Putnam
U.S.
Government
Income Trust
SEMIANNUAL REPORT
March 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "[Fund Manager Michael] Martino doesn't make big bets or take big
risks with this fund. By following a plain-vanilla strategy, he is
building a record of competitive returns and modest volatility."
-- Morningstar Mutual Funds, March 28, 1997
* Lipper Analytical Services ranked Putnam U.S. Government Income
Trust's class A shares 16th out of 51 Ginnie Mae funds for 1-year
performance through March 31, 1997, placing them among the top 31% of
competing funds.*
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
15 Financial statements
*Lipper rankings are based on total return performance, vary over time,
and do not reflect the effects of sales charges. The fund's class A shares
were ranked 24 out of 29 and 15 out of 21 GNMA funds for 5- and 10-year
performance, respectively, through 3/31/97. The fund's class B and class M
shares were ranked 36 and 22, respectively, out of 51 GNMA funds for
1-year performance through 3/31/97. Class B and class M shares were not
ranked over longer applicable periods. Past performance is not indicative
of future results. GNMA and Ginnie Mae stand for the Government National
Mortgage Association.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Anxiety over the effect of continued economic strength and the uncertain
course of interest rates defined the prevailing market environment during the
first half of Putnam U.S. Government Income Trust's current fiscal year. The
Federal Reserve Board's first increase in short-term interest rates in more
than two years provided a fitting climax to the period that ended on March 31,
1997.
Like many of his counterparts, Fund Manager Michael Martino responded by
taking defensive measures, such as shortening the fund's average duration and
moving the portfolio's maturity structure toward a "barbell" configuration. He
also increased the weighting of mortgage-backed securities, partly as another
defensive move and also in response to their superior performance relative to
Treasury bonds.
Mike explains his strategies in detail and discusses prospects for the fiscal
year's second half in the following report.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 21, 1997
Report from the Fund Manager
Michael Martino
Despite changing interest-rate conditions, Putnam U.S. Government Income
Trust's results generally kept pace with the market during the first half of
its current fiscal year, the six months ended March 31, 1997. Your fund's
class A shares returned 3.03% at net asset value over the period, while the
Lehman Brothers Mortgage-Backed Securities Index -- the fund's principal
market benchmark -- measured a return of 3.01%. The total return of class A
shares at public offering price was - 1.87%. (Please refer to the tables on
pages 8 and 9 for complete performance information, including results for
other share classes.)
* POSITIONING WAS DEFENSIVE IN LIGHT OF ECONOMIC STRENGTH AND MARKET GYRATIONS
U.S. economic data were broadly and consistently strong throughout much of the
period. As anticipated, revised fourth-quarter 1996 gross domestic product
growth came in at a healthy 3.8% annual rate. Lower-than-expected unemployment
figures and strong personal income gains helped keep consumer confidence at a
27-year high. Retail sales rebounded in January after a disappointing holiday
season. New-home sales remained strong, setting an 11-year record in January.
Industrial indicators suggested a vigorous manufacturing sector benefiting
from increased orders and tight inventories.
After seeing bond prices rise during the period's first three months, the
focus in the U.S. Treasury market shifted to concern that continuing robust
economic growth would prompt an interest-rate increase by the Federal Reserve
Board. The Fed finally acted as the period came to a close, raising the target
for short-term bank lending rates by a quarter point to 5.50%, its first
increase in more than two years. Bond prices fell and yields, which move in
the opposite direction, rose in response to this shift to a more restrictive
monetary policy.
Against this changing market backdrop, we maintained a defensive strategy by
shortening the portfolio's duration, keeping it as much as 10% lower than that
of competing Ginnie Mae funds.* Duration is the principal indicator of
interest-rate sensitivity for a given portfolio of bonds. It is measured in
years. The longer the duration, the more sensitive a portfolio is to a given
change in rates. When interest rates rise, a relatively long duration causes
the portfolio's value to decline more rapidly with each succeeding rate
increase. By keeping duration somewhat shorter than our peer group's average,
therefore, we were able to gain a modest performance advantage when interest
rates began to climb. As is frequently the case, active management of the
portfolio's duration was a key determinant of your fund's performance over the
period.
