmed the fund's weighting in Japan over the first quarter of
1995.
Within our reduced, though significant, Japanese weighting, we concentrated
on sectors that still appeared to offer growth potential and resilience. We
sold flagging auto-related stocks, such as Mitsubishi and Bridgestone, and
added to our technology holdings, whose values and growth prospects seemed
most compelling. Two semiconductor companies in the fund's portfolio, Rohm
and Kyocera, benefited nicely from the same global demand fueling the
technology boom in the U.S. market. Omron, an electronics-equipment
manufacturer, has been a strong performer and may be poised for growth in the
months ahead. Another equipment company, Tokyo Electronics, seems similarly
well positioned for earnings growth.
We are cautiously optimistic about Japan's prospects in the year ahead,
mostly because, after concerted intervention in currency markets by Germany,
the United States, and Japan itself, the yen has finally begun to weaken.
Indeed, we expect further decline in the value of the yen and have moved to
insulate our Japanese holdings with a 61% protective hedge, which will allow
the fund to benefit as the yen weakens. A weaker yen's
<TABLE>
<CAPTION>
ALLOCATIONS BY COUNTRY*
as of 3/31/95 9/30/95
.............................................................................
<S> <C> <C>
Japan 46.8% 45.3%
.............................................................................
Hong Kong 9.3 14.0
.............................................................................
Singapore 14.0 11.6
.............................................................................
Malaysia 8.9 7.5
.............................................................................
Indonesia 2.6 5.9
.............................................................................
Australia 2.4 2.9
.............................................................................
Thailand 0.7 2.5
.............................................................................
Taiwan 4.0 2.2
.............................................................................
South Korea 2.4 1.2
.............................................................................
Philippines 1.2 1.1
.............................................................................
India 0.7 0.5
</TABLE>
* Based on net assets as of indicated date. Holdings will vary over time.
5
<PAGE>
effect on corporate profits, coupled with low interest rates and ongoing
government stimulus packages, may finally begin to lift the Japanese market
- -- perhaps dramatically.
(bullet) SIGNS OF IMPENDING STRENGTH ABOUND IN OTHER REGIONAL MARKETS
Over the past six months, the Hong Kong market has gained some 13% in local
currency terms, sparked in part by conditions in the United States. Indeed,
Hong Kong, along with other "dollar-bloc" countries in the region, is highly
sensitive to the direction of U.S. interest rates; 1994's rising U.S.
interest rates pushed many of these markets lower. Our 14% position in Hong
Kong, up from about 10% early in 1995, is concentrated in finance and
technology. HSBC, a Hong Kong banking concern, was boosted by a local lift in
mortgage lending. Cheung Kong, a property developer, may be poised for growth
as the island's deflationary property spiral appears to have bottomed. We are
particularly upbeat about Varitronix, a liquid-crystal display manufacturer,
whose stock performed very well throughout 1995 and whose earnings continue
to increase.
Singapore, which represents 11.6% of the portfolio, has had mixed results
over the past six months. While economic growth has been robust -- gross
domestic product (GDP) rose some 8.1% over the second quarter of 1995 -- the
stock market there has been somewhat erratic. A more moderate (and thus less
inflationary) GDP growth rate of 7% is expected in 1996. This, coupled with
strong export growth, could bode well for Singapore's equity market in the
coming months. In the fund's Singapore holdings, we have seen strong results
from Venture Manufacturing, a relatively small high-technology company.
Malaysia's stock market has vacillated over the past six months. After
bidding up stocks there over the first quarter of 1995, investors began to
fear that an overheating economy (GDP growth over that period was among the
world's highest) would ignite inflation. We have positioned much of the
fund's 7.5% weighting in Malaysia in the manufacturing and construction
sectors expecting the Malaysian government's seemingly endless infrastructure
development projects to boost growth.
6
<PAGE>
TOP 10 HOLDINGS (9/30/95)
Sampoerna Industries (Indonesia)
Clove cigarette maker
.............................................................................
HSBC Holdings (Hong Kong)
Financial services; banking
.............................................................................
Daiwa Securities (Japan)
Brokerage, financial services
.............................................................................
Omron Corp. (Japan)
Specialized electronics maker
.............................................................................
Hong Kong Electric (Hong Kong)
Electricity generator
.............................................................................
SMC (Japan)
Air-pressure equipment
.............................................................................
Cheung Kong Holdings (Hong Kong)
Property developer
.............................................................................
Hutchison Whampoa (Hong Kong)
Conglomerate
.............................................................................
Tokyo Electron (Japan)
Semiconductor manufacturer
.............................................................................
Kurita Water Industries (Japan)
Water-treatment equipment
These holdings represent 17.95% of the fund's assets. Portfolio holdings are
subject to change.
