Putnam
Asia Pacific
Growth
Fund
ANNUAL REPORT
September 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
*"Putnam Asia Pacific Growth Fund thinks on a grand scale....
Pacific stock investors should consider this fund."
-- Morningstar Mutual Funds, August 30, 1996
*"With the U.S. stock market (at) all-time highs, an increasing
number of investors are looking overseas for better investment
opportunities."
-- Value Line Mutual Fund Advisor, September 17,
1996
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
In his groundbreaking book, Megatrends Asia, published earlier this
year, futurist John Naisbitt explores eight significant trends
taking shape in Asia that he believes will have a profound influence
on how the Far East does business with the West. In the coming
century, Naisbitt claims, Asia will be at once America's greatest
competitor and the greatest consumer of U.S. goods and services.
This possibility is not one that U.S. investors can afford to
ignore.
Naisbitt's conclusions come as no surprise to Putnam's international
investment professionals. They have had a finger on Asia's pulse for
years, traveling there frequently to study developments firsthand.
They, too, see great long-term investment potential in the region.
As a shareholder in Putnam Asia Pacific Growth Fund, you are in an
excellent position to participate in the investment opportunities
the developing trends present.
I am pleased to introduce Robert J. Swift as a new addition to your
fund's management team, Robert joined Putnam in 1995 as a senior
vice president and portfolio manager. His prior assignments have
been with IAI International/Hill Samuel in London; Pring Dean in
Sydney, Australia; and Brown Shipley in London. He has 13 years of
investment experience.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
November 20, 1996
Report from the Fund Managers
David K. Thomas
Robert Swift
With this report Putnam Asia Pacific Growth Fund marks the end of a
subdued fiscal year. The fund's class A shares gained 5.02% at net
asset value and fell 1.02% at public offering price for one-year
performance through September 30, 1996. These results are in line
with the Morgan Stanley Capital International (MSCI) Pacific Index,
which rose 3.07% over the same period. For performance of other
share classes and longer-term fund results, please see page 8 of
this report.
Three factors have affected the region in recent months. First,
business confidence in Japan was generally weak, underscoring the
fragile state of the economic recovery there. Second, because of the
close relationship between U.S. interest rates and the Hong Kong
economy, relatively stable interest rates in the U.S. exerted a
favorable influence there. Finally, a slowdown in the smaller
Southeast Asian economies was evident.
*JAPAN'S STILL GRAPPLING WITH DIFFICULTIES
Over the past several months, our moderate optimism about Japanese
stocks has gradually faded in part because the bond market has
become a more attractive investment than equities for Japanese
institutions. Furthermore prices of Japanese stocks have declined in
response to disappointing profits, especially in basic industries
such as chemicals and steels. One leading indicator for the Japanese
stock market, the business confidence level, was last announced in
August and remained negative. This is particularly problematic
because the muted economic recovery seems to be peaking and optimism
should be on the rise. In addition, consumption remains subdued and
other economic signals are mixed.
We consider it likely that some further economic stimulus may be
implemented soon. Indeed, as the effect of previous public spending
initiatives continues to wear off, additional action appears to be
necessary. The weakening yen offers some encouragement to corporate
Japan, since it makes Japanese exports more attractive in world
markets. Nevertheless, we have reduced the fund's weighting in Japan to
around 40% of the fund's assets, as disappointing economic news
continues.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: ALLOCATIONS BY COUNTRY*]
Top bar of each country represents 9/30/96
Bottom bar represents 9/30/95
Japan 40.4%
45.3%
Hong Kong 23.2%
14.0%
Malaysia 7.2%
7.5%
Australia 6.1%
2.9%
Singapore 5.7%
11.6%
Thailand 2.7%
2.5%
US 2.6%
Philippines 2.2%
1.1%
Indonesia 2.0%
5.9%
Taiwan 1.9%
2.2%
South Korea 1.8%
1.2%
India 0.1%
0.5%
Footnote reads:
*Based on net assets as of 9/30/96. Holdings will vary over time.
*HONG KONG MODERATELY UPBEAT; AUSTRALIA ROBUST
Confidence about the Hong Kong market remains sound, although not as
a result of the economy itself, which remains relatively subdued. A
key support for Hong Kong stocks is stable U.S. interest rates.