[GRAPHIC OMITTED: vertical bar chart AVERAGE EFFECTIVE MATURITY AND DURATION]
1st line of 3 represents effective maturity at 3/31/96
2nd line of 3 represents effective maturity at 9/30/96
3rd line of 3 represents effective maturity at 3/31/97
Average effective maturity -- 6.1 years
-- 9.3 years
-- 8.7 years
1st line of 3 represents Duration at 3/31/96
2nd line of 3 represents Duration at 9/30/96
3rd line of 3 represents Duration at 3/31/97
Duration -- 3.8 years
-- 5.1 years
-- 4.6 years
Footnote reads:
This chart depicts the fund's average effective maturity and duration at
6-month intervals over the 12 months ended 3/31/97. Average effective
maturity and duration, stated in years, are derived from calculations that
incorporate assumptions about prepayment rates and cash flows of mortgage-
backed securities. Measures of effective maturity, duration, and the
assumptions on which they are based will vary over time.
*Government National Mortgage Association. Lipper Analytical Services
categorizes the fund as a Ginnie Mae fund.
* FUND BENEFITS FROM INCREASED ALLOCATION AS GINNIE MAES OUTPERFORM TREASURIES
While your fund normally keeps the bulk of its portfolio in Ginnie Mae
mortgage-backed securities, we will sometimes adjust the weighting based on
our assessment of relative value and the risk/reward tradeoff versus
Treasuries. We began the period with approximately 75% of the portfolio
allocated to Ginnie Maes. However, in response to the volatility in the
Treasury market over the final three months of the period, we increased the
fund's Ginnie Mae holdings to just over 81% of the portfolio's net assets by
the end of March.
Given their higher income streams and the fact that rising interest rates
allayed prepayment fears, Ginnie Maes outperformed Treasuries of comparable
maturities over the period. In fact, mortgage-backed securities as a group
were the best-performing investment-grade bond sector during the
January-to-March 1997 period.*
* EMPHASIS ON MORTGAGE-BACKED SECURITIES COMBINED WITH SHORT- AND LONG-TERM
TREASURIES
We continue to anticipate a modest acceleration in U.S. economic growth
coupled with low inflation over the balance of calendar 1997. Concern about
rising wage-inflation pressure may cause the Fed to boost rates further by
year's end.
In light of this outlook, we believe short- and intermediate-term bond yields
may rise more than long-term yields in the months ahead. Consequently, we are
structuring the fund's Treasury holdings in something of a barbell
configuration, concentrating holdings near the extreme short-term and
long-term ends of the interest-rate spectrum and avoiding intermediate
maturities for now. Intermediate-term bonds tend to underperform when the Fed
is raising rates. We also currently plan to expand the fund's commitment to
Ginnie Maes, increasing the allocation to perhaps as much as 90% of the
portfolio.
*Source: Putnam Research. Mortgage-backed securities are subject to prepayment
risk, which is the risk that an investor's principal will be returned in full
at some point prior to the security's stated maturity date. Such prepayment
may cause an investor's actual rate of return to differ from the expected rate
of return. Prepayment risk is greatest when interest rates are falling, since
mortgage holders rush to refinance, forcing retirement of the bonds that back
their existing mortgages.
[GRAPHIC OMITTED: pie chart PORTFOLIO ALLOCATIONS (3/31/97)]
PORTFOLIO ALLOCATIONS (3/31/97)*
U.S. Treasury securities -- 17.9%
Cash and short-term
investments -- 0.5%
Mortgage-backed
securities -- 81.6%
Footnote reads:
*Based on total market value of assets. The allocation to mortgage-backed
securities is concentrated primarily in Ginnie Maes. Allocations will vary
over time.
Although we cannot provide assurances, we believe this type of portfolio
composition -- overweighting mortgage securities and barbelling Treasuries --
may give the fund the potential to benefit in two ways. First, if the Fed
continues to raise rates, causing short-term rates to rise faster than
long-term rates, we would expect long-term bonds to outperform other
maturities, as they typically do in such an environment. By holding long-term
bonds and balancing them with extremely short-term securities, including cash
equivalents, we are attempting to position the fund to benefit from price
appreciation while seeking to manage the greater inherent volatility of
long-term bonds. Our goal, regardless, is to keep the portfolio's overall
duration (or interest-rate sensitivity) in the intermediate range of three to
five years.
Second, Ginnie Maes and other mortgage-backed bonds have outperformed
Treasuries over the past several months, and we believe the current
environment is still favorable for mortgage-backed securities. Not only do
they currently offer more attractive yields than Treasuries, but also the risk
of prepayment, which reduces their appreciation potential in declining-rate
environments, lessens as interest rates rise. In short, mortgage securities
represent a defensive holding during periods of rising interest rates.