(bullet) SMALLER COUNTRIES MIXED OVER PERIOD; OPTIMISM ABOUT REGIONAL OUTLOOK
Several smaller fund allocations, including Indonesia, Taiwan, and Thailand,
were mixed performers over the past six months. In Indonesia, where we have
currently committed some 5.9% of the portfolio, we saw strong performance
over the fiscal year from Sampoerna, the fund's largest single holding, a
clove cigarette manufacturer. Other potentially promising Indonesian firms in
the fund's portfolio are Matahari, a retailer, and Astra International, a
Toyota distributor.
The fund's performance was slightly hampered by our failure to participate
significantly in a sharp, albeit short, stock market rise in Thailand over
the second quarter. A small portion of the portfolio was also pushed down by
the volatile Taiwanese market, battered by increasing tensions with China.
Ultimately, we believe that the growth prospects for the Asia Pacific region
remain excellent and represent a significant opportunity for patient
investors and that the fund's long-term
7
<PAGE>
performance record provides a much better picture of its potential than do
results over this most recent period.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. Although the described
holdings were viewed favorably as of September 30, 1995, there is no
guarantee the fund will continue to hold these securities in the future.
8
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund.
Performance should always be considered in light of a fund's investment
strategy. Putnam Asia Pacific Growth Fund is designed for investors seeking
capital appreciation primarily through common stocks and other securities of
companies located in Asia and in the Pacific Basin.
TOTAL RETURN FOR PERIODS ENDED 9/30/95
most recent calendar quarter
<TABLE>
<CAPTION>
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year -4.14% -9.63% -4.88% -9.48% -- --
- -----------------------------------------------------------------------------------
3 years 72.32 62.38 -- -- -- --
Annual average 19.89 17.54 -- -- -- --
- -----------------------------------------------------------------------------------
Life of class A 64.08 54.71 -- -- -- --
Annual average 11.34 9.93 -- -- -- --
- -----------------------------------------------------------------------------------
Life of class B -- -- 27.67 24.67 -- --
Annual average -- -- 11.05 9.93 -- --
- -----------------------------------------------------------------------------------
Life of class M -- -- -- -- 9.03% 5.21%
- -----------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 9/30/95
<TABLE>
<CAPTION>
MSCI Pacific Consumer Price
Index Index
- ------------------------------------------------------------------------------
<S> <C> <C>
1 year -4.31% 2.54%
- ------------------------------------------------------------------------------
3 years 46.05 8.42
Annual average 13.47 2.73
- ------------------------------------------------------------------------------
Life of class A 17.86 13.65
Annual average 3.65 2.81
- ------------------------------------------------------------------------------
Life of class B 7.41 6.24
Annual average 3.11 2.63
- ------------------------------------------------------------------------------
Life of class M 4.80 1.93
- ------------------------------------------------------------------------------
</TABLE>
The fund began operations on 2/20/91, offering shares now known as class A.
Effective 6/1/93, the fund began offering class B shares and on 2/1/95, class
M shares. Performance data represent past results and will differ for each
share class. Investment returns and net asset value will fluctuate so an
investor's shares, when sold, may be worth more or less than their original
cost.graphic
9
<PAGE>
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000
investment since 2/20/91
Fund's class A shares at POP $15,471
MSCI International Pacific Index $11,786
Consumer Price Index $11,365
PLOT POINTS FOR LINE CHART
2/20/91 9425 10000 10000
9/30/91 8879 9558 10178
9/30/92 8978 8070 10482
9/30/93 12692 11329 10764
9/30/94 16138 12318 11083
9/30/95 15471 11786 11365
Past performance is no assurance of future results. A $10,000 investment in
the fund's class B shares at inception on 6/1/93 would have been valued at
$12,767 on 9/30/95 ($12,467 with a redemption at the end of the period). A
$10,000 investment in the fund's class M shares at inception on 2/1/95 would
have been valued at $10,513 on 9/30/95.
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.
10
<PAGE>
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
The Morgan Stanley Capital International (MSCI) Pacific Index is an unmanaged
list of Asian and Pacific Rim equity securities, excluding U.S., with all
values expressed in U.S. dollars. Performance of the index reflects changes
in market price and reinvestment of distributions net of withholding taxes.
The fund's portfolio contains securities that differ from those in the
indexes. Investment in the fund is subject to special international risks,
such as currency fluctuations and political developments.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
11
<PAGE>
Relative risk/reward potential of Putnam funds
These illustrations provide a simplified guide to the risk/reward potential
for funds within each category of the Putnam Family of Funds and are not
intended as investment advice. Your investment advisor can help you evaluate
your risk tolerance.
These rankings are relative only to Putnam funds and should not be compared to
other investments. There is no guarantee that one Putnam fund will be less
volatile than another, since each fund has its own investment risks. That's
why it is essential to read the fund's prospectus before investing.