Furthermore, as we approach the July 1997 transfer of rule over Hong
Kong from Britain to China, expectations that the changeover will be
smooth are gathering momentum. Accordingly, Hong Kong is in an
upbeat mood. The stock market is also benefiting from the lack of
attractive options in other regional markets. Hong Kong's corporate
profits have been satisfactory against the background of a sluggish
economy, especially in the banking sector. HSBC, a major bank,
enjoyed a substantial rise in profits. Varitronix, a maker of
computer displays, continued to be one of the fund's better-
performing holdings. While these stocks, along with others discussed
in this report, were viewed favorably at the end of the
fiscal period, all portfolio holdings are subject to review and
adjustment in accordance with the fund's investment strategy and may
vary in the future.
The Australian portion of the portfolio made a substantial
contribution to the fund's performance over the fiscal year.
Australian banks have benefited from lower interest rates and
speculation regarding some future industry consolidation. For
example, Westpac, a portfolio holding, is a likely takeover
candidate within the financial services industry. Your fund's
position in CSL, a manufacturer of blood plasma and vaccines now
expanding into a broader-based pharmaceutical company, has also
proved rewarding.
*OUTSIDE OF MALAYSIA, SOME OF ASIA'S TIGERS SLOWING
The Malaysian market has been quite strong over the past six months,
driven by speculative demand from local investors. We remain
concerned that Malaysia's economy might grow too quickly, however,
fed by extremely high bank lending to the property and construction
sectors. In turn, this could lead to interest rates rising. However,
inflation seems to be under control -- a cause for some optimism
about this market in the coming months.
By contrast, a slowdown in economic activity, especially in exports,
is quite evident in Singapore. Manufacturing output has been
sluggish, non-oil exports are growing slowly, and sales of
electronic goods have been especially weak. We believe that
Singapore's economy will struggle to show 7% growth this year --
quite strong compared with the pace of the U.S. economy but slow
relative to Singapore's results in past years. In particular,
industrial profits may show little growth overall, and the
electronics sector is likely to post some losses. Nevertheless, your
fund's holding in Venture Manufacturing, which produces higher
value-added electronic products, has performed well.
Thailand has seen a pronounced deterioration in economic
fundamentals. Unfortunately, while the economy is slowing, the Bank
of Thailand is maintaining a tight credit policy with limits on
capital inflows. Corporate profits have suffered and are
significantly below earlier expectations. Many stocks do not look
appealing, except in the banking sector. Ultimately we believe that
Thailand offers good future investment opportunities, but the
current slowdown cautions us to avoid raising weightings in the
short term.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
HSBC Holdings PLC (Hong Kong)
Property development
Cheung Kong Holdings (Hong Kong)
Property development
Wharf Holdings (Hong Kong)
Property, hotels
Sun Hung Kai Holdings (Hong Kong)
Financial holding company
AFLAC (U.S)
Insurance sales in US and Japan
Sharp Corp. (Japan)
Electronics
Citic Pacific Ltd. (Hong Kong)
Conglomerate
Ito-Yokado (Japan)
Supermarkets
Swire Pacific (Hong Kong)
Conglomerate
Bridgestone Corp. (Japan)
Tires
Footnote reads:
These holdings represent 20.0% of the fund's net assets as of
9/30/96. Portfolio holdings will vary over time.
*SOME DIFFICULTY EXPECTED IN REGION OVER NEAR TERM
We remain downbeat in our assessment of Japan's near-term prospects.
This will lead us to look for opportunities to reduce holdings in
Japan still further, while raising holdings in Hong Kong toward the
30% maximum of our long-term target range. We do this in the belief
that sentiment will remain favorable during the brief period
remaining before the Chinese takeover.
For the region's emerging markets, we need to see an upturn in the
profit cycle before increasing portfolio weightings. Such an upturn
could begin next year, especially if the vital electronics sector
shows some recovery worldwide and China continues to stimulate its
economy moderately -- a potential support for the entire region.
Regardless of any short-term difficulties certain Asia Pacific stock
exchanges may encounter, we continue to believe that this region
remains one of the world's premier areas for long-term investors.
Footnote reads:
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 9/30/96, there is no guarantee
the fund will continue to hold these securities in the future.
International investing involves risks including political
developments, economic instability and currency fluctuations.
Performance summary
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.