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 3/31/97, there is no guarantee the fund will continue to hold
these securities in the future. While U.S. government backing of individual
securities does not insure your principal, which will fluctuate with market
conditions, it does guarantee that the fund's government-backed holdings will
make timely payments of interest and principal.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
U.S. Government Income Trust is designed for investors seeking current
income consistent with capital preservation. The fund primarily invests in
securities backed by the full faith and credit of the United States
government and in repurchase agreements and forward commitments with
respect to these securities.
TOTAL RETURN FOR PERIODS ENDED 3/31/97
Class A Class B Class M
inception (2/8/84) (4/27/92) (2/6/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 3.03% -1.87% 2.65% -2.34% 2.90% -0.41%
- ------------------------------------------------------------------------------
1 year 5.15 0.14 4.37 -0.56 4.89 1.48
- ------------------------------------------------------------------------------
5 years 33.31 26.98 -- -- -- --
Annual average 5.92 4.89 -- -- -- --
- ------------------------------------------------------------------------------
10 years 101.98 92.42 -- -- -- --
Annual average 7.28 6.76 -- -- -- --
- ------------------------------------------------------------------------------
Life of class -- -- 27.50 25.65 17.57 13.78
Annual average -- -- 5.05 4.74 7.82 6.19
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/97
Lehman Bros.
Mortgage-backed Consumer
Securities Index Price Index
- ------------------------------------------------------------------------------
6 months 3.01% 1.39%
- ------------------------------------------------------------------------------
1 year 5.95 2.76
- ------------------------------------------------------------------------------
5 years 39.73 14.86
Annual average 6.92 2.81
- ------------------------------------------------------------------------------
10 years 127.13 42.73
Annual average 8.55 3.62
- ------------------------------------------------------------------------------
Life of class B 38.37 14.70
Annual average 6.83 2.82
- ------------------------------------------------------------------------------
Life of class M 20.63 6.45
Annual average 9.06 2.95
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or,
for class A shares, distribution fees prior to implementation of the class
A distribution plan in 1990. Investment returns and principal value will
fluctuate so that an investor's shares, when sold, may be worth more or
less than their original cost. POP assumes 4.75% maximum sales charge for
class A shares and 3.25% for class M shares. CDSC for class B shares
assumes the applicable sales charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.402 $0.354 $0.386
- ------------------------------------------------------------------------------
Total $0.402 $0.354 $0.386
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
9/30/96 $12.63 $13.26 $12.59 $12.63 $13.05
- ------------------------------------------------------------------------------
3/31/97 12.61 13.24 12.57 12.61 13.03
- ------------------------------------------------------------------------------
Current return (end
of period)
- ------------------------------------------------------------------------------
Current dividend
rate1 6.38% 6.07% 5.73% 6.19% 5.99%
- ------------------------------------------------------------------------------
Current 30-day
SEC yield2 6.58 6.26 5.78 6.33 6.12
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
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 4.75% sales charge for class A
shares and 3.25% 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
Lehman Brothers Mortgage-backed Securities Index is an unmanaged list of
GNMA bonds. This index assumes reinvestment of all distributions and
interest payments, does not take into account brokerage commissions or
other costs, may include bonds different from those in the fund, and may
pose different risks than the fund. It is not possible to invest directly
in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DBL. DAGGERS]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS **
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGERS] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured up to certain
limits by federal/state agencies. Savings accounts may also be insured
up to certain limits. Please call your financial advisor or Putnam at
1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and expenses. Please read
it carefully before you invest or send money.
