Putnam
Asia Pacific
Growth Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Asia Pacific Growth Fund's class A shares were ranked in the top
17% by Lipper Analytical Services for the 5-year period ended September
30, 1998. The fund ranked 3 out of 17 Pacific region funds ranked.*
* "Before bankers, economists, and journalists talk the world into
depression, they should look again at East Asia . . . it offers the first
glimmer of hope."
-- The Economist, October 17, 1998
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
17 Financial statements
* Past performance is not indicative of future results. Lipper is an
industry research firm whose rankings are based on total return
performance, vary over time, and do not reflect the effects of sales
charges. For the one-year period ended 9/30/98, the fund ranked 11 out of
46 funds. The fund was not ranked over longer periods. Performance of
other share classes will vary.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
This is one of those times that shareholders with long-term investment
horizons, patience, and confidence in the future must put their
convictions to the test. It is especially the case for investors in the
beleaguered Asia Pacific region.
You should find reassurance in the following report from the management of
Putnam Asia Pacific Growth Fund for fiscal 1998. As you will see, your
fund's managers are not merely riding out the storm. While they are
attentive to minimizing losses, they are also positioning the portfolio in
what they believe will be the most advantageous way to derive maximum
benefit from the recovery they believe will eventually come to the region.
Only time will tell when the environment will change and how astute the
managers' decisions will prove to be. But given their individual and
collective expertise, I think a high degree of confidence is warranted.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 18, 1998
Report from the Fund Managers
David K. Thomas
Paul C. Warren
After more than a year of volatile equity trading and downward pressure on
currencies, a period of relative calm has descended over the Asian
financial markets. In fact, many Asian markets outperformed their large
Western counterparts in September. Although the region's financial
problems are far from over, this time of relative stability has afforded
us opportunities to position Putnam Asia Pacific Growth Fund in quality
companies that we believe have the potential to grow despite the region's
ongoing economic difficulties.
Although the precipitous declines of the Asian markets during the period
caused the fund's absolute performance to be disappointing, its
performance relative to its peers remains solid. For the year ended
September 30, 1998, the fund's class A shares had a total return of
- -34.47% at net asset value (-38.24% at public offering price). Yet, for
the year, the fund ranked in the top quartile of its peer group according
to Lipper Analytical Services. For more detailed information from Lipper,
please turn to page 2, and for additional performance information,
including results for other share classes, please turn to page 9.
* JAPAN: OPPORTUNITIES EXIST EVEN IN DIFFICULT MARKET
There's been little good news to report regarding Japan's lingering
recession and depressed banking system. Some estimates put the amount of
problem loans in the Japanese banking system at 30% of gross domestic
product. Although the Japanese government announced a large-scale bailout
package just after the close of the fund's annual reporting period, most
investors remain pessimistic about the government's ability to deal with
the banks or to stimulate demand in the economy.
Interestingly enough, even within such a negative investment climate we
have found some stocks that we believe represent attractive investment
opportunities. Stocks of companies in the Japanese electric power industry
are currently exceptionally cheap and offer attractive yields. These
companies are also beginning to manage their capital expenditures better
and this could raise their return on equity in the future. Some of the
companies we have targeted in this area include Tokyo Electric Power and
Kyushu Electric Power.
After years of weakness, the dramatic 7% strengthening of the yen against
the U.S. dollar just after the fiscal year's end had potentially negative
implications for the large-scale multinational companies we have favored
for some time. However, we believe this strengthening was a short-term
trading phenomenon. Therefore, we believe quality manufacturers such as
Sony, Honda, and Fujitsu are now even more attractively valued and will
continue to leverage their global brand names around the world. While
these holdings, along with others discussed in this report, were viewed
favorably at the end of the period, all are subject to review and
adjustment in accordance with the fund's investment strategy and may vary
in the future.
* AUSTRALIA AND SINGAPORE OFFER RELATIVELY SAFE HAVENS
As investors in the Pacific Rim, we are constantly evaluating the quality
of each market relative to the rest of the region. This search for
relative merit has led us to stocks in Australia and Singapore. In
Australia, we focused on banking stocks such as Commonwealth Bank of
Australia. Commonwealth offers a low valuation based on its forward
price-to-earnings ratio as well as a high dividend yield. We believe that
should the Australian economy maintain reasonably steady growth and low
interest rates, banking stocks such as Commonwealth could benefit.