PUTNAM GROWTH FUNDS
Asia Pacific Growth(1)
Diversified Equity(1)
Europe Growth(1)
Global Growth(1)
Health Sciences
International New Opportunities(1,2)
Investors
Natural Resorses
New Opportunities(2)
OTC Emerging Growth(2)
Overseas Growth(1)
Vista
Voyager
Voager II
Lower Risk
Lower Reward Potential
PUTNAM GROWTH AND INCOME FUNDS
Balanced Retirement
Convertible Income-Growth
Equity Income
George Putnam
Fund for Growth and Income
Putnam Growth and Income Fund II
Utilities Growth and Income
Higher Risk
Higher Reward Potential
(1) Foreign investments are subject to certain risks, such as currency
fluctuations and political developments, that are not present with
domestic investments.
(2) This fund invests all or a portion of its assets in small to medium-sized
companies, which increases the risk of price fluctuations.
(3) While U.S. government backing of individual securities does not insure
your principal, which will fluctuate, it does guarantee that the fund's
government-backed holdings will make timely payments of interest and
principal.
12
<PAGE>
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government(3)
American Government Income(3)
Diversified Income(1,3,5)
Federal Income(3)
Global Governmental(1,5)
High Yield(5)
High Yield Advantage(5)
Income
Money Market(4)
Intermediate U.S. Government(3)
Preferred Income
U.S. Government Income(3)
Lower Risk
Lower Reward Potential
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt
Municipal Income
Singe-state tax-free Funds*
Tax Exempt Income
Tax Exempt Money Market(4)
Tax-Free High Yield(5)
Tax-Free Insured(7)
Higher Risk
Higher Reward Potential
* State tax-free funds available for Arizona, California, Florida,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and
Pennsylvania. Not available in all states.
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments. The
three portfolios are:
(bullet) Putnam Asset Allocation: Balanced Portfolio
(bullet) Putnam Asset Allocation: Conservative Portfolio
(bullet) Putnam Asset Allocation: Growth Portfolio
Please call your financial advisor -- or Putnam at 1-800-225-1581 -- to
obtain a prospectus for any Putnam fund. The prospectus contains more
complete information, including risk considerations, charges, and expenses.
Read it carefully before you invest or send money.
(4) The fund is managed to maintain a steady price of $1.00 per share,
although there is no assurance this price can be maintained in the future.
(5) The lower credit ratings of high-yield corporate and municipal bonds
reflect a greater possibility that adverse changes in the economy or their
issuers may affect their ability to pay principal and interest on the
bonds.
(6) Income may be subject to state and local taxes. Capital gains, if any, are
taxable for federal and, in most cases, state purposes.
(7) Bond insurance does not guarantee principal or protect against changes in
market price.
13
<PAGE>
Report of Independent Accountants
For the year ended September 30, 1995
To the Trustees and Shareholders of
Putnam Asia Pacific Growth Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Asia Pacific Growth Fund, including the portfolio of investments
owned, as of September 30, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Putnam Asia Pacific Growth Fund as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated therein, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 22, 1995
14
<PAGE>
Portfolio of investments owned
September 30, 1995
<TABLE>
<CAPTION>
COMMON STOCKS (94.7%)*
NUMBER OF SHARES VALUE
<S> <C> <C>
Australia (2.9%)(diamond bullet)
- -----------------------------------------------------------------------------
400,000 Amcor, Ltd. $ 2,999,808
1,500,000 CSL Limited 3,969,000
109,100 Qantas Airways Ltd. 144A+ 1,909,250
-------------
8,878,058
Hong Kong (14.0%)(diamond bullet)
- -----------------------------------------------------------------------------
922,000 Cheung Kong Holdings Ltd. 5,020,850
804,800 Guoco Group Ltd. 4,028,685
3,700,000 HKR International Ltd. 3,134,782
453,684 HSBC Holdings PLC 6,308,502