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 9/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (2/20/91) (6/1/93) (2/1/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------
1 year 5.02% -1.02% 4.33% - 0.67% 4.65% 0.99%
- --------------------------------------------------------------------
5 years 82.99 72.53 -- -- -- --
Annual average 12.85 11.52 -- -- -- --
- --------------------------------------------------------------------
Life of Fund 72.33 62.48 33.20 31.20 14.09 10.10
Annual average 10.19 9.04 8.99 8.50 8.27 5.97
- --------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/96
MSCI Pacific Consumer
Index Price Index
- --------------------------------------------------------------------
1 year 3.07% 3.00%
- --------------------------------------------------------------------
5 years 27.11 15.02
Annual average 4.91 2.84
- --------------------------------------------------------------------
Life of class A 21.49 17.06
Annual average 3.54 2.85
- --------------------------------------------------------------------
Life of class B 10.71 9.43
Annual average 3.10 2.74
- --------------------------------------------------------------------
Life of class M 8.02 4.99
Annual average 4.74 2.98
- --------------------------------------------------------------------
Footnote reads:
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%.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class M
- --------------------------------------------------------------------
Distributions (number) 1 1 1
- --------------------------------------------------------------------
Income $0.5984 $0.5124 $0.5874
- --------------------------------------------------------------------
Capital gains
- --------------------------------------------------------------------
Long-term 0.0066 0.0066 0.0066
- --------------------------------------------------------------------
Total $0.6050 $0.5190 $0.5940
- --------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------
9/30/95 $13.58 $14.41 $13.37 $13.53 $14.02
- --------------------------------------------------------------------
9/30/96 13.63 14.46 13.41 13.54 14.03
- --------------------------------------------------------------------
[GRAPHIC OMITTED worm chart PLOT POINTS TO COME FROM CLIENT!!!!!!!]
Footnote reads:
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 $13,320 on 9/30/96 ($13,120 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 $11,409 at net
asset value on 9/30/96 ($11,010 at public offering price).
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
The Morgan Stanley Capital International Pacific Index (MSCI) is an
unmanaged list of Asian and Pacific Rim equity securities, excluding
U.S., with all values expressed in U.S. dollars. The index reflects
changes in market price and reinvestment of distributions net of
withholding taxes and does not take into account brokerage fees or
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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [DOUBLE DAGGER]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments to help maximize your return and reduce your
risk. The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS [SECTION MARK]
Putnam money market funds: **
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts ++
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DOUBLE DAGGER]Not available in all states.
[SECTION MARK] Relative to above.
** An investment in a money market fund is neither
insured nor guaranteed by the U.S. government. These
funds are managed to maintain a price of $1.00 per
share, although there is no assurance that this
price will be maintained in the future.
++ Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be
insured up to certain limits by federal/state
agencies. Savings accounts may also be insured up
to certain limits. Please call your financial
advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more
complete information, including charges and
expenses. Please read it carefully before you invest
or send money.
Report of independent accountants
For the fiscal year ended September 30, 1996
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, 1996, 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 of 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, 1996, 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, 1996, 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 13, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1996
COMMON STOCKS (92.4%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Australia (6.1%)
- ------------------------------------------------------------------------------------------------------------
150,000 Commonwealth Bank of Australia (Installment Shares) 885,017
264,000 Commonwealth Bank of Australia 2,428,316
1,049,000 CSL Ltd. 5,425,938
4,415,000 Goodman Fielder Ltd. ADR 4,504,452
3,380,000 MIM Holdings Ltd. 4,116,793
1,051,250 QBE Insurance Group Ltd. 5,653,749
950,300 Westpac Banking Ltd. 4,915,413
-----------
27,929,678
Hong Kong (23.2%)
- ------------------------------------------------------------------------------------------------------------
5,776,000 Amoy Properties Ltd. 6,722,532
1,265,000 Cheung Kong Holdings Ltd. 9,733,537
1,970,000 Citic Pacific Ltd. 8,916,563
3,382,367 First Pacific Co. 5,117,641
1,300,800 Guoco Group Ltd. 6,358,659
530,000 Hang Seng Bank Ltd. 5,620,215
4,070,000 HKR International Ltd. 4,736,964
1,392,000 Hong Kong Electric Holdings Ltd. 4,500,310
2,972,000 Hong Kong Land Holdings Ltd. 6,924,760
649,326 HSBC Holdings PLC 12,049,746
809,000 Hutchison Whampoa Ltd. 5,440,203
416,000 Oriental Press Group 200,795
894,000 Sun Hung Kai Properties Ltd. 9,509,039
850,000 Swire Pacific Ltd. Class A 7,612,055
1,745,000 Varitronix International Ltd. 3,204,402
2,350,000 Wharf (Holdings) Ltd. 9,724,808
-----------
106,372,229
India (0.1%)
- ------------------------------------------------------------------------------------------------------------
131,250 KEC International Ltd. + 251,393
Indonesia (2.0 %)
- ------------------------------------------------------------------------------------------------------------
506,925 Bank Bali 1,053,455
1,420,000 PT Bank International Indonesia 2,079,420
482,000 PT Indorama Synthetics 1,437,612
845,000 PT Matahari Putra Prima 918,952
845,000 PT Matahari Putra Prima Rights 11/14/96 + 555,011
298 PT Mulia Industrindo 298