<TABLE>
<CAPTION>
Portfolio of investments owned
March 31, 1997 (Unaudited)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (99.0%)*
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
U.S. Government Agency Mortgage Pass-Through Certificates (81.2%)
- ------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
$ 157,001 16s, with due dates from October 15, 2011 to
November 15, 2011 $ 193,408
309,316 15s, with due dates from July 15, 2011 to
March 15, 2013 377,208
238,277 14s, with due dates from July 15, 2014 to
January 20, 2015 285,490
1,340,356 13 1/2s, with due dates from June 15, 2010 to
June 20, 2015 1,590,418
1,278,454 13s, with due dates from November 15, 2010 to
October 20, 2015 1,502,591
11,431 12 3/4s, October 15, 2013 13,375
616,317 12 1/2s, with due dates from May 15, 2010 to
November 20, 2015 715,125
29,340 12 1/4s, January 15, 2014 33,962
602,777 12s, with due dates from April 20, 2014 to
March 20, 2016 695,833
3,628,105 11 1/2s, with due dates from April 15, 2010 to
November 15, 2019 4,116,181
3,448,637 11s, with due dates from November 20, 2013 to
June 20, 2019 3,879,715
64,984 11s, Midgets, with due dates from July 15, 2000 to
July 15, 2000 68,964
206,741 10 7/8s, February 15, 2010 227,173
30,473,739 10 1/2s, with due dates from April 15, 2010 to
November 15, 2021 33,495,063
1,396,676 10s, with due dates from October 15, 2009 to
January 20, 2021 1,514,005
114,594,559 9 1/2s, with due dates from June 15, 2009 to
April 15, 2023 123,323,362
143,813,249 9s, with due dates from November 15, 2004 to
January 15, 2025 151,806,997
2,461,506 9s, Project Loans, June 15,2021 2,563,043
4,916,603 8.58s, July 15, 2024 4,855,146
320,932,597 8 1/2s, with due dates from August 15, 2004 to
March 15, 2027 331,914,100
16,760,772 8 1/2s, Midgets, with due dates from May 15, 2001
to January 15, 2008 17,410,337
700,160,722 8s, with due dates from January 15, 2001 to
September 15, 2026 708,084,444
55,469,096 8s, Midgets, with due dates from
November 15, 2001 to November 15, 2009 56,717,214
801,178,773 7 1/2s, with due dates from March 15, 2001 to
September 15, 2026 789,121,515
655,854,182 7s, with due dates from March 15, 2022 to
January 15, 2027 628,343,015
48,913 7s, Midgets, November 15, 2007 46,942
62,502,697 6 1/2s, with due dates from May 15, 2023 to
October 15, 2025 57,989,443
98,761 5 1/2s, May 15, 2017 101,076
Government National Mortgage Association
Graduated Payment Mortgages
78,252 15s with due dates from May 15, 2012 to
September 15, 2012 94,276
49,304 13 3/4s with due dates from September 20, 2014 to
November 20, 2014 57,687
195,463 13 1/2s with due dates from June 15, 2010 to
November 15, 2012 229,674
215,000 13 1/4s with due dates from October 15, 2014 to
January 20, 2015 250,691
54,333 13s with due dates from November 15, 2010 to
December 15, 2010 63,706
1,120,407 12 3/4s with due dates from October 15, 2013 to
July 20, 2015 1,309,567
273,989 12 1/2s with due dates from May 15, 2010 to
January 20, 2014 316,549
1,059,185 12 1/4s with due dates from August 15, 2013 to
July 15,2015 1,224,584
1,888,272 11 1/4s with due dates from June 15, 2013 to
January 15, 2016 2,114,281
236,036 10 3/4s with due dates from January 15, 2015 to
February 15, 2016 262,740
509,280 10 1/4s with due dates from March 15, 2016 to
December 15, 2020 557,373
1,597,674 10s with due dates from October 15, 2009 to
May 15, 2010 1,765,925
1,758,302 9 1/4s with due dates from April 15, 2016 to
November 15, 2019 1,847,313
--------------
2,931,079,511
U.S. Treasury Obligations (17.8%)
- ------------------------------------------------------------------------------------------------------------
200,000,000 U.S. Treasury Bonds 6 5/8s, February 15, 2027 188,188,000
U.S. Treasury Notes
50,000,000 9 1/8s, May 15, 1999 52,562,500
120,000,000 7 1/2s, May 15, 2002 123,712,800
80,000,000 6s, September 30, 1998 79,649,600
100,000,000 5 5/8s, November 30, 1998 98,844,000
100,000,000 5 3/8s, November 30, 1997 99,641,000
--------------
642,597,900
--------------
Total U.S. Government and Agency Obligations
(cost $3,609,969,179) $ 3,573,677,411
SHORT-TERM INVESTMENTS (0.5%) * (cost $19,542,528)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$19,539,000 Interest in $800,000,000 joint repurchase agreement
dated March 31, 1997 with Goldman, Sachs & Co.
due April 1, 1997 with respect to U.S. Treasury
obligations -- maturity value of $19,543,229
for an effective yield of 6.5% $ 19,542,528
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,629,511,707) *** $3,593,219,939
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,609,262,575.