1,900,000 Hang Lung Development Co. 3,059,760
1,592,000 Hong Kong Electric Holdings, Ltd. 5,323,140
1,600,000 Hong Kong Land Holdings Ltd. 2,800,000
909,000 Hutchison Whampoa, Ltd. 4,926,543
1,153,000 J.F. Indonesia Equity Fund+ 1,401,914
4,200,000 Shun Tak Holdings Ltd. 3,313,930
1,745,000 Varitronix International Ltd. 3,555,006
-------------
42,873,112
India (0.5%) (diamond bullet)
- -----------------------------------------------------------------------------
393,750 KEC International Ltd.+ 1,428,229
Indonesia (5.9%) (diamond bullet)
- -----------------------------------------------------------------------------
1,900,000 Astra International (Registered) 3,774,825
506,925 Bank Bali (Registered) 1,320,464
333,000 Bank Nisp (Registered) 323,443
726,000 PT Ciputra Development (Registered) 1,554,566
1,329,000 PT Matahari Putra Prima 2,405,689
666,700 PT Mulia Industrindo 1,655,708
750,000 Sampoerna Industries (Registered) 6,986,738
-------------
18,021,433
Japan (45.0%) (diamond bullet)
- -----------------------------------------------------------------------------
110,000 Alpine Electronics Inc. 1,675,351
210,000 Bridgestone Corp. 3,093,186
300,000 Brother Industries Ltd. 1,463,928
255,000 Dai Nippon Printing Co., Ltd. 4,011,523
486,000 Daiwa Securities Ltd. 6,087,174
364,000 Fujitsu, Ltd. 4,559,118
101,000 Futaba Industrial Co., Ltd. 4,513,627
120,000 Glory Ltd. 4,232,465
53,550 Hirose Electric Co. Ltd. 3,337,485
70,000 Ito Yokado Co., Ltd. 3,843,687
230,000 KAO Corp. 2,834,669
27,000 Keyence Corp. 3,327,655
159,000 Komori Corp. 3,743,988
170,000 Kurita Water Ltd. 4,599,198
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C> <C>
Japan (continued)
- -----------------------------------------------------------------------------
50,000 Kyocera Corp. $ 4,078,156
210,000 Marui Co., Ltd. 3,892,786
65,000 Maruichi Steel Tube 1,217,936
200,000 Matsushita Electric Industrial Co., Ltd. 3,046,092
172,000 Mitsubishi Bank 3,412,425
91,000 Murata Manufacturing Co. Ltd. 3,391,984
325,000 NEC Corp. 4,493,988
215,000 Nichicon 2,886,774
510 Nippon Telegraph and Telephone Corp. 4,359,018
370,000 Nishimatsu Construction Co. 4,485,972
250,000 Omron Corp. 5,761,523
60,000 Rohm Co. Ltd. 3,763,527
78,000 SMC Corp. 5,236,473
136,000 Santen Pharmaceutical Co., Ltd. 3,393,186
60,000 Secom Co., Ltd. 3,967,936
275,000 Sekisui Chemical Co., Ltd. 3,471,944
63,000 Shinkawa 2,518,737
220,000 Takasago Thermal Engineering 3,284,569
240,000 Toho Bank Ltd. 1,563,126
300,000 Tokio Marine & Fire Insurance Co. Ltd. 3,216,433
110,000 Tokyo Electron Ltd. 4,750,501
100,000 Tostem Corp. 3,196,393
150,000 Tsubakimoto Precision Prods. Ltd. 1,803,607
100,000 Yamaguchi Bank Ltd. 1,703,407
174,000 Yamanouchi Pharmaceutical Co. Ltd. 3,731,062
-------------
137,950,609
Malaysia (7.5%) (diamond bullet)
- -----------------------------------------------------------------------------
300,000 Carlsberg Brewery of Malaysia 1,385,075
276,000 Edaran Otomobil Nasional Berhad+ 2,208,000
353,000 Genting (Berhad) 3,048,796
358,750 George Kent 685,373
261,000 Hong Leong Industries Berhad 1,371,224
506,667 Leader Universal 1,552,771
352,000 Malayan Banking Berhad 2,844,020
400,000 Maruichi Malaysia 1,544,279
1,670,000 TA Enterprise Berhad 2,352,955
400,000 Telekom Malaysia (Berhad) 3,008,955
460,000 United Engineers 2,947,662
-------------
22,949,110
Philippines (1.1%) (diamond bullet)
- -----------------------------------------------------------------------------
50,000 Philippine Long Distance Telephone Co. ADR 3,318,750
Singapore (11.6%) (diamond bullet)
- -----------------------------------------------------------------------------
508,000 City Developments Ltd. 3,138,224
1,226,000 Clipsal Industries Ltd. 3,065,000
1,960,000 Courts (Singapore) Ltd. 2,834,397
450,000 Cycle & Carriage Ltd. 4,011,934
394,000 Development Bank of Singapore (Registered) 4,480,730
74,000 Edaran Otomobil Nasional 592,000
295,000 George Kent 563,582
90,000 Hong Leong Industries 472,836
158,448 Jardine Matheson Holdings Ltd. 1,069,524
