Putnam
Global
Governmental
Income Trust
ANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* For the 12 months ended October 31, 1996, Putnam Global Governmental
Income Trust's class A and class M shares were ranked 33 and 37,
respectively, out of 122 global income funds, placing both share classes
within the top 31% of all similar funds rated, according to Lipper
Analytical Services.*
"[Among European bond markets,] the big winners have been markets
heretofore shunned by traditional, conservative bond investors, such as
Italy, Spain, and Sweden. These bond market successes parallel those of
the emerging markets of Latin America. In both cases, governments
historically prone to excessive spending and borrowing, which produced
high inflation and low growth, essentially cleaned up their acts. In
Europe, the spur has been economic and monetary union, or EMU, which is
slated to take effect in 1999."
-- "As Bonds Stagnate in the New World,
They're Roaring Ahead in the Old One,"
Barrons, October 21, 1996
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
17 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 B
shares were ranked 47 out of 122 global income funds for 1-year
performance through 10/31/96. The fund's class A shares were ranked 22
out of 34 global income funds for 5-year performance through 10/31/96.
Class B and class M shares were not ranked over longer applicable
periods. Past performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
During the 12 months ended October 31, 1996, the management team of
Putnam Global Governmental Income Trust played to the strengths of the
markets in which the fund invests. The results were market-beating total
returns for all classes of the fund's shares, even after taking sales
charges into account.
In Europe, the fund's managers emphasized the higher-yielding markets of
Italy, Spain, and Sweden. During the fiscal year's second half, the fund
benefited from the strong performance of its holdings in the emerging
markets.
A rebound in Russian bonds and a re-established exposure to South
Africa's bonds also contributed to the fund's results. Your fund's
managers also kept a close watch on the currency markets, making hedging
strategy adjustments as appropriate relative to the dollar.
In the report that follows, the management team provides additional
detail and explains why it currently believes continuation of the
strategy now in place appears justified.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
December 18, 1996
Report from the Fund Managers
D. William Kohli, lead manager
Jonathan H. Francis
Mark J. Siegel
Jennifer E. Leichter
Putnam Global Governmental Income Trust continued its index-beating
performance as it completed its 1996 fiscal year on October 31.
Following its improved results for the semiannual period ended April 30,
1996, your fund's 12-month returns of 7.11%, 6.57%, and 8.46% for class
A, class B, and class M shares, respectively, at public offering price,
surpassed the 5.36% return measured by the Salomon Brothers World
Government Bond Index -- the fund's principal performance benchmark.
Favorable country and currency decisions, including substantial exposure
to Europe's higher-yielding markets and to the emerging markets of
Russia, Latin America, and elsewhere, were the primary contributors to
your fund's performance. (Please refer to the tables on pages 9 through
11 for complete performance information.)
* HIGHER-YIELDING MARKETS LEAD THE WAY IN EUROPEAN STRATEGY
Throughout much of the fiscal year, we maintained significant
investments in the higher-yielding European bond markets, such as Italy,
Spain, and Sweden. By doing so, your fund was able to capture most of
the outperformance of these markets relative to Germany and other core
European markets.
Changing perceptions about the progress of European Monetary Union
(EMU), or the movement toward a single European currency, was perhaps
the key factor influencing European bond markets throughout the fiscal
year. Because of the stringent budgetary and growth criteria required to
qualify for EMU, countries are under enormous pressure to adapt their
economies to the dictates of the free market and to rely less on
governmental control and regulation.
Particularly during the second half of the year, these markets were
buoyed by the improving outlook for EMU. Following a German-French
summit to discuss progress toward EMU, the unveiling of France's budget
in early September provided the first concrete evidence that these two
countries intend to keep the EMU process on track. Bond markets cheered
the possibility that EMU would likely stay on course and that even Spain
and Italy, despite their considerable budget deficits, might be included
in the first round of its implementation. This development, in turn, was
the principal factor behind the outperformance of the higher-yielding
European markets during the period's second half.
* SUBSTANTIAL ALLOCATION TO EMERGING MARKETS BOOSTS OVERALL PERFORMANCE
Emerging fixed-income markets enjoyed exceptional performance over most
of the fiscal year and contributed significantly to your fund's total
return. Improving economic fundamentals (i.e., growth rates,
unemployment, and inflation trends) in key countries bolstered the
sector overall. Despite a recent dip in Russian bond prices on fears
about President Boris Yeltsin's health, Russia led all emerging markets
for the year as a whole. As Yeltsin's medical prospects appeared to
improve in late September, investors began to refocus on prospects for
the Russian economy.
In Latin America, markets such as Argentina and Mexico benefited from
better-than-expected economic performance with minimal inflationary
pressures. In addition, the Mexican peso strengthened during the
period's second half, providing further support to that market.