*** The aggregate identified cost on a tax basis is $3,646,187,165, resulting in gross unrealized
appreciation and depreciation of $21,192,154 and $74,159,380, respectively, or net unrealized
depreciation of $52,967,226.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,629,511,707) (Note 1) $3,593,219,939
- ---------------------------------------------------------------------------------------------------
Cash 11,376
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 29,580,423
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,862,892
- ---------------------------------------------------------------------------------------------------
Total assets 3,627,674,630
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 10,146,688
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,910,762
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,278,186
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 33,871
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 9,321
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 2,608,965
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 424,262
- ---------------------------------------------------------------------------------------------------
Total liabilities 18,412,055
- ---------------------------------------------------------------------------------------------------
Net assets $3,609,262,575
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) 3,998,257,921
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,614,412
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (357,317,990)
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (36,291,768)
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,609,262,575
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,244,584,734 divided by 177,966,938 shares) $12.61
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $12.61)* $13.24
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,351,670,085 divided by 107,506,869 shares)** $12.57
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($7,802,267 divided by 618,949 shares) $12.61
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $12.61)* $13.03
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($5,205,489 divided by 412,687 shares) $12.61
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended March 31,1997 (Unaudited)
<S> <C>
Interest income: $140,979,623
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,023,369
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,159,355
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 80,283
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 18,041
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,961,381
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 7,107,156
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 16,020
- --------------------------------------------------------------------------------------------------
Reports to shareholders 126,005
- --------------------------------------------------------------------------------------------------
Registration fees 100
- --------------------------------------------------------------------------------------------------
Auditing 63,969
- --------------------------------------------------------------------------------------------------
Legal 17,094
- --------------------------------------------------------------------------------------------------
Postage 123,820
- --------------------------------------------------------------------------------------------------
Other 179,117
- --------------------------------------------------------------------------------------------------
Total expenses 21,875,710
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (449,885)
- --------------------------------------------------------------------------------------------------
Net expenses 21,425,825
- --------------------------------------------------------------------------------------------------
Net investment income 119,553,798
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 13,607,638
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investment during the period (19,377,573)
- --------------------------------------------------------------------------------------------------
Net loss on investments (5,769,935)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $113,783,863
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 119,553,798 $ 270,152,118
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 13,607,638 (26,992,361)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (19,377,573) (72,048,992)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 113,783,863 171,110,765
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (74,993,633) (172,223,146)
- ----------------------------------------------------------------------------------------------------------------------
Class B (39,642,777) (89,029,511)
- ----------------------------------------------------------------------------------------------------------------------
Class M (194,615) (281,755)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (108,361) (849,623)
- ----------------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (10,073,580)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (5,207,464)
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (16,480)
- ----------------------------------------------------------------------------------------------------------------------
Class Y -- (49,694)
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (308,111,317) (567,593,809)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (309,266,840) (674,214,297)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 3,918,529,415 4,592,743,712
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $4,614,412 and $--, respectively 3,609,262,575 3,918,529,415
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
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
- -------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share March 31
operating performance (Unaudited) Year ended September 30
- -------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.63 $12.95 $12.37 $13.63 $13.96 $13.89
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .42 .84 (c) .88 .69 1.10 1.19
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.04) (.30) .61 (1.00) (.36) .12
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .38 .54 1.49 (.31) .74 1.31
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.40) (.81) (.83) (.74) (1.07) (1.21)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- (.03)
- -------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.05) (.08) (.21) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.86) (.91) (.95) (1.07) (1.24)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.61 $12.63 $12.95 $12.37 $13.63 $13.96
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.03 * 4.32 12.62 (2.35) 5.55 9.92
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,244,585 $2,450,376 $2,903,016 $3,213,428 $4,797,481 $4,465,162
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .43 * .88 .90 .85 .88 1.01
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.26 * 6.55 7.09 7.31 7.92 8.44
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.90 * 138.97 195.45 209.00 295.88 293.36
- -------------------------------------------------------------------------------------------------------------------------------
