Putnam
Asia Pacific
Growth
Fund
ANNUAL REPORT
September 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Asia Pacific Growth Fund's class A shares have provided
strong, consistent performance over the fund's existence when
compared to its peers. For the one and five years ended
September 30, 1997, the fund ranked 5 out of 40 and 1 out of 14
Pacific region funds, respectively, according to Lipper Analytical
Services.*
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
17 Financial statements
*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. Performance of other share classes will vary. Past
performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Although the dramatic upheaval in the Asian securities markets occurred after
the close of Putnam Asia Pacific Growth Fund's fiscal year, the forewarning
tremors inevitably had an effect on performance. As events both in Asia and in
most of the world's other markets sort themselves out during the months ahead,
the effectiveness of portfolio managers will surely be put to the test.
In this regard, I am pleased to announce the addition of Paul C. Warren to
your fund's management team. Paul brings to his new assignment 15 years of
investment experience, mainly in the Asian markets. Before joining Putnam, he
was with IDS Fund Management, Pilgrim Baxter Asia, Prudential Asia Fund
Management, Rothschild Asset Management, Salomon Brothers Asia, and Morgan
Grenfell.
In the report that follows, your fund's managers discuss fiscal 1997
performance in the context of an increasingly challenging market environment
and share their views on prospects for the year ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 19, 1997
Report from the Fund Managers
David K. Thomas
Paul C. Warren
The final quarter of your fund's fiscal year was marked by both fiscal and
political upheaval in the Asia Pacific region, significantly dampening its
results for the full fiscal year. As difficult as the last quarter was,
however, active portfolio management kept your fund's performance well ahead
of the Morgan Stanley Capital International (MSCI) Pacific Index. Your fund's
class A shares returned 3.47% at net asset value (-2.47% at public offering
price) for the 12 months ended September 30, 1997. Over the same period,
the MSCI Index returned -12.83%.
* TURMOIL RULES IN SOUTHEAST ASIA
Several factors accounted for these disappointing results, few of which could
have been foreseen as recently as six months ago. The most visible factors
were the collapse of Thailand's currency and the implosion of Malaysia's
market. Other factors contributing to the present state of affairs in
Southeast Asia include a general slowing of exports leading to deteriorating
balance of trade positions, a preponderance of growth based on the shaky
construction and real estate sectors (especially in Southeast Asia), and an
overcapacity in production of some basic products such as chemicals and
textiles. In addition, China's massive increase in production capacity has
siphoned off industrial growth from much of the rest of the region.
Nevertheless, there have also been some isolated bright spots. Among them are
the excellent performance of blue-chip exporters in the context of an
otherwise lackluster Japanese economy, strong performance by utilities in Hong
Kong, and generally healthy Australian industrial shares that acted as a
moderate counterbalance to the otherwise tumultuous region.
* JAPAN: SLEEPING GIANT OPENS ONE EYE
Despite optimistic government proclamations and strong exports resulting from
a weak yen, the much-vaunted recovery of the Japanese economy seems to have
petered out. The nation's second quarter GDP fall of 2.9% was worse than
expected. The banking sector seems particularly vulnerable due in part to
outstanding loans to regional countries, such as Thailand, whose currencies
are in a state of collapse. Fortunately your fund had no exposure to this
sector. The Japanese government appears to have hoped that the economy would
expand itself out of its lethargy and that time would take care of things.
These have not turned out to be the case.
That said, blue-chip exporters such as Sony and Rohm, a semiconductor chip
maker, continue to perform very well as does American Family Life (or AFLAC,
Inc., which, though a U.S.-listed company, derives more than 80% of its
business in Japan). On the basis of that not inconsiderable strength plus our
conviction that the Japanese government will soon take additional stimulatory
measures, the fund's Japanese weighting remains quite high at more than 45%.
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.