330,000 Sampoerna Industries 3,212,161
-----------
9,256,909
Japan (40.4%)
- ------------------------------------------------------------------------------------------------------------
14,800 Amway Japan Ltd. ADR 314,500
420,000 Bridgestone Corp. 7,584,225
727,000 Cosmo Oil Co. Ltd. 4,140,850
340,000 Dai Nippon Printing Co. 6,353,428
216,000 Daikin Industries Ltd. 2,115,174
914 East Japan Railway Co. 4,417,681
40,000 Futaba Industrial Co., Ltd. 1,796,784
135,000 Glory Ltd. (Glory Kogyo) 4,050,850
86,500 Hirose Electric Co., Ltd. 5,299,884
300,000 Hitachi Credit Corp. 5,336,448
220,000 Hokuriku Electric Power Co. 4,605,157
135,000 Ito-Yokado Co., Ltd. 7,677,209
180,000 Jusco Co., Ltd. 5,481,988
600,000 KAO Corp. 7,492,589
40,000 Keyence Corp. 4,959,124
160,000 Komori Corp. 3,694,188
430,000 Kuraray Co., Ltd. 4,365,287
300,000 Kurita Water Ltd. 6,495,374
300,000 Marui Co., Ltd. 5,794,628
214,000 Mitsubishi Bank 4,671,818
600,000 Mitsubishi Heavy Industries, Ltd. 4,889,049
750,000 Mitsui Co. 6,529,064
390,000 NEC Corp. 4,589,885
470,000 Nippon Express Co., Ltd. 4,306,891
610 Nippon Telegraph and Telephone Corp. 4,493,757
550,000 Obayashi Corp. 4,516,217
200,000 Omron Corp. 3,755,279
276,000 Onward Kashiyama Co., Ltd. 3,868,117
165,000 Santen Pharmaceutical Co., Ltd. 3,602,103
333,000 Sekisui Chemical Co., Ltd. 3,948,972
450,000 Seventy Seventh Bank 4,447,040
560,000 Sharp Corp. 9,307,341
358,000 Sumitomo Trust & Banking 4,502,741
113,000 Takasago Thermal Engineering 1,705,507
84,000 TDK Corp. 5,229,720
550,000 Tokio Marine & Fire Insurance Co., Ltd. 6,522,326
268,000 Toyota Motor Corp. 6,861,918
250,000 Yamanouchi Pharmaceutical Co., Ltd. 5,300,513
-----------
185,023,626
Malaysia (7.2%)
- ------------------------------------------------------------------------------------------------------------
310,000 Carlsberg Brewery of Malaysia 2,164,804
418,000 Edaran Otomobil Nasional Berhad 4,119,952
500,000 Malayan Banking Berhad 4,968,077
640,000 Maruichi Malaysia 2,285,714
850,000 Perusahaan Otomobil Nasional 4,612,929
900,000 Sungei Way Holdings Berhad 4,812,450
540,000 Telekom Malaysia 4,762,171
920,000 YTL Corp. Berhad 5,213,089
-----------
32,939,186
Philippines (2.2%)
- ------------------------------------------------------------------------------------------------------------
195,000 Metropolitan Bank & Trust Co. 4,651,718
380,000 Philippine Commercial International Bank 5,257,634
-----------
9,909,352
Singapore (5.7%)
- ------------------------------------------------------------------------------------------------------------
1,859,000 Courts (Singapore) Ltd. 2,601,940
747,000 DBS Land Ltd. 2,473,194
393,000 Development Bank of Singapore 4,830,480
730,000 Far East Levingston Shipbuilding Ltd. 3,449,023
544,648 Jardine Matheson Holdings Ltd. 3,404,050
980,000 Overseas Union Bank Ltd. 6,858,259
1,342,500 Venture Manufacturing Ltd. 2,346,394
-----------
25,963,340
South Korea (1.8%)
- ------------------------------------------------------------------------------------------------------------
394,000 Cho Hung Bank Co. Ltd. 4,295,588
75,500 Samsung Electronics 144A GDR + 3,718,375
-----------
8,013,963
Thailand (1.1%)
- ------------------------------------------------------------------------------------------------------------
1,340,100 Industrial Finance Corp. 5,246,094
United States (2.6%)
- ------------------------------------------------------------------------------------------------------------
263,000 AFLAC Inc. 9,336,500
860,000 Clipsal Industries Ltd. 2,494,000
-----------
11,830,500
-----------
Total Common Stocks (cost $396,448,929) 422,736,270
INVESTMENT COMPANIES (1.9%) *
NUMBER OF SHARES VALUE
Taiwan (1.9%)
- ------------------------------------------------------------------------------------------------------------
200,000 ROC Taiwan Fund, Inc. 2,150,000
55,000 Taipei Fund Units 4,620,000
92,000 Taiwan Fund, Inc. 2,127,500
-----------
Total Investment Companies (cost $9,219,098) 8,897,500
CONVERTIBLE BONDS AND NOTES (1.6%) * (cost $7,123,363)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$6,600,000 Bangkok Bank 144A cv. sub. notes 3 1/4s, 2004 (Thailand) 7,194,000
SHORT-TERM INVESTMENTS (2.9%) * (cost $13,125,060)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$13,123,000 Interest in $374,793,000 joint repurchase agreement
dated September 30, 1996 with Morgan Stanley & Co. Inc.
due October 1, 1996 with respect to various U.S. Treasury
obligations- maturity value of $13,125,060 for an effective
yield of 5.65% 13,125,060
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $425,916,450) *** 451,952,830
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $457,692,151.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is
$429,519,913, resulting in gross unrealized appreciation and
depreciation of $35,689,244 and $13,258,327, respectively,
or net unrealized ap(de)preciation of $22,432,917.
ADR or GDR after the name of a foreign holding
stands for American Depository Receipts 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.
<CAPTION>
Forward Currency Contracts to Sell at September 30, 1996
(Aggregate face value $98,515,332)
Market Aggregate Delivery Unrealized
Value Face Value Date Appreciation
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen $97,058,764 $98,515,332 1/6/97 $1,456,568
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
<S> <C>
Assets
- ------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$425,916,450) (Note 1) $451,952,830
- ------------------------------------------------------------------------------------------
Cash 1,396,470
- ------------------------------------------------------------------------------------------
Dividends, interest and other receivables 933,253
- ------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,958,872
- ------------------------------------------------------------------------------------------
Receivable for securities sold 1,467,485
- ------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,456,568
- ------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 737,673
- ------------------------------------------------------------------------------------------
Total assets 468,903,151
Liabilities
- ------------------------------------------------------------------------------------------
Payable for securities purchased 9,026,757
- ------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 679,689