+ 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 year ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 April 27, 1992+
operating performance (Unaudited) Year ended September 30 to September 30
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.59 $12.91 $12.33 $13.60 $13.93 $13.64
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .37 .74 (c) .79 .64 1.00 .48 (c)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.04) (.30) .61 (1.05) (.35) .28
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .33 .44 1.40 (.41) .65 .76
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.35) (.72) (.75) (.67) (.98) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.04) (.07) (.19) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.35) (.76) (.82) (.86) (.98) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.57 $12.59 $12.91 $12.33 $13.60 $13.93
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.65 * 3.52 11.82 (3.16) 4.85 5.67 *
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,351,670 $1,458,848 $1,643,923 $1,752,887 $2,232,219 $660,515
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81 * 1.63 1.65 1.60 1.61 .77 *
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.90 * 5.80 6.33 6.55 7.11 3.10 *
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.90 * 138.97 195.45 209.00 295.88 293.36
- ---------------------------------------------------------------------------------------------------------------------------------
+ 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 year ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended Feb. 6, 1995+
operating performance (Unaudited) Sept. 30 to Sept. 30
- --------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $12.63 $12.96 $12.29
- --------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------
Net investment income .39 .82 (c) .61
- --------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.02) (.32) .66
- --------------------------------------------------------------------------------------------
Total from
investment operations .37 .50 1.27
- --------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------
From net
investment income (.39) (.78) (.55)
- --------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- --
- --------------------------------------------------------------------------------------------
From return of capital -- (.05) (.05)
- --------------------------------------------------------------------------------------------
Total distributions (.39) (.83) (.60)
- --------------------------------------------------------------------------------------------
Net asset value,
end of period $12.61 $12.63 $12.96
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.90 * 3.99 10.54 *
- --------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $7,802 $6,116 $2,609
- --------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .56 * 1.14 .79 *
- --------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.17 * 6.37 4.14 *
- --------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.90 * 138.97 195.45
- --------------------------------------------------------------------------------------------
+ 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 year ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ---------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Apr. 11, 1994+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.63 $12.98 $12.38 $12.68
- ---------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------
Net investment income .40 (c) .88 (c) .90 .39
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments -- (.34) .64 (.30)
- ---------------------------------------------------------------------------------------------------------------
Total from
investment operations .40 .54 1.54 .09
- ---------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------
From net
investment income (.42) (.84) (.86) (.30)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
From return of capital -- (.05) (.08) (.09)
- ---------------------------------------------------------------------------------------------------------------
Total distributions (.42) (.89) (.94) (.39)
- ---------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.61 $12.63 $12.98 $12.38
- ---------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.16 * 4.34 13 .07 .11 *
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,205 $3,190 $43,196 $19,337
- ---------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .31 * .62 .65 .29 *
- ---------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.40 * 6.51 7.16 3.63 *
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.90 * 138.97 195.45 209.00
- ---------------------------------------------------------------------------------------------------------------
+ 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 year ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
March 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam U.S. Government Income Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund's investment objective is to seek as
high a level of current income as is consistent with preservation of capital
by investing exclusively in securities backed by the full faith and credit of
the United States and in repurchase agreements and forward commitments with
respect to those securities.
The fund offers class A, class B, class M and class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. 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 may be 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 3.25% and pay an ongoing distribution fee
that is higher than class A shares but lower than class B shares. Class Y
shares, which are sold at net asset value, are generally subject to the same
expenses as class A shares, class B and class M shares, but do not bear a
distribution fee. Class Y shares are sold to defined contribution plans that
invest at least $250 million in a combination of Putnam Funds and other
accounts managed by affiliates of Putnam Investment Management, Inc. ("Putnam
Management"), the fund's manager, a wholly-owned subsidiary of Putnam
Investments, Inc.
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
that fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies consistently,
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market, and other investments are stated at
fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Management.
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.
E) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held nor for excise tax
on income and capital gains.
At September 30, 1996, the fund had a capital loss carryover of approximately
$328,920,000 available to offset future capital gains, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration
------------- ------------------
$ 1,686,000 September 30, 1999
9,297,000 September 30, 2002
266,054,000 September 30, 2003
51,883,000 September 30, 2004
F) Distributions to shareholders Distributions to shareholders are recorded by
the fund on the ex-dividend date. At certain times, the fund may pay
distributions at a level rate even though, as a result of market conditions or
investment decisions, the fund may not achieve projected investment results
for a given period.
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. 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.