* HONG KONG, AUSTRALIA PROVIDE BALANCE; TAIWAN, NEW ZEALAND STRONG
Although the former British colony's handover to China went as smoothly as one
could have hoped, Hong Kong remains a difficult market in some respects. While
some commercial property companies have fared poorly, companies specializing
in residential properties, such as Cheung Kong Holdings, have more than held
their own, however. Another excellent performer with fully 2.6% of the fund's
net assets, has been HSBC Holdings, which is listed on the stock exchange of
both the U.K. and Hong Kong, but is based in the U.K. First Pacific, however,
has suffered recently because of the poor performance of its property
subsidiaries in the Philippines. At the end of the period, Hong Kong-based
stocks composed 18% of the fund's net assets.
[GRAPHIC OMITTED: horizontal bar chart COUNTRY ALLOCATION]
COUNTRY ALLOCATION*
Japan 45.8%
Hong Kong 17.9%
Australia 12.6%
Singapore 5.4%
United States 2.6%
United Kingdom 2.6%
Footnote reads:
*Based on net assets as of 9/30/97. Holdings will vary over time.
The Australian market at about 12% of the fund's net assets has performed very
well and provided good diversification away from the currency turmoil in
Southeast Asia. With declining interest rates, the banking sector looks
healthy, as does the industrial sector. Goodman-Fielder, a food manufacturer
and distributor, has achieved solid growth after a corporate restructuring.
Your fund has also enjoyed continued success with a smaller, long-term
holding, CSL, a pharmaceutical company whose share price has outpaced strong
profit growth.
Nearby, Telecom Corp. of New Zealand has performed well for your fund as have
Taiwanese stocks, in which we maintain a 2.2% weighting.
* SOUTHEAST ASIA REMAINS PROBLEMATICAL
Although it held a small position in Thailand earlier in the year, your fund
had no direct exposure to the Thai currency collapse, in which Thailand was
forced to float its currency -- the baht -- and raise interest rates
dramatically in an effort to stem the currency's fall. The resulting
devaluation exacerbated a banking and finance sector crisis, which spilled
over to Malaysia, the Philippines, and Indonesia.
The market collapse in Malaysia stemmed originally from structural economic
causes rather than from political reasons. However, senior government
officials there blamed the region's currency weakness on predatory foreign
speculators, causing the inflow of investment funds from abroad to dry up and
beginning a general investment retreat. Attempts to correct the situation were
ineffective, and Malaysia's market fell precipitously. Your fund, which began
this fiscal year with a 7.2% stake in Malaysia, has now reduced its current
weighting to 1.1%.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Sony (Japan)
Consumer electronics
Canon (Japan)
Office equipment
Cheung Kong Holdings (Hong Kong)
Property
AFLAC, Inc. (U.S.)
Life insurance
HSBC Holdings (U.K.)
Banking
Dai Nippon Printing (Japan)
Printing
Ito Yokado (Japan)
Retailing
Kao Corp. (Japan)
Chemicals
Hutchison Whampoa (Hong Kong)
Conglomerate
Fuji Photo (Japan)
Chemicals
Footnote reads:
These holdings represent 24.4% of the fund's assets as of 9/30/97.
Portfolio holdings will vary over time.
Singapore, with a 5.4% weighting, has inevitably suffered somewhat from the
trickle-down effect of regional currency and market instability. We don't
expect that Singapore will suffer the same turmoil as its neighbors, however,
because of its strong, technocrat-led economy. Its strongest performers
have been specialty electronics manufacturers, such as Venture Manufacturing.
* LOOKING AHEAD: STAYING THE COURSE
Most of the current turmoil in Asia has occurred only in the past six months.
We believe that the full effects on the region's currencies and markets have
yet to play themselves out and that in the near term, caution should be the
watchword in Southeast Asia. Your fund's exposure there is now of an extremely
low order, and until currency stability returns we expect it to remain so. The
single bright spot for Southeast Asia is that currency devaluations have made
exporting companies very competitive.
Much of our attention is now focused on Japan; we believe that for as long as
the yen remains relatively weak against the dollar, the highest growth in the
Japanese market will continue to come from blue-chip exporters. Your fund is
well positioned to take advantage of this situation. Australia will also
remain a strong focus, since companies are restructuring and, in marked
contrast to those in Japan, operate largely in shareholders' interests.
It is important to keep in mind that despite the current spate of difficulties
in the region, we believe that the experience of Putnam's portfolio managers
and the depth of the firm's research capabilities will be a major advantage
when the markets rebound. We continue to believe that as China gains in
strength and importance the Pacific Rim will offer opportunity for long-term
investors.