[GRAPHIC OMITTED: horizontal bar chart of COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
Japan 59.3%
Australia 17.6%
Hong Kong 8.2%
Singapore 3.9%
United States 2.3%
Footnote reads:
*Based on net assets as of 9/30/98. Holdings will vary over time.
Singapore -- although affected by the economic and political chaos of its
neighbors Malaysia and Indonesia -- continues to hold a fiscal and current
account surplus. In this market, we looked for companies that could
actually benefit from the weakness of currencies in the region. For
example, the relative attractiveness in price of the goods and services
offered by a company such as Venture Manufacturing is improved when it
obtains subcontracting work from major U.S. multinationals such as Hewlett
Packard and Compaq Computer. We've also seen favorable developments in
companies such as Singapore Press, the largest newspaper publishing
company in Singapore, which has a strong balance sheet and has started a
stock buyback program.
* HONG KONG POSITION RE-ESTABLISHED; EMERGING ASIAN MARKETS GENERALLY
AVOIDED
Heading into this past summer, we moved to reduce our exposure to Hong
Kong. The Hong Kong dollar's peg to the U.S. dollar came under intense
speculative pressure and forced the authorities to raise interest rates to
punitively high levels. This proved a devastating development for property
and banking firms as well as for the Hong Kong economy as a whole. In a
series of disturbing instances, the Hong Kong Monetary Authority bought
significant blocks of stock of several blue-chip companies in a bid to
prop up the value of the market.
Since then, short-term rates have fallen from these high levels and we
have begun to develop positions in some property companies that are now
trading at unusually attractive valuations because of precipitous falls in
their stock prices. Some examples include Sun Hung Kai Properties and
Cheung Kong Holdings, both purchased just after the close of the fund's
reporting period.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Honda Motor Co., Ltd. (Japan)
Automotive
Commonwealth Bank of Australia (Australia)
Insurance and finance
Fujitsu Ltd. (Japan)
Computer services and software
Tokyo Electric Power Co. (Japan)
Utilities
KAO Corp. (Japan)
Consumer nondurables
Bridgestone Corp. (Japan)
Automotive
Canon, Inc. (Japan)
Photography
Sony Corp. (Japan)
Electronics and electrical equipment
Fuji Photo Film Co. (Japan)
Photography
Fuji Heavy Industries (Japan)
Automotive
These holdings represent 28.1% of the fund's net assets as of 9/30/98.
Portfolio holdings will vary over time.
For the most part, we have avoided the emerging economies of Asia. The
fund was not affected by the capital controls imposed by the Malaysian
government or the near anarchy of Indonesia following the resignation of
that country's long-time leader. We were heartened, however, by the
stabilization of the Thai economy, which led us to start some small
positions there. One example was PTT Exploration (purchased following the
close of the fund's fiscal year), the leading oil company in Thailand.
* OPTIMISM TEMPERED WITH CAUTION GOING FORWARD
For the time being, we will continue to add to the fund's holdings in Hong
Kong, Singapore, and other countries that may appear likely to benefit
from lower interest rates in their own markets. Additionally, should
interest rates move lower in the world's major industrialized economies,
the relative attractiveness of many of the Asian markets may become
apparent.
There is no getting around the fact that it may still take some time
before we see a sustained recovery in the region. Certainly, while many of
the Asian economies have stabilized, the long process of recapitalizing
their respective banking systems still lies ahead. Additionally, any
recovery is dependent on developments in the region's largest economy,
Japan.
However, we are heartened by the fact that as the fund moves into its new
fiscal year, we are seeing evidence of a major change in sentiment. With
interest-rate premiums falling -- that is, the extra level of compensation
demanded in exchange for the risk of lending or investing -- we are more
optimistic about finding quality investment opportunities in Asia and for
the fund's prospects in 1999.
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 9/30/98, there is no guarantee the fund will
continue to hold these securities in the future. The fund concentrates its
investments in one region or industry and involves more risk than a fund
that invests more broadly. International investing involves certain risks,
such as currency fluctuations, economic instability, and political
developments, not present with domestic investments.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Asia Pacific Growth Fund is designed for investors seeking capital
appreciation through common stocks and other securities of companies
located in the Asia and the Pacific Rim.