- ------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 889,051
- ------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 176,835
- ------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,013
- ------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,377
- ------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 332,266
- ------------------------------------------------------------------------------------------
Other accrued expenses 102,012
- ------------------------------------------------------------------------------------------
Total liabilities 11,211,000
- ------------------------------------------------------------------------------------------
Net assets $457,692,151
Represented by
- ------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $445,411,927
- ------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 10,968,550
- ------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (26,171,370)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 27,483,044
- ------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $457,692,151
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($223,307,177 divided by 16,380,487 shares) $13.63
- ------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.63)* $14.46
- ------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($225,240,865 divided by 16,800,472 shares)** $13.41
- ------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($9,144,109 divided by 675,271 shares) $13.54
- ------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.54)* $14.03
- ------------------------------------------------------------------------------------------
* 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 September 30, 1996
<S> <C>
Investment Income:
- -------------------------------------------------------------------------------------
Dividends (net of foreign tax of $412,274) $5,641,008
- -------------------------------------------------------------------------------------
Interest 905,103
- -------------------------------------------------------------------------------------
Total investment income 6,546,111
Expenses:
- -------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,168,714
- -------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,499,889
- -------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 20,348
- -------------------------------------------------------------------------------------
Administrative services (Note 2) 9,540
- -------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 497,352
- -------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,911,398
- -------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 45,692
- -------------------------------------------------------------------------------------
Reports to shareholders 49,460
- -------------------------------------------------------------------------------------
Registration fees 51,625
- -------------------------------------------------------------------------------------
Auditing 52,788
- -------------------------------------------------------------------------------------
Legal 10,603
- -------------------------------------------------------------------------------------
Postage 189,113
- -------------------------------------------------------------------------------------
Other 74,666
- -------------------------------------------------------------------------------------
Total expenses 7,581,188
- -------------------------------------------------------------------------------------
Expense reduction (Note 2) (367,080)
- -------------------------------------------------------------------------------------
Net expenses 7,214,108
- -------------------------------------------------------------------------------------
Net investment loss (667,997)
- -------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (5,802,685)
- -------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 16,154,886
- -------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (1,542,422)
- -------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 9,596,993
- -------------------------------------------------------------------------------------
Net gain on investments 18,406,772
- -------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $17,738,775
- -------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -----------------------------------------------------------------------------------------------------
Operations:
- -----------------------------------------------------------------------------------------------------
Net investment loss ($667,997) ($570,671)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions 10,352,201 (13,087,663)
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 8,054,571 2,882,897
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 17,738,775 (10,775,437)
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders
- -----------------------------------------------------------------------------------------------------
From net investment income:
Class A (6,908,193) (408,458)
- -----------------------------------------------------------------------------------------------------
Class B (5,685,612) (332,113)
- -----------------------------------------------------------------------------------------------------
Class M (125,143) --
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A -- (4,408,786)
- -----------------------------------------------------------------------------------------------------
Class B -- (3,584,353)
- -----------------------------------------------------------------------------------------------------
Class M -- --
- -----------------------------------------------------------------------------------------------------
In excess of net realized gain on investments:
Class A (78,334) --
- -----------------------------------------------------------------------------------------------------
Class B (73,742) --
- -----------------------------------------------------------------------------------------------------
Class M (1,408) --
- -----------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 146,709,587 65,187,981
- -----------------------------------------------------------------------------------------------------
Total increase in net assets 151,575,930 45,678,834
- -----------------------------------------------------------------------------------------------------
Net assets