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 9/30/97, there is no guarantee the fund will continue to hold
these securities in the future. International investing has certain risks,
including currency fluctuations, economic instability and political
developments. Funds investing in a single sector may be subject to more
volatility than funds investing in a diverse group of sectors.
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 Asia and the Pacific Rim.
TOTAL RETURN FOR PERIODS ENDED 9/30/97
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 3.47% -2.47% 2.66% -2.32% 2.93% -0.67%
- --------------------------------------------------------------------------
5 years 87.26 76.47 80.66 78.66 82.64 76.25
Annual average 13.37 12.03 12.56 12.31 12.80 12.00
- --------------------------------------------------------------------------
Life of fund 78.32 68.13 69.33 69.33 71.84 65.81
Annual average 9.14 8.18 8.29 8.29 8.54 7.95
- --------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/97
MSCI Consumer
Pacific Index Price Index
- --------------------------------------------------------------------------
1 year -12.83% 2.15%
- --------------------------------------------------------------------------
5 years 31.22 14.08
Annual average 5.59 2.67
- --------------------------------------------------------------------------
Life of class A 5.90 19.58
Annual average .87 2.75
- --------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% for class A shares and 3.50% for class M shares.
One-, five-, and ten-year (when available) and life- of-fund returns for
class B shares reflect the applicable contingent deferred sales charges
(CDSC), which is 5% in the first year, declines each year 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 costs
applicable to such shares. All returns assume reinvestment of
distributions at NAV and represent past performance; they do not guarantee
future results. 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.
[GRAPHIC OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 2/20/91
MSCI
Date/year Fund at POP Pacific Index CPI
2/20/91 9429 10000 10000
9/30/91 8879 9558 10178
9/30/92 8978 8070 10482
9/30/93 12692 11329 10764
9/30/94 16138 12318 11083
9/30/95 15471 11786 11365
9/30/96 16248 12149 11706
9/30/97 16813 10590 11958
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 $16,933 with a redemption on 9/30/97; a $10,000 investment
in the fund's class M shares would have been valued at $17,184 ($16,581 at
public offering price). See first page of performance section for performance
calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/97
Class A Class B Class M
- --------------------------------------------------------------------------
Distributions (number) 1 1 1
- --------------------------------------------------------------------------
Income $0.512 $0.419 $0.468
- --------------------------------------------------------------------------
Capital gains -- -- --
- --------------------------------------------------------------------------
Total $0.512 $0.419 $0.468
- --------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------------
9/30/96 $13.63 $14.46 $13.41 $13.54 $14.03
- --------------------------------------------------------------------------
9/30/97 13.58 14.41 13.34 13.46 13.95
- --------------------------------------------------------------------------
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 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
Morgan Stanley Capital International (MSCI) Pacific Index* is an unmanaged
list of equity securities from Pacific Rim markets with all values
expressed in U.S. dollars.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the
fund will differ. It is not possible to invest directly in an index.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
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 Total Return Fund
High Yield Trust +
Income Fund
Money Market 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 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
LIFESTAGESM 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 Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[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, 1997
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, 1997, and the related statement of operations for the year then
ended and the statements 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, 1997, 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, 1997, the results of its
operations for the year then ended and 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 7, 1997
Portfolio of investments owned
September 30, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (90.8%) *
NUMBER OF SHARES VALUE
Australia (12.6%)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
792,770 Commonwealth Bank of Australia $ 9,799,284
150,000 Commonwealth Bank of Australia
(Installment Shares) 1,365,566
480,000 CRA Ltd. 7,224,984
1,458,000 CSL Ltd. 9,783,107
5,554,300 Goodman Fielder Ltd. ADR 8,984,869
457,486 Lend Lease Corp. Ltd. 10,882,033
2,200,100 Pioneer International Ltd. 7,491,401
2,014,764 QBE Insurance Group Ltd. 12,701,982
1,300,300 Westpac Banking Ltd. 8,206,167
1,400,000 Woodside Petroleum Ltd. 13,376,956
341,600 Woolworth Co. 1,111,864
--------------
90,928,213
Hong Kong (17.9%)
- ------------------------------------------------------------------------------------------------------------
7,572,000 Amoy Properties Ltd. 8,269,260
1,700,000 Cheung Kong Holdings Ltd. 19,114,701
3,805,900 Dairy Farm International Holdings Ltd. 3,615,605
1,300,000 Dao Heng Bank Group Ltd. 5,863,651
5,185,367 First Pacific Co. 5,193,747
1,495,800 Guoco Group Ltd. 5,973,534
5,829,560 HKR International Ltd. 6,893,761
6,000,000 Hong Kong and China Gas Co., Ltd. 12,368,336