TOTAL RETURN FOR PERIODS ENDED 9/30/98
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 -34.47% -38.24% -34.93% -38.19% -34.75% -37.04%
- ------------------------------------------------------------------------------
5 year -13.20 -18.16 -16.27 -17.77 -15.23 -18.18
Annual average -2.79 -3.93 -3.49 -3.84 -3.25 -3.93
- ------------------------------------------------------------------------------
Life of fund 16.85 10.18 10.18 10.18 12.13 8.20
Annual average 2.07 1.28 1.28 1.28 1.52 1.04
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/98
MSCI Consumer
Pacific Index Price Index
- ------------------------------------------------------------------------------
1 year -35.53% 1.36%
- ------------------------------------------------------------------------------
5 year -39.73 12.61
Annual average -9.63 2.40
- ------------------------------------------------------------------------------
Life of fund -31.73 21.22
Annual average -4.91 2.57
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. Returns for class A
and class M shares reflect the current maximum initial sales charges of
5.75% and 3.50%, respectively. Class B share returns for the 1-year and
life-of-fund periods reflect the applicable contingent deferred sales
charge (CDSC), which is 5% in the first year, declines to 1% in the sixth
year, and is eliminated thereafter. Returns shown for class B and class M
shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
initial sales charge or CDSC, if any, currently applicable to each class
and in the case of class B and class M shares, the higher operating
expenses applicable to such shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
2/20/91
Fund's class A MSCI Pacific Consumer Price
Date shares at POP Index Index
2/28/91 9,429 10,000 10,000
9/30/91 8,879 9,558 10,178
9/30/92 8,978 8,071 10,482
9/30/93 12,692 11,330 10,764
9/30/94 16,138 12,319 11,083
9/30/95 15,471 11,788 11,364
9/30/96 16,248 12,150 11,705
9/30/97 16,815 10,591 11,957
9/30/98 $11,018 $6,827 $12,122
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $11,018 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $11,213 ($10,820 at public offering price). See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 -- 1
- ------------------------------------------------------------------------------
Income $0.088 $0.000 $0.004
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term -- -- --
- ------------------------------------------------------------------------------
Short-term -- -- --
- ------------------------------------------------------------------------------
Total $0.088 $0.000 $0.004
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
9/30/97 $13.58 $14.41 $13.34 $13.46 $13.95
- ------------------------------------------------------------------------------
9/30/98 8.83 9.37 8.68 8.78 9.10
- ------------------------------------------------------------------------------
TERMS AND DEFINITIONS
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.
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 5.75% maximum 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
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Morgan Stanley Capital International (MSCI) Pacific Index is an index of
approximately 418 equity securities issued by companies located in five
Asian countries. All values are expressed in U.S. dollars. Securities
indexes assume reinvestment of all distributions and interest payments and
do not take in account brokerage fees or taxes. Securities in the fund do
not match those in the indexes and performance of the fund will differ. It
is not possible to invest directly in an index.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research 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
Global Growth and Income Fund
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
Global Governmental Income Trust
High Quality Bond Fund +
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
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:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
*Formerly Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
**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.
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, 1998
To the Trustees and Shareholders of
Putnam Asia Pacific Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements
of operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of Putnam
Asia Pacific Growth Fund at September 30, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at September 30, 1998 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 10, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1998