240,000 Maruichi Malaysia 926,567
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C> <C>
Singapore (continued)
- -----------------------------------------------------------------------------
721,000 NatSteel Ltd. $ 1,493,120
287,000 Singapore Airlines Ltd. (Registered) 2,659,459
207,600 Singapore Press Holdings (Registered) 3,177,030
371,000 SungeiWay Holdings 1,328,256
480,150 United Overseas Bank Ltd. (Registered) 4,145,908
537,000 Venture Manufacturing Ltd. 1,681,306
-------------
35,639,873
South Korea (1.2%)(diamond bullet)
- -----------------------------------------------------------------------------
216 Seoul Access Trust+ 3,564,000
Taiwan (1.5%)(diamond bullet)
- -----------------------------------------------------------------------------
186,231 Hocheng Group Corp. 144A GDR+ 1,789,252
118,029 Tung Ho Steel Enterprise 144A GDR+ 1,239,305
41,814 Yageo Corp. GDR+ 522,675
79,446 Yageo 144A GDR+ 973,214
-------------
4,524,446
Thailand (2.5%)(diamond bullet)
- -----------------------------------------------------------------------------
148,500 Alphatec Electronics (Registered)+ 2,392,105
620,100 Industrial Finance Corp. (Registered) 1,903,816
2,150,000 Ruam Pattana Fund (Registered) 1,307,316
1,150,000 Sinpinyo Fund 5 (Registered) 848,286
150,000 Thai Farmers Bank Public Co. (Registered) 1,303,828
-------------
7,755,351
United States (1.0%)
- -----------------------------------------------------------------------------
72,000 AFLAC Inc. 2,988,000
- -----------------------------------------------------------------------------
Total Common Stocks (cost $273,153,352) $289,890,971
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS AND NOTES (0.7%)* (diamond bullet) (cost $2,465,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$2,550,000 Teco Electric & Machinery 144A $ 2,040,000
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WARRANTS (0.3%)+* (diamond bullet)
<S> <C> <C> <C>
NUMBER OF WARRANTS EXPIRATION DATE VALUE
- -----------------------------------------------------------------------------
75,100 Bank Bali 8/29/00 $ 49,735
80 Luks Ind. Co. Ltd. 6/30/96 1
680 Sega Enterprises 8/31/99 994,160
- -----------------------------------------------------------------------------
Total Warrants (cost $917,128) $ 1,043,896
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (2.1%)* (cost $6,315,236)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$6,313,000 Interest in $652,192,000 joint repurchase
agreement dated September 29, 1995 with
Goldman, Sachs & Co. due October 2, 1995
with respect to various U.S. Treasury
obligations--maturity value of $6,316,354
for an effective yield of 6.375% $ 6,315,236
- -----------------------------------------------------------------------------
Total Investments (cost $282,850,716)*** $299,290,103
- -----------------------------------------------------------------------------
</TABLE>
17
<PAGE>
NOTES
- -----------------------------------------------------------------------------
* Percentages indicated are based on net assets of $306,116,221, which
correspond to a net asset value per class A, class B, and class M share of
$13.58, $13.37 and $13.53, respectively.
+ Non-income-producing security.
(diamond bullet) Securities whose values are determined or significantly
influenced by trading on exchanges not in the United States
or Canada.
*** The aggregate identified cost for federal income tax purposes is
$283,105,341, resulting in gross unrealized appreciation and depreciation
of $29,068,727 and $12,883,965, respectively, or net unrealized
appreciation of $16,184,762.
Forward Currency Contracts to Sell Outstanding at September 30, 1995
<TABLE>
<CAPTION>
Market Aggregate Delivery Unrealized
Value Face Value Date Appreciation
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen $86,739,830 $89,731,230 2/20/96 $2,991,400
</TABLE>
ADR or GDR after the name of a holding stands for American Depository Receipt
or Global Depository Receipts, respectively, representing ownership of
foreign securities on deposit with a domestic custodian bank.