2,400,000 Hong Kong Electric Holdings Ltd. 8,933,118
1,610,000 Hutchison Whampoa Ltd. 15,865,913
509,000 Li & Fung Ltd. 595,341
2,700,000 New World Infrastructure Ltd. + 7,118,578
6,270,000 South China Morning Post Ltd. 5,712,892
616,000 Sun Hung Kai Properties Ltd. 7,244,717
2,787,000 Varitronix International Ltd. 5,330,869
3,125,000 Wharf (Holdings) Ltd. 11,510,501
--------------
129,604,524
Indonesia (0.6%)
- ------------------------------------------------------------------------------------------------------------
556,925 Bank Bali 815,745
3,315,000 PT Telekomunikasi Indonesia 3,686,176
--------------
4,501,921
Japan (45.8%)
- ------------------------------------------------------------------------------------------------------------
30,900 Acom Co. Ltd. 144A 1,614,294
482,000 Bridgestone Corp. 11,609,638
657,000 Canon, Inc. 19,262,547
789,000 Dai Nippon Printing Co. 16,907,147
144,000 Fuji Machine Manufacturing Co., Ltd. 5,238,540
380,000 Fuji Photo Film Co. 15,717,612
178,300 Hirose Electric Co., Ltd. 13,165,178
300,000 Ito-Yokado Co., Ltd. 16,295,685
1,100,000 KAO Corp. 15,988,376
2,300,000 Kawasaki Steel Corp. 4,412,792
106,000 Keyence Corp. 14,878,741
482,000 Kurita Water Ltd. 9,648,009
1,340,000 Matsushita Electric Works Ltd. 14,023,259
129,000 Mitsui & Co. 1,016,786
220,000 Murata Manufacturing Co., Ltd. 9,538,208
449,000 Omron Corp. 9,434,969
490,000 Onward Kashiyama Co., Ltd. 7,081,397
122,650 Promise Co., Ltd. 6,417,734
510,000 Ricoh Co., Ltd. 7,666,946
82,000 Rohm Co., Ltd. 9,671,099
445,000 Sankyo Co., Ltd. 15,449,340
290,000 Santen Pharmaceutical Co., Ltd. 5,467,609
150,000 Secom Co., Ltd. 10,153,657
120,000 Seven-Eleven Japan Co., Ltd. 9,029,903
264,000 Shin-Etsu Chemical Co. 7,279,736
215,000 Sony Corp. 20,357,137
328,000 Taisho Pharmaceutical Co., Ltd. 8,690,368
550,000 Taiyo Yuden Co., Ltd. 6,166,945
229,000 Tokyo Electron Ltd. 14,017,695
241,000 Toyota Motor Corp. 7,406,148
439,000 Yamanouchi Pharmaceutical Co., Ltd. 10,865,617
620,000 Yamato Transport Co., Ltd. 7,621,264
--------------
332,094,376
Malaysia (1.1%)
- ------------------------------------------------------------------------------------------------------------
521,000 Berjaya Sports Toto Berhad 1,494,080
831,000 Carlsberg Brewery of Malaysia 3,203,053
400,000 Edaran Otomobil Nasional Berhad 1,603,454
18,000 Malyaysian Pacific Industries Berhad 64,385
1,780,000 Sungei Way Holdings Berhad 1,635,646
--------------
8,000,618
New Zealand (1.6%)
- ------------------------------------------------------------------------------------------------------------
2,385,000 Telecom Corp. of New Zealand Ltd. 12,102,310
Philippines (0.6%)
- ------------------------------------------------------------------------------------------------------------
7,500,000 International Container Terminal Services, Inc. 1,557,018
90,700 Philippine Long Distance Co. 2,466,404
--------------
4,023,422
Singapore (5.4%)
- ------------------------------------------------------------------------------------------------------------
2,145,000 Clipsal Industries Ltd. 6,821,100
2,788,500 Courts (Singapore) Ltd. 2,043,258
553,000 Cycle & Carriage Ltd. 3,346,582
1,420,000 DBS Land Ltd. 3,455,937
3,317,000 Overseas Union Bank Ltd. 14,756,690
2,123,500 Venture Manufacturing Ltd. 9,030,258
--------------
39,453,825
United Kingdom (2.6%)
- ------------------------------------------------------------------------------------------------------------
558,279 HSBC Holdings PLC 18,687,465
United States (2.6%)
- ------------------------------------------------------------------------------------------------------------
345,000 AFLAC, Inc. 18,716,250
--------------
Total Common Stocks (cost $576,964,751) $ 658,112,924
INVESTMENT COMPANIES (2.2%) *
NUMBER OF SHARES VALUE
TAIWAN (2.2%) *
- ------------------------------------------------------------------------------------------------------------
200,000 ROC Taiwan Fund, Inc. $ 2,425,000
55,000 Taipei Fund Units + 6,737,500
260,000 Taiwan Fund, Inc. 6,597,500
--------------
Total Investment Companies (cost $13,457,553) $ 15,760,000
SHORT-TERM INVESTMENTS (8.2%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 7,000,000 Fed Home Loan Mortgage Corp. 5.425s, 10/10/97 $ 6,982,067
52,469,000 Interest in $226,927,000 joint repurchase agreement
dated September 30, 1997 with Goldman, S.B.C.
Warburg, Inc. due October 1, 1997 with respect to
various U.S. Treasury obligations -- maturity value
of $52,477,818 for an effective yield of 6.05% 52,477,818
--------------
Total Short-Term Investments (cost $59,459,885) $ 59,459,885
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $649,882,189) *** $ 733,332,809
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $724,446,570.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is $664,339,658, resulting in gross unrealized appreciation
and depreciation of $100,757,896 and $31,764,745, respectively, or net unrealized appreciation of
$68,993,151.
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 after the name of a foreign holding stands for American Depository Receipts 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, 1997
(as a percentage of net assets):
Insurance and Finance 16.7%
Electronics and Electronic Equipment 16.3
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $649,882,189) (Note 1) $733,332,809
- ---------------------------------------------------------------------------------------------------
Cash 3,818,932
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 1,195,481
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 5,342,596
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 5,654,374
- ---------------------------------------------------------------------------------------------------
Total assets 749,344,192
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 3,346,283