COMMON STOCKS (95.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Australia (17.6%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 AMP Ltd. $ 2,065,041
249,500 AMP Ltd.144A 3,030,751
220,000 Brambles Industries Ltd. 4,760,411
927,770 Commonwealth Bank of Australia 11,004,824
1,211,400 CSL Ltd. 7,195,716
829,000 Foster's Brewing Group Ltd. 1,812,128
1,370,000 Goodman Fielder Ltd. ADR 1,798,454
375,400 John Fairfax Holdings Ltd. 633,285
280,000 Lend Lease Corp. Ltd. 5,987,520
215,428 News Corp. Ltd. ADR 5,520,343
638,918 QBE Insurance Group Ltd. 2,334,031
229,050 Rio Tinto Ltd. 2,778,257
1,119,386 Westpac Banking Corp. 6,174,403
1,711,399 Woolworth Co. 5,916,443
--------------
61,011,607
Hong Kong (8.2%)
- --------------------------------------------------------------------------------------------------------------------------
838,000 Asia Satellite Telecommunications Holdings Ltd. 1,000,387
4,408,000 Dairy Farm International Holdings Ltd. 4,672,480
1,682,500 Hong Kong Electric Holdings Ltd. 5,786,749
709,200 Hong Kong Telecommunications Ltd. 1,395,793
2,473,500 Johnson Electric Holdings Ltd. 4,692,579
1,742,000 Li & Fung Ltd. 2,810,221
1,296,000 Smartone Telecommunications 3,537,511
300,000 South China Morning Post Ltd. 118,087
2,211,000 Varitronix International Ltd. 4,294,451
--------------
28,308,258
Japan (59.3%)
- --------------------------------------------------------------------------------------------------------------------------
159,600 Aoyamma Trading Co. Ltd. 3,397,484
217,000 Asahi Bank Ltd. 603,219
471,000 Bridgestone Corp. 9,475,129
459,000 Canon, Inc. 9,300,879
347,000 Chubu Electric Power, Inc. 5,546,416
556,000 Dai Nippon Printing Co., Ltd. 7,125,912
658,000 Diawa House Industry Co., Ltd. 5,968,691
1,559,000 Fuji Heavy Industries 8,120,030
251,000 Fuji Photo Film Co. 8,629,848
1,207,000 Fujitsu Ltd. 10,418,875
30,000 Fujitsu Support and Services Inc. 144A 1,141,185
70,000 Futaba Corp. 2,509,144
394,000 Honda Motor Co., Ltd. 11,961,231
154,000 Hoshiden Corp. (NON) 2,101,024
72,000 Ito-Yokado Co., Ltd. 3,423,556
611,000 KAO Corp. 9,743,820
314,000 Kyushu Electric Power Inc. 5,087,857
64,000 Mabuchi Motor 4,002,927
261,000 Matsushita-Kotobuki Electronics Industries, Ltd. 5,918,801
232,000 Mitsumi Electric Company, Ltd. 4,234,382
224,000 Murata Manufacturing Co. Ltd. 7,554,061
2,550,000 Nikko Securities Co. Ltd. 5,465,619
1,040 Nippon Telegraph and Telephone Corp. 7,569,862
13,810 Nippon Television Network Corp. 3,859,123
370,000 Omron Corp. 3,667,521
126,000 Onward Kashiyama Co. Ltd. 1,545,735
78,600 Promise Co., Ltd. 3,536,138
790,000 Ricoh Co., Ltd. 7,281,640
73,000 Rohm Co. Ltd. 6,942,210
176,000 Sankyo Co., Ltd. 3,888,223
900 Santen Pharmaceutical Co. Ltd 12,608
128,000 Secom Co., Ltd. 7,959,036
129,300 Sony Corp. 8,976,278
80,000 Takeda Chemical Industries 2,136,065
517,600 Tokyo Electric Power Co. 9,882,489
307,000 Yamanouchi Pharmaceutical Co., Ltd. 6,602,635
--------------
205,589,653
New Zealand (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
900,400 Telecom Corp. of New Zealand Ltd. 3,446,785
Singapore (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
390,000 Development Bank of Singapore Ltd. 1,570,625
185,000 Singapore Press Holdings Ltd. 1,533,906
1,599,000 Singapore Telecommunications, Ltd. 2,670,524
2,572,500 Venture Manufacturing Ltd. 7,922,416
--------------
13,697,471
South Korea (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
78,067 Samsung Electronics Co. 2,136,506
Taiwan (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
505,300 Asustek Computer, Inc. GDR (NON) 3,537,100
173,275 Taiwan Semiconductor Manufacturing Co. ADR (NON) 2,122,619
--------------
5,659,719
United Kingdom (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
136,677 HSBC Holdings PLC 2,504,760
United States (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
276,000 AFLAC Inc. 7,883,251
--------------
Total Common Stocks (cost $351,504,019) $ 330,238,010
SHORT-TERM INVESTMENTS (3.5%) (a)(cost $12,238,853)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$12,237,000 Interest in $471,473,000 joint repurchase agreement
dated September 30,1998 with Credit Suisse First
Boston Global due October 1,1998 with respect
to various U.S. Treasury obligations -- maturity value
of $12,238,853 for an effective yield of 5.45% $ 12,238,853
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $363,742,872) (b) $ 342,476,863
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $346,797,658.