- -----------------------------------------------------------------------------------------------------
Beginning of year 306,116,221 260,437,387
- -----------------------------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $10,968,550 and $6,163,966,
respectively) $457,692,151 $306,116,221
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
February 1, 1995
Year (commencement
ended of operations) to
September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------
Class M Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.53 $12.41 $13.37
- ---------------------------------------------------------------------------------------------------------------------------
Investment activities
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03)(d) (.01) (.07)(d)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .63 1.13 .63
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .60 1.12 .56
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (.58) -- (.51)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (.01) -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.59) -- (.52)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.54 $13.53 $13.41
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 4.65 9.03 * 4.33
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $9,144 $2,829 $225,241
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.06 2.09 * 2.30
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (.24) (.45)* (.55)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 72.68 91.13 72.68
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0229 -- $.0229
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the Period
June 1, 1993
(commencement
of operations) to
Year ended September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $14.53 $11.54 $10.86
- ---------------------------------------------------------------------------------------------------------------------------
Investment activities
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.07) (.03) (.02)(d)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.64) 3.06 .70
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.71) 3.03 .68
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (.04) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (.41) (.04) --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.45) (.04) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.37 $14.53 $11.54
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) (4.88) 26.31 6.26 *
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $144,514 $110,951 $9,901
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.31 2.27 .86 *
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (.62) (.73) (.25)*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 91.13 65.02 79.78
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended September 30
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.58 $14.64 $11.55
- ---------------------------------------------------------------------------------------------------------------------------
Investment activities
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .03 (d) .02 .04
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .63 (.63) 3.09
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .66 (.61) 3.13
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (.60) (.04) --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (.41) (.04)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (.01) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (.45) (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.63 $13.58 $14.64
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 5.02 (4.14) 27.15
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $223,307 $158,773 $149,486
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.54 1.55 1.53
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .20 .14 (.01)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 72.68 91.13 65.02
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0229 -- --
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.17 $8.08
- ------------------------------------------------------------------------------------------------------
Investment activities
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03) (.01)(a)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.41 .10
- ------------------------------------------------------------------------------------------------------
Total from investment operations 3.38 .09
- ------------------------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------------------------
Net investment income -- --
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments -- --
- ------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- --
- ------------------------------------------------------------------------------------------------------
Total distributions -- --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.55 $8.17
- ------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 41.37 1.11
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $24,150 $2,548
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.03 1.88(a)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (.54) (.06)(a)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 79.78 95.67
- ------------------------------------------------------------------------------------------------------
Average commission rate paid (e) -- --
- ------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a result of such
limitation, expenses of the fund for the period ended September 30, 1992
reflects a per share reduction of approximately $0.01.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets for the periods ended September 30, 1995
and thereafter includes amounts paid through expense offset arrangements and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2)
(d) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) Average commission rate paid is required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
Notes to financial statements
September 30, 1996
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, 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 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. 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 forward currency contracts.) Securities
quoted in foreign currencies are translated into U.S. dollars at the
current exchange rate.
B) Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the fund may transfer
uninvested cash balances into a joint trading account along with the
cash of other registered investment companies and certain other
accounts managed by Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc.. These balances may be invested in one or
more repurchase agreements and/or short-term money market
instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as
the fund is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income
and withholding taxes are translated at prevailing exchange rates
when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such fluctuations
are included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed
forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes
in the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward
currency contracts, which are agreements between two parties to buy
and sell currencies at a set price on a future date, to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of a currency in which
securities a fund intends to buy are denominated, when a fund holds
cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using forward currency
exchange rates supplied by a quotation service. The market value of
the contract will fluctuate with changes in currency exchange rates.
The contract is "marked to market" daily and the change in market
value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was
opened and the value at the time it was closed. The fund could be
exposed to risk if the value of the currency changes unfavorably, if
the counterparties to the contracts are unable to meet the terms of
their contracts or if the fund is unable to enter into a closing
position.
G) Federal taxes It is the policy of the fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the fund
to distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held and for
excise tax on income and capital gains.
At September 30, 1996 the fund had a capital loss carryover of
approximately $21,694,000 available to offset future net capital
gain, if any, which will expire on September 30, 2004.
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, losses on wash sale transactions, realized and unrealized
losses on passive foreign investment companies, realized and
unrealized gains and losses on forward foreign currency contracts.
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, 1996, the fund reclassified $18,191,529 to increase
undistributed net investment income and $1,839,893 to decrease paid-
in-capital, with an increase to accumulated net realized loss on
investments of $16,351,636. The calculation of net investment income
per share in the financial highlights table excludes these
adjustments.
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: 0.80%
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 subject, under current law, to reduction in
any year by the amount of certain brokerage commissions and fees
(less expenses) received by affiliates of Putnam Management on the
fund's portfolio transactions.
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 September 30, 1996, fund expenses were reduced by
$367,080 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 $1,150 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 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 0.35%, 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 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, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $352,813 and
$18,487 from the sale of class A and class M shares, respectively
and $341,682 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, 1996, Putnam Mutual Funds Corp., acting as underwriter
received $4,607 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$406,145,420 and $264,074,532, 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 September 30, 1996, there was an unlimited number of shares of
beneficial interest authorized.