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 19,148,405
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,408,483
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 259,804
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 18,954
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,049
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 501,885
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 210,759
- ---------------------------------------------------------------------------------------------------
Total liabilities 24,897,622
- ---------------------------------------------------------------------------------------------------
Net assets $724,446,570
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $703,643,674
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (2,876,009)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
(Note 1) (59,768,925)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities
in foreign currencies 83,447,830
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $724,446,570
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($515,106,838 divided by 37,936,271 shares) $13.58
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.58)* $14.41
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($199,035,625 divided by 14,916,841 shares)** $13.34
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($10,304,107 divided by 765,314 shares) $13.46
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.46)* $13.95
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 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, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $739,256) $ 8,934,360
- --------------------------------------------------------------------------------------------------
Interest 1,600,711
- --------------------------------------------------------------------------------------------------
Total investment income 10,535,071
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,637,949
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,968,007
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 34,722
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 11,383
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 915,053
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,160,828
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 77,015
- --------------------------------------------------------------------------------------------------
Reports to shareholders 158,068
- --------------------------------------------------------------------------------------------------
Registration fees 72,286
- --------------------------------------------------------------------------------------------------
Auditing 55,455
- --------------------------------------------------------------------------------------------------
Legal 10,362
- --------------------------------------------------------------------------------------------------
Postage 222,055
- --------------------------------------------------------------------------------------------------
Other 224,826
- --------------------------------------------------------------------------------------------------
Total expenses 10,548,009
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (468,509)
- --------------------------------------------------------------------------------------------------
Net expenses 10,079,500
- --------------------------------------------------------------------------------------------------
Net investment income 455,571
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (30,786,850)
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 269,238
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (1,449,454)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 57,414,240
- --------------------------------------------------------------------------------------------------
Net gain on investments 25,447,174
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $25,902,745
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 455,571 $ (667,997)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (30,517,612) 10,352,201
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 55,964,786 8,054,571
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 25,902,745 17,738,775
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (6,762,186) (6,908,193)
- ----------------------------------------------------------------------------------------------------------------------
Class B (5,832,588) (5,685,612)
- ----------------------------------------------------------------------------------------------------------------------
Class M (287,728) (125,143)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A (1,179,833) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,017,641) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (50,201) --
- ----------------------------------------------------------------------------------------------------------------------
In excess of realized gains
Class A -- (78,334)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (73,742)
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (1,408)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 255,981,851 146,709,587
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 266,754,419 151,575,930
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 457,692,151 306,116,221
- ----------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income and undistributed net investment
income of $2,876,009 and $10,968,550, respectively) $724,446,570 $457,692,151
- ----------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.63 $13.58 $14.64 $11.55 $8.17
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .05 (c) .03 (c) .02 .04 (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .41 .63 (.63) 3.09 3.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .46 .66 (.61) 3.13 3.38