(b) The aggregate identified cost on a tax basis is $366,213,646, resulting in gross unrealized appreciation and
depreciation of $1,039,708 and $24,776,491, respectively, or net unrealized depreciation of $23,736,783.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
ADR, GDR or after the name of a foreign holding stands for American Depository Receipts, Global Depository
Receipts or respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at September 30, 1998 (as a percentage of
net assets):
Electronics and Electrical Equipment 20.4%
Insurance and Finance 15.0
Utilities 10.2
- ------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at September 30, 1998
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- ------------------------------------------------------------------------------------
Australian Dollars $22,782,375 $24,119,692 11/12/98 $1,337,317
Japanese Yen 103,501,250 105,681,575 3/15/99 2,180,325
- ------------------------------------------------------------------------------------
$3,517,642
- ------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $363,742,872) (Note 1) $342,476,863
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $38,992) 38,573
- -----------------------------------------------------------------------------------------------
Interest, dividends and other receivables 1,905,668
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,407,727
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 2,381,896
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,517,642
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 772,243
- -----------------------------------------------------------------------------------------------
Total assets 355,500,612
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 1,986
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 6,037,452
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,156,023
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 851,306
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 76,189
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 24,853
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,908
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 288,332
- -----------------------------------------------------------------------------------------------
Other accrued expenses 264,905
- -----------------------------------------------------------------------------------------------
Total liabilities 8,702,954
- -----------------------------------------------------------------------------------------------
Net assets $346,797,658
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $552,619,757
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 23,215,866
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (211,289,288)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments
and assets and liabilities in foreign currencies (17,748,677)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $346,797,658
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($240,977,960 divided by 27,294,960 shares) $8.83
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $8.83)* $9.37
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($100,331,308 divided by 11,562,364 shares)** $8.68
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($5,488,390 divided by 624,974 shares) $8.78
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $8.78)* $9.10
- -----------------------------------------------------------------------------------------------
* 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, 1998
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $828,511) $ 11,512,040
- -----------------------------------------------------------------------------------------------
Interest 1,415,393
- -----------------------------------------------------------------------------------------------
Total investment income 12,927,433
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,179,722
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,421,372
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 26,756
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,321
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 955,986
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,397,796
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 55,828
- -----------------------------------------------------------------------------------------------
Reports to shareholders 74,680
- -----------------------------------------------------------------------------------------------
Auditing 63,105
- -----------------------------------------------------------------------------------------------
Legal 7,930
- -----------------------------------------------------------------------------------------------
Postage 130,689
- -----------------------------------------------------------------------------------------------
Other 502,125
- -----------------------------------------------------------------------------------------------
Total expenses 8,825,310
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (405,893)
- -----------------------------------------------------------------------------------------------
Net expenses 8,419,417
- -----------------------------------------------------------------------------------------------
Net investment income 4,508,016
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (148,484,966)
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 22,308,306
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 3,520,122
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (104,716,629)
- -----------------------------------------------------------------------------------------------
Net loss on investments (227,373,167)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(222,865,151)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
-------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 4,508,016 $ 455,571
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments
and foreign currency transactions (126,176,660) (30,517,612)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments and
assets and liabilities in foreign currencies (101,196,507) 55,964,786
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (222,865,151) 25,902,745
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (3,446,213) (6,762,186)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (5,832,588)
- ---------------------------------------------------------------------------------------------------------------
Class M (2,733) (287,728)
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (1,179,833)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (1,017,641)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (50,201)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (151,334,815) 255,981,851
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (377,648,912) 266,754,419
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 724,446,570 457,692,151
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income and distributions in excess of net investment
income of $23,215,866 and $2,876,009, respectively) $346,797,658 $724,446,570
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.58 $13.63 $13.58 $14.64 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .11(c) .05(c) .03(c) .02 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (4.77) .41 .63 (.63) 3.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (4.66) .46 .66 (.61) 3.13
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.43) (.60) (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.08) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.41) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.51) (.61) (.45) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.83 $13.58 $13.63 $13.58 $14.64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (34.47) 3.47 5.02 (4.14) 27.15
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $240,978 $515,107 $223,307 $158,773 $149,486
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.46 1.50 1.54 1.55 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 1.05 .40 .20 .14 (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 128.25 89.77 72.68 91.13 65.02
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) Distributions from net investment income amounted to less than $.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.34 $13.41 $13.37 $14.53 $11.54
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .03(c) (.06)(c) (.07)(c) (.07) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (4.69) .41 .63 (.64) 3.06
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (4.66) .35 .56 (.71) 3.03
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.36) (.51) (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.41) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.42) (.52) (.45) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.68 $13.34 $13.41 $13.37 $14.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (34.93) 2.66 4.33 (4.88) 26.31
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $100,331 $199,036 $225,241 $144,514 $110,951
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.21 2.25 2.30 2.31 2.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .32 (.45) (.55) (.62) (.73)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 128.25 89.77 72.68 91.13 65.02
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) Distributions from net investment income amounted to less than $.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share February 1, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.46 $13.54 $13.53 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .06(c) (.02)(c) (.03)(c) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (4.74) .41 .63 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (4.68) .39 .60 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --(d) (.40) (.58) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.07) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.47) (.59) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.78 $13.46 $13.54 $13.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (34.75) 2.93 4.65 9.03*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,488 $10,304 $9,144 $2,829
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.96 2.00 2.06 2.09*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .57 (.17) (.24) (.45)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 128.25 89.77 72.68 91.13
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) Distributions from net investment income amounted to less than $.01 per share.