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: 0.57% of the first $500 million of
average net assets, 0.475% of the next $500 million, 0.4275% of the next $500
million, and 0.38% of any amount over $1.5 billion.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended March 31, 1997, fund expenses were reduced by
$449,885 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 $3,340 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 "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees payable on
or after July 1, 1995. The deferred fees remain in the fund and are invested
in certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%
and 0.50% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended March 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $118,639 and $1,513 from the sale of
class A and class M shares, respectively and $1,727,878 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 six
months ended March 31, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $4,772 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1997, purchases and sales of U.S.
government and agency obligations other than short-term investments aggregated
$2,005,317,385 and $2,298,473,131, respectively. 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 March 31, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 10,240,166 $131,033,961
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,665,074 46,794,987
- ------------------------------------------------------------
13,905,240 177,828,948
Shares
repurchased (29,938,780) (383,113,629)
- ------------------------------------------------------------
Net decrease (16,033,540) $(205,284,681)
- ------------------------------------------------------------
Year ended
September 30, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 19,366,419 $247,688,012
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,731,954 111,274,606
- ------------------------------------------------------------
28,098,373 358,962,618
Shares
repurchased (58,277,141) (744,377,165)
- ------------------------------------------------------------
Net decrease (30,178,768) $(385,414,547)
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 5,213,777 $66,542,642
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,023,349 25,763,018
- ------------------------------------------------------------
7,237,126 92,305,660
Shares
repurchased (15,588,276) (198,879,157)
- ------------------------------------------------------------
Net decrease (8,351,150) $(106,573,497)
- ------------------------------------------------------------
Year ended
September 30, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 15,353,056 $196,512,877
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,731,254 60,119,880
- ------------------------------------------------------------
20,084,310 256,632,757
Shares
repurchased (31,581,307) (401,947,885)
- ------------------------------------------------------------
Net decrease (11,496,997) $(145,315,128)
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 249,760 $3,199,869
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,561 160,401
- ------------------------------------------------------------
262,321 3,360,270
Shares
repurchased (127,646) (1,637,033)
- ------------------------------------------------------------
Net increase 134,675 $1,723,237
- ------------------------------------------------------------
Year ended
September 30, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 490,209 $6,293,248
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 19,052 241,581
- ------------------------------------------------------------
509,261 6,534,829
Shares
repurchased (226,315) (2,884,026)
- ------------------------------------------------------------
Net increase 282,946 $3,650,803
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 182,063 $2,303,038
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,487 108,361
- ------------------------------------------------------------
190,550 2,411,399
Shares
repurchased (30,346) (387,775)
- ------------------------------------------------------------
Net increase 160,204 $2,023,624
- ------------------------------------------------------------
Year ended
September 30, 1996
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 235,622 $3,051,374
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 69,593 899,319
- ------------------------------------------------------------
305,215 3,950,693
Shares
repurchased (3,380,789) (44,465,630)
- ------------------------------------------------------------
Net decrease (3,075,574) $(40,514,937)
- ------------------------------------------------------------
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary Coburn
Vice President
William J. Curtin
Vice President
Michael Martino
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 U.S. Government
Income Trust Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information, or to
request a prospectus, call toll free: 1-800-225-1581. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[PUTNAM LOGO OMITTED]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
32902 032/885/689/527 5/97
PUTNAM INVESTMENTS [LOGO]
- -------------------------------------------------------------------------
Putnam U.S. Government Income Trust
Supplement to the Semiannual Report dated March 31, 1997
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee,
nor contingent deferred sales charge, will differ from performance of class
A, B, and M shares, which are discussed more extensively in the semiannual
report.
FISCAL 1997 SEMIANNUAL RESULTS AT A GLANCE
- --------------------------------------------------------------------------
Total return: NAV
6 months ended 3/31/97 3.16%
Life of class (since 4/11/94 inception date) 22.61
Annual average 7.10
- --------------------------------------------------------------------------
Share value: NAV
4/11/9X (Inception date) $12.68
9/30/96 12.63
3/31/97 12.61
- --------------------------------------------------------------------------
Distributions: No. Income Total
6 $0.419 $0.419
- --------------------------------------------------------------------------
Current return (end of period) Total
Current dividend rate1 6.57%
Current 30-day SEC yield2 6.84
1Income portion of most recent distribution, annualized and divided by NAV
at end of period.
2Based on investment income only, calculated using SEC guidelines.
- --------------------------------------------------------------------------
Please note that past performance does not indicate future results.
Investment returns and net asset value will fluctuate so that your
shares, when redeemed, may be worth more or less than their original
cost. See full report for information on comparative benchmarks. If you
have questions, please consult your fund prospectus or call Putnam toll
free at 1-800-752-9894.