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.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 (.51) (.61) (.45) (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.58 $13.63 $13.58 $14.64 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.47 5.02 (4.14) 27.15 41.37
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $515,107 $223,307 $158,773 $149,486 $24,150
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.50 1.54 1.55 1.53 2.03
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .40 .20 .14 (.01) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.77 72.68 91.13 65.02 79.78
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0167 $.0229
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share June 1, 1993+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.41 $13.37 $14.53 $11.54 $10.86
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06)(c) (.07)(c) (.07) (.03) (.02)(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .41 .63 (.64) 3.06 .70
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .35 .56 (.71) 3.03 .68
- ------------------------------------------------------------------------------------------------------------------------------------
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 $13.34 $13.41 $13.37 $14.53 $11.54
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.66 4.33 (4.88) 26.31 6.26*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $199,036 $225,241 $144,514 $110,951 $9,901
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.25 2.30 2.31 2.27 .86*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.45) (.55) (.62) (.73) (.25)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.77 72.68 91.13 65.02 79.78
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0167 $.0229
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $13.54 $13.53 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02)(c) (.03)(c) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .41 .63 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .39 .60 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.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 $13.46 $13.54 $13.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.93 4.65 9.03*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,304 $9,144 $2,829
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.00 2.06 2.09*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.17) (.24) (.45)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.77 72.68 91.13
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0167 $.0229
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
Notes to financial statements
September 30, 1997
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. 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 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 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 period ended month day, year, 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, 1997, the fund had a capital loss carryover of approximately
$28,079,000 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
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 on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include temporary
and permanent differences of losses on wash sale transactions, realized and
unrealized gains and losses on passive foreign investment companies,
post-October loss deferrals and realized gains and losses on forward foreign
currently 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, 1997, the fund reclassified $830,047 to decrease distributions in excess
of net investment income and $2,249,896 to increase paid-in-capital, with an
increase to accumulated net realized loss on investments of $3,079,943. 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.
Prior to January 20, 1997, any amount over $1.5 billion was based on 0.60%.
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, 1997, fund expenses were reduced by $468,509
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 $1,322 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 currently limit 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, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $159,179 and $9,488 from the sale of
class A and class M shares, respectively and $536,111 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, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $3,791 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $704,570,334 and
$496,145,896, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
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, 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, 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, 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, 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
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Federal tax information
(Unaudited)
For the period, interest and dividends from foreign countries
were $9,673,708 or $.180 per share (for all share classes). Taxes
paid to foreign countries were $739,256 or $.014 (for all classes
of shares).
The Form 1099 you receive in January 1998 will show the tax
status of all distributions paid to your account in calendar 1997.
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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
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. 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
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Asia Pacific
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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PUTNAM INVESTMENTS
The Putnam Funds
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Putnam
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