</TABLE>
Notes to financial statements
September 30, 1998
Note 1
Significant accounting policies
Putnam Asia Pacific Growth Fund (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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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, and 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 gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and 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
current 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) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
September 30, 1998, the fund had no borrowings against the line of credit.
H) 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, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At September 30, 1998, the fund had a capital loss carryover of
approximately $69,269,000 available to offset future net capital gain, if
any. The amount of carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- -----------
$21,694,000 9/30/04
6,385,000 9/30/05
41,190,000 9/30/06
I) 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 in the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions, foreign currency gains and losses, post-October loss
deferrals, realized gains and losses on passive foreign investment
companies and unrealized gains and losses 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, 1998, the fund reclassified $25,032,805 to increase
undistributed net investment income and $310,898 to increase
paid-in-capital, with an increase to accumulated net realized losses of
$25,343,703. 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, 0.60% of the next $5 billion, 0.575% of the next $5
billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion and
0.53% thereafter.
The fund reimburses Putnam Management an allocated amount 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.
As part of the subcustodian contract between the subcustodian bank and
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc., the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At September 30, 1998, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 1998, fund expenses were reduced by
$405,893 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.
Each Trustee of the fund receives an annual Trustee fee, of which $1,010
has been allocated to the fund, 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 has adopted a Trustee Fee Deferral Plan (the "Deferral 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 Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 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 to 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, 1998 Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $129,969 and $8,772 from the sale
of class A and class M shares, respectively and $543,241 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, 1998 Putnam Mutual Funds Corp.,
acting as underwriter received $10,458 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 1998 purchases and sales of investment
securities other than short-term investments aggregated $634,288,433 and
$724,701,106, 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, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
September 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 54,048,482 $ 589,265,153
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 86,345 972,298
- -----------------------------------------------------------------------------
54,134,827 590,237,451
Shares
repurchased (64,776,138) (702,418,905)
- -----------------------------------------------------------------------------
Net decrease (10,641,311) $(112,181,454)
- -----------------------------------------------------------------------------
Year ended
September 30, 1997
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 108,467,305 $1,471,086,586
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 520,009 6,905,723
- -----------------------------------------------------------------------------
108,987,314 1,477,992,309
Shares
repurchased (87,431,530) (1,195,459,718)
- -----------------------------------------------------------------------------
Net increase 21,555,784 $ 282,532,591
- -----------------------------------------------------------------------------
Year ended
September 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,481,054 $125,403,283
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
11,481,054 125,403,283
Shares
repurchased (14,835,531) (162,782,350)
- -----------------------------------------------------------------------------
Net decrease (3,354,477) $ (37,379,067)
- -----------------------------------------------------------------------------
Year ended
September 30, 1997
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 34,368,702 $459,575,304
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 449,144 5,892,766
- -----------------------------------------------------------------------------
34,817,846 465,468,070
Shares
repurchased (36,701,477) (493,052,877)
- -----------------------------------------------------------------------------
Net decrease (1,883,631) $(27,584,807)
- -----------------------------------------------------------------------------
Year ended
September 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,532,571 $28,258,569
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 187 2,093
- -----------------------------------------------------------------------------
2,532,758 28,260,662
Shares
repurchased (2,673,098) (30,034,956)
- -----------------------------------------------------------------------------
Net decrease (140,340) $(1,774,294)
- -----------------------------------------------------------------------------
Year ended
September 30, 1997
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,569,016 $34,985,302
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 21,841 288,734
- -----------------------------------------------------------------------------
2,590,857 35,274,036
Shares
repurchased (2,500,814) (34,239,969)
- -----------------------------------------------------------------------------
Net increase 90,043 $ 1,034,067
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
For the period, interest and dividends from foreign countries were
$9,811,655. Taxes paid to foreign countries were $828,511 or $.021 (for
all classes of shares).
The fund has designated 8.74% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
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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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Brett C. Browchuk
Vice President
David K. Thomas
Vice President and Fund Manager
Paul C. Warren
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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 the
principal amount invested.
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