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.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Statement of assets and liabilities
September 30, 1995
<TABLE>
<CAPTION>
Assets
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $282,850,716) (Note 1) $ 299,290,103
- ---------------------------------------------------------------------------------------------------------
Cash 12,269
- ---------------------------------------------------------------------------------------------------------
Receivable for securities sold 3,947,421
- ---------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,497,347
- ---------------------------------------------------------------------------------------------------------
Dividends and other receivables 690,347
- ---------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 2,991,400
- ---------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 1,141
- ---------------------------------------------------------------------------------------------------------
Total assets 308,430,028
- ---------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------
Payable for securities purchased 628,659
- ---------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 609,634
- ---------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 605,424
- ---------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian (Note 2) 174,276
- ---------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,001
- ---------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,720
- ---------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 224,359
- ---------------------------------------------------------------------------------------------------------
Other accrued expenses 67,734
- ---------------------------------------------------------------------------------------------------------
Total liabilities 2,313,807
- ---------------------------------------------------------------------------------------------------------
Net assets $ 306,116,221
- ---------------------------------------------------------------------------------------------------------
Represented by
- ---------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 300,542,233
- ---------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 6,163,966
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (Note 1) (20,018,451)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign
currencies 19,428,473
- ---------------------------------------------------------------------------------------------------------
Total--Representing net assets applicable
to capital shares outstanding $ 306,116,221
- ---------------------------------------------------------------------------------------------------------
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($158,773,310 divided by 11,692,660 shares) $ 13.58
- ---------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $13.58)* $ 14.41
- ---------------------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($144,514,051 divided by 10,805,360 shares)+ $ 13.37
- ---------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($2,828,860 divided by 209,045 shares) $ 13.53
- ---------------------------------------------------------------------------------------------------------
Offering price per share (100/96.50 of $13.53)* $ 14.02
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
19
<PAGE>
Statement of operations
Year ended September 30, 1995
<TABLE>
<CAPTION>
Investment income:
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $493,387) $ 3,624,608
- ---------------------------------------------------------------------------------------------------------
Interest 834,597
- ---------------------------------------------------------------------------------------------------------
Total investment income 4,459,205
- ---------------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,212,456
- ---------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,053,443
- ---------------------------------------------------------------------------------------------------------
Reports to shareholders 92,835
- ---------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,038
- ---------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,968
- ---------------------------------------------------------------------------------------------------------
Auditing 49,445
- ---------------------------------------------------------------------------------------------------------
Registration fees 56,815
- ---------------------------------------------------------------------------------------------------------
Legal 14,526
- ---------------------------------------------------------------------------------------------------------
Postage 82,657
- ---------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,997
- ---------------------------------------------------------------------------------------------------------
Other expenses 20,497
- ---------------------------------------------------------------------------------------------------------
Distribution fees (Note 2)
- ---------------------------------------------------------------------------------------------------------
Class A 375,018
- ---------------------------------------------------------------------------------------------------------
Class B 1,258,258
- ---------------------------------------------------------------------------------------------------------
Class M 4,944
- ---------------------------------------------------------------------------------------------------------
Total expenses 5,249,897
- ---------------------------------------------------------------------------------------------------------
Fees paid indirectly (Note 2) (220,021)
- ---------------------------------------------------------------------------------------------------------
Net expenses 5,029,876
- ---------------------------------------------------------------------------------------------------------
Net loss on investment transactions (570,671)
- ---------------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (19,160,470)
- ---------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency translation
and forward currency contracts (Note 1) 6,072,807
- ---------------------------------------------------------------------------------------------------------
Net unrealized foreign currency translation loss
during the year (3,214)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
during the year 2,886,111
- ---------------------------------------------------------------------------------------------------------
Net loss on investments (10,204,766)
- ---------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
operations $ (10,775,437)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Year ended
September 30
-----------------------------------
1995 1994
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------
Net investment loss $ (570,671) $ (443,219)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (13,087,663) 8,483,816
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments,
forward currency contracts and foreign currency
translation 2,882,897 14,494,683
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset resulting
from operations (10,775,437) 22,535,280
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
- ---------------------------------------------------------------------------------------------------------
Net investment income
- ---------------------------------------------------------------------------------------------------------
Class A (408,458) --
- ---------------------------------------------------------------------------------------------------------
Class B (332,113) --
- ---------------------------------------------------------------------------------------------------------
Net realized gain on investments
- ---------------------------------------------------------------------------------------------------------
Class A (4,408,786) (201,104)
- ---------------------------------------------------------------------------------------------------------
Class B (3,584,353) (93,170)
- ---------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 65,187,981 204,145,161
- ---------------------------------------------------------------------------------------------------------
Total increase in net assets 45,678,834 226,386,167
- ---------------------------------------------------------------------------------------------------------
Net assets
- ---------------------------------------------------------------------------------------------------------