Transactions in capital shares were as follows:
Year ended
September 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 38,389,618 $519,121,073
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 492,461 6,421,692
- ----------------------------------------------------
38,882,079 525,542,765
Shares
repurchased (34,194,252) (463,687,598)
- ----------------------------------------------------
Net increase 4,687,827 $61,855,167
- ----------------------------------------------------
Year ended
September 30, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 15,568,780 $206,706,791
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 329,815 4,386,545
- ----------------------------------------------------
15,898,595 211,093,336
Shares
repurchased (14,416,240) (191,188,659)
- ----------------------------------------------------
Net increase 1,482,355 $19,904,677
- ----------------------------------------------------
Year ended
September 30, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 39,326,633 $525,334,358
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 391,200 5,046,485
- ----------------------------------------------------
39,717,833 530,380,843
Shares
repurchased (33,722,721) (451,870,914)
- ----------------------------------------------------
Net increase 5,995,112 $78,509,929
- ----------------------------------------------------
Year ended
September 30, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 12,548,682 $166,060,840
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
12,548,682 166,060,840
Shares
repurchased (9,378,249) (123,563,428)
- ----------------------------------------------------
Net increase 3,170,433 $42,497,412
- ----------------------------------------------------
Year ended
September 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 1,089,513 $14,649,740
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,884 102,417
- ----------------------------------------------------
1,097,397 14,752,157
Shares
repurchased (631,171) (8,407,666)
- ----------------------------------------------------
Net increase 466,226 $6,344,491
- ----------------------------------------------------
For period
February 1, 1995
(commencement of
operations)
to September 30, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
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
- ----------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Fund
hereby designates $.007 per share (or if different, the amount
necessary to offset net capital gain earned by the Fund) for all
share classes as capital gain dividends for its taxable year
ended September 30, 1996.
For the period, interest and dividends from foreign countries were
$6,053,281 or $.179 per share for all share classes. Taxes paid to
foreign countries were $412,274 or $.012 per share for all share classes.
The Form 1099 you receive in January 1997 will show the tax status
of all distributions paid to your account in calendar 1996.
Results of September 5, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on September 5,
1996. At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes for Votes
withheld
Jameson Adkins Baxter 20,632,960 391,943
Hans H. Estin 20,613,047 411,856
John A. Hill 20,637,084 387,820
R.J. Jackson 20,621,276 403,628
Elizabeth T. Kennan 20,625,033 399,870
Lawrence J. Lasser 20,636,394 388,509
Robert E. Patterson 20,635,817 389,086
Donald S. Perkins 20,607,998 416,905
William F. Pounds 20,609,873 415,030
George Putnam 20,608,363 416,540
George Putnam, III 20,621,255 403,648
E. Shapiro 20,566,260 458,644
A.J.C. Smith 20,618,432 406,471
W. Nicholas Thorndike 20,612,415 412,489
A proposal to ratify the selection of Coopers & Lybrand L.L.P. as
auditors for the fund was approved as follows: 20,217,0529 votes
for, and 197,215 votes against, with 610,629 abstentions and broker
non-votes.
A proposal to amend the fund's fundamental investment restriction
with respect to diversification of investments was approved as
follows: 16,944,737 votes for, and 788,508 votes against, with
3,291,658 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction
with respect to investments in the securities of a single issuer was
approved as follows: 16,556,024 votes for, and 1,072,510 votes
against, with 3,396,369 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction
with respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
16,051,968 votes for, and 1,620,532 votes against, with 3,352,403
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction
with respect to investments in commodities or commodity contracts
was approved as follows: 16,311,737 votes for, and 1,369,321 votes
against, with 3,343,845 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction
with respect to senior securities was approved as follows:
16,665,259 votes for, and 965,319 votes against, with 3,394,325
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment
restriction with respect to investments in securities of issuers in
which management of the fund or Putnam Investment Management, Inc.
owns securities was approved as follows: 16,217,459 votes for, and
1,430,750 votes against, with 3,376,694 abstentions and broker non-
votes.
A proposal to eliminate the fund's fundamental investment
restriction with respect to margin transactions was approved as
follows: 15,967,987 votes for, and 1,622,689 votes against, with
3,434,228 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment
restriction with respect to short sales was approved as follows:
16,092,845 votes for, and 1,504,623 votes against, with 3,428,435
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was
approved as follows: 15,978,921 votes for, and 1,641,229 votes
against, with 3,404,753 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment
restriction with respect to investments in certain oil, gas an
mineral interests was approved as follows: 16,461,688 votes for, and
1,174,537 votes against, with 3,388,678 abstentions and broker non-
votes.
A proposal to eliminate the fund's fundamental investment
restriction with respect to invest to gain control of a company's
management was approved as follows: 16,330,926 votes for, and
1,310,727 votes against, with 3,383,250 abstentions and broker non-
votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in other investment companies was approved as
follows: 16,388,207 votes for, and 1,260,151 votes against, with 3,376,545
abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Anthony V. Regan
Vice President
David K. Thomas
Vice President and Fund Manager
Robert Swift
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 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. 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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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28357-844/193/470 11/96