Beginning of year 260,437,387 34,051,220
- ---------------------------------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $6,163,966 and distribution
in excess of net investment income of $244,274,
respectively) $306,116,221 $260,437,387
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period For the period
February 1, 1995 June 1, 1993
(commencement (commencement
of operations) to of operations) to
September 30 Year ended September 30 September 30
----------------------------------------------------------------------
1995 1995 1994 1993+
----------------------------------------------------------------------
Class M Class B
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 12.41 $ 14.53 $ 11.54 $ 10.86
- --------------------------------------------------------------------------------------------------------------------
Investment activities
- --------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01) (.07) (.03) (.02)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.13 (.64) 3.06 .70
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.12 (.71) 3.03 .68
- --------------------------------------------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------------------------------------------
Net investment income -- (.04) -- --
- --------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (.41) (.04) --
- --------------------------------------------------------------------------------------------------------------------
Total distributions -- (.45) (.04) --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.53 $ 13.37 $ 14.53 $ 11.54
- --------------------------------------------------------------------------------------------------------------------
Total investment return at net
asset value (%) (b) 9.03(c) (4.88) 26.31 6.26(c)
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 2,829 $ 144,514 $ 110,951 $ 9,901
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets (%) (d) 2.09(c) 2.31 2.27 .86(c)
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.45)(c) (.62) (.73) (.25)(c)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 91.13(c) 91.13 65.02 79.78(c)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
For the period
February 20, 1991
(commencement
of operations) to
Year ended September 30 September 30
- ------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$14.64 $ 11.55 $ 8.17 $ 8.08 $ 8.58
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
.02 .04 (.03) (.01)(a) (.02)(a)
- ------------------------------------------------------------------------------
(.63) 3.09 3.41 .10 (.52)
- ------------------------------------------------------------------------------
(.61) 3.13 3.38 .09 (.50)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(.04) -- -- -- --
- ------------------------------------------------------------------------------
(.41) (.04) -- -- --
- ------------------------------------------------------------------------------
(.45) (.04) -- -- --
- ------------------------------------------------------------------------------
$13.58 $ 14.64 $ 11.55 $ 8.17 $ 8.08
- ------------------------------------------------------------------------------
(4.14) 27.15 41.37 1.11 (5.83)(c)
- ------------------------------------------------------------------------------
$158,773 $149,486 $24,150 $2,548 $2,084
- ------------------------------------------------------------------------------
1.55 1.53 2.03 1.88(a) 1.38(a)(c)
- ------------------------------------------------------------------------------
.14 (.01) (.54) (.06)(a) .28(a)(c)
- ------------------------------------------------------------------------------
91.13 65.02 79.78 95.67 47.11(c)
- ------------------------------------------------------------------------------
</TABLE>
+ Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(a) Reflects an expense limitation in effect during the period. As a result of
such limitation, expenses of the fund for the periods ended September 30 ,
1991 and 1992, reflect a per share reduction of approximately $0.08 and
$0.01, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Not annualized.
(d) The ratio of expenses to average net assets for the year or period ended
September 30, 1995 includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts. (See Note 2)
23
<PAGE>
Notes to financial statements
September 30, 1995
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 by investing primarily in common stocks and other
securities of companies located in Asia and in the Pacific Basin.
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 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 all classes
of shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class votes
as a class only with respect to its own distribution plan or other matters on
which a class vote is required by law or determined by the Trustees. Shares
of each class would receive their pro- rata share of the net assets of the
fund, if the fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price on the principal market in which the securities are
traded, or, if no sales are reported--as in the case of some securities
traded over-the-counter--the last reported bid price, except that certain
U.S. government obligations are stated at the mean between the last reported
bid and asked prices. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates market
value, and other investments are stated at fair value following procedures
approved by the Trustees. (See Section F of Note 1 with respect to the
valuation of options and forward currency contracts.)
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rate. Gains and losses that arise from changes in
exchange rates are not segregated from gains and losses that arise from
changes in market prices of investments. The effects on net investment income
arising from changes in exchange rates are also not segregated.
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 and certain other
accounts of other registered investment companies managed by Putnam
Investment Management, Inc. ("Putnam Management"), the fund's Manager, a
24
<PAGE>
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 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 and dividend
income is recorded on the ex-dividend date, except that certain dividends
from foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
Foreign-currency-denominated receivables and payables are "marked-to- market"
using the current exchange rate. The fluctuation between the original
exchange rate and the current exchange rate is recorded as unrealized
translation gain or loss. Upon receipt or payment, the fund realizes a gain
or loss amounting to the difference between the original value and the ending
value of the receivable or payable. Foreign currency gains and losses related
to interest receivable are reported as part of interest income.
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) Option accounting principles The premium paid by the fund for the purchase
of a call or put option is included in the fund's "Statement of assets and
liabilities" as an investment and subsequently "marked-to-market" to reflect
the current market value of the option. If an option the fund has purchased
expires on the stipulated expiration date, the fund realizes a loss in the
amount of the cost of the option. If the fund enters into a closing sale
transaction, the fund realizes a gain or loss, depending on whether the
proceeds from the closing sale transaction are greater or less than the cost
of the option. If the fund exercises a purchased call option, the cost of the
security or currency acquired by exercising the call is increased by the
25
<PAGE>
premium paid to buy the call. If the fund exercises a put option, it realizes
a gain or loss from the sale of the underlying security or currency and the
proceeds from such sale are decreased by the premium originally paid.
Options on foreign currencies The fund writes and purchases put and call
options on foreign currencies. The accounting principles and risks involved
are similar to those described above relating to options on securities. The
amount of potential loss to the fund upon exercise of a written call option
is the value (in U.S. dollars) of the currency sold, converted at the spot
price, less the value of U.S. dollars received in exchange. The amount of
potential loss to the fund upon exercise of a written put option is the value
(in U.S. dollars) of the currency received converted at the spot price, less
the value of the U.S. dollars paid in exchange.
Forward currency contracts The fund may engage in forward currency contracts,
which are agreements between two parties to buy and sell currencies at a set
price on a future date, to protect against a decline in value relative to the
U.S. dollar of the currencies in which its portfolio securities are
denominated or quoted (or an increase in the value of a currency in which
securities a fund intends to buy are denominated, when a fund holds cash
reserves and short-term investments). The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an unrealized
gain or loss. When the contract is closed, the fund records a realized gain
or loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. The maximum potential
loss from forward currency contracts is the aggregate face value in U.S.
dollars at the time the contract was opened. The fund could be exposed to
risk if the value of the currency changes unfavorably, if the counter parties
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 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 of securities held and 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. These differences include treatment
of post-October loss deferrals, realized and unrealized gains and losses on
forward foreign currency contracts and realized 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 September 30, 1995, the fund reclassified $7,719,482 to
increase undistributed net investment income and $805,031 to decrease paid-
26
<PAGE>
in-capital, with an increase to accumulated net realized losses of
$6,914,451. 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 $14,777. These expenses are being amortized on a
straight-line basis over a five-year period.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc., for management and investment
advisory services is paid quarterly based on the average net assets of the
fund for the quarter. Such fee is at an annual rate of 0.80% of the first
$500 million of average net assets, 0.70% of the next $500 million, 0.65% of
the next $500 million and 0.60% of any amount over $1.5 billion. The fee is
subject to reduction in any year to the extent that expenses (exclusive of
distribution fees, brokerage, interest and taxes) of the fund exceed 2.5% of
the first $30 million of average net assets, 2% of the next $70 million and
1.5% of any amount over $100 million and by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of the Manager on
the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $1,100 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
During the year ended September 30, 1995, the fund adopted a Trustee Fee
Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of
all or a portion of Trustee 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 subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 1995, fund expenses were reduced by $220,021
under expense offset arrangements with PFTC. 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
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 shares, 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 0.35%, 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
27
<PAGE>
fund at an annual rate of 0.25%, 1.00% and 0.75% of the average net assets
attributable to class A, class B and class M shares, respectively.
For the year ended September 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $262,063 and $6,022 from the sale of
class A and class M shares, respectively. There was $288,413 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 September 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received $1,860 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1995, purchases and sales of investment
securities other than short-term investments aggregated $290,365,204 and
$228,019,622, respectively. There were no purchases or sales of U.S.
government obligation during the year. 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 September 30 1995, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
September 30 September 30
----------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 15,568,780 $ 206,706,791 15,491,392 $ 213,580,560
Shares issued in
connection with
reinvestment of
distributions 329,815 4,386,545 14,011 187,312
- ---------------------------------------------------------------------------------
15,898,595 211,093,336 15,505,403 213,767,872
Shares repurchased (14,416,240) (191,188,659) (7,385,357) (103,138,353)
- ---------------------------------------------------------------------------------
Net increase 1,482,355 $ 19,904,677 8,120,046 $ 110,629,519
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended
September 30 September 30
----------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------
Class B Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 12,548,682 $166,060,840 8,671,210 $120,131,536
Shares issued in
connection with
reinvestment of
distributions -- -- 6,090 81,248
- ---------------------------------------------------------------------------------
12,548,682 166,060,840 8,677,300 120,212,784
Shares repurchased (9,378,249) (123,563,428) (1,900,231) (26,697,142)
- ---------------------------------------------------------------------------------
Net increase 3,170,433 $ 42,497,412 6,777,069 $ 93,515,642
- ---------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
For period February 1, 1995
(commencement of operations)
to September 30
----------------------------
1995
- -----------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------
<S> <C> <C>
Shares sold 220,645 $2,940,683
Shares issued in connection
with reinvestment of
distributions -- --
- -----------------------------------------------------------------------
220,645 2,940,683
Shares repurchased (11,600) (154,791)
- -----------------------------------------------------------------------
Net increase 209,045 $2,785,892
- -----------------------------------------------------------------------
</TABLE>
29
<PAGE>
Federal tax information
Pursuant to Section 852 of the Internal Revenue Code, the fund hereby
designates $.034 per share (or if different, the amount necessary to offset
net capital gain earned by the fund) for classes A and B as capital gain
dividends for its taxable year ended September 30, 1995.
For the period, interest and dividends from foreign countries were $4,118,000
or $.181 per share. Taxes paid to foreign countries were $493,387 or $.022
per share.
The Form 1099 you receive in January 1996 will show the tax status of all
distributions paid to your account in calendar 1995.
30
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Coopers & Lybrand, L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Anthony W. Regan
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
David K. Thomas
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Asia Pacific
Growth 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 31
Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other
agency, and involve risk, including the possible loss of principal amount
invested.
31
<PAGE>
============
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
============
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
20972-844/193/470 11/95
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM)