[GRAPHIC PIE CHART OMITTED: GEOGRAPHICAL BREAKDOWN (10/31/96)*]
GEOGRAPHICAL BREAKDOWN (10/31/96)*
% of total assets
United States 42.3
France 10.2
United Kingdom 8.9
Denmark 6.0
Italy 5.1
Russia 5.0
Canada 4.4
Other 18.1
Footnote reads:
*Based on total market value of assets. Country allocations will vary
over time.
In late June, we temporarily re-established exposure to South Africa,
where the bond market and the currency had been pummeled earlier in the
year. We entered the market because we believed the earlier selling
pressure had reduced prices to bargain levels and because of improving
political and economic conditions.
The fund benefited from the superior performance of its emerging market
holdings throughout the second half of the year. To capitalize fully on
this strength, we increased the fund's emerging markets allocation to
its allowable maximum, 15% of the portfolio, in August. Near the end of
the fiscal year, however, we believed the sector's risk/reward profile
had become less favorable. Consequently, we began taking profits and
reduced the fund's exposure to approximately 10% of the portfolio by the
period's end.
* ACTIVE MANAGEMENT OF U.S. DOLLAR EXPOSURE PROVES BENEFICIAL
In the currency arena, with the exception of some volatility in mid-
July, the fiscal year's second half was characterized by quiet markets,
with many exchange rates remaining within previously established ranges.
Investor uncertainty about EMU and the potential for an interest-rate
hike by the Federal Reserve Board kept many market participants on the
sidelines in July and August. In September, the currency markets became
more optimistic about EMU, sparking rallies by peripheral European
currencies and the U.S. dollar versus the German deutschemark. Renewed
political will for a stronger dollar among the leaders of the United
States, Japan, and Germany contributed to the dollar's considerable rise
against the Japanese yen during the period's second half.
During the fiscal third quarter, our fundamentally positive long-term
view on the dollar led us to reduce the portfolio's overweighted
deutschemark and yen positions in favor of increasing the fund's dollar
exposure. This detracted from performance initially, as the dollar
weakened amid July's unexpected (and short-lived) volatility in the
currency markets. However, in the August through October period, with
interest-rate cuts in Europe and steady monetary policy in Japan
reinforcing our positive outlook for the dollar, we significantly
reduced the fund's positions in core European currencies and the yen and
increased its exposure to the dollar and to the currencies of dollar-
bloc countries such as Canada and Australia. This currency strategy
proved to be successful through the end of the fiscal year.
[GRAPHIC VERTICAL BAR CHART OMITTED: TOP CURRENCY EXPOSURES (10/31/96)*]
TOP CURRENCY EXPOSURES (10/31/96)*
% of net assets
Germany 72.7
United States 41.2
Japan 23.7
France 18.5
Switzerland 12.9
Denmark 10.4
Footnote reads:
*Based on net assets. Chart reflects all portfolio holdings, including
forward currency contracts. Currency exposures will vary over time.
* CONDITIONS FAVOR CONTINUATION OF FISCAL 1996 STRATEGY
Overall, we currently anticipate steady economic growth worldwide,
accompanied by stable inflation. In the United States, the immediate
outlook for the pace of growth and for any attendant pickup in inflation
is unclear. We believe Japan's moderate recovery is likely to proceed
without the threat of inflation, while Germany's recovery has taken hold
more firmly in the past several months. Our larger focus in the months
ahead will be on economic growth differentials, as European economies
may gather steam while the U.S. economy may slow down somewhat.
Against this backdrop, we are currently maintaining positions that
contributed significantly to fiscal 1996's results: underweightings in
core European markets and in the U.S. and Japanese markets and
overweightings in Denmark and in the higher-yielding markets of Spain,
Sweden, and Italy. We currently plan to maintain the fund's commitment
to emerging markets but will proceed with caution going forward, given
the tremendous rally in this sector over the past 12 to 18 months.
On the currency front, we established substantial pro-U.S. dollar and
dollar-bloc positions over the final four months of the period, which
were largely successful. Looking ahead, we remain fundamentally bullish
on the dollar but will, as always, actively monitor its movements vis-
vis other currencies and adjust the fund's exposures accordingly.
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 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future. Foreign
investments are subject to certain risks, such as those related to
currency fluctuations, political developments, and economic instability,
that are not present with domestic investments.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Global Governmental Income Trust is designed for
investors seeking high current income by investing principally in debt
securities of foreign and U.S. governmental entities, including
supranational issuers. Preservation of capital and long-term total
return are secondary objectives.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 10/31/96
Class A Class B Class M
(inception date) (6/1/87) (2/1/94) (3/17/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 12.46% 7.11% 11.57% 6.57% 12.14% 8.46%
- ------------------------------------------------------------------------
5 years 41.86 35.15 -- -- -- --
Annual average 7.24 6.21 -- -- -- --
- ------------------------------------------------------------------------
Life of class 157.96 145.77 9.67 6.85 24.32 20.28
Annual average 10.58 10.02 3.41 2.44 14.29 12.00
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/96
Salomon Bros.
World Govt. Consumer
Bond Index Price Index
- -----------------------------------------------------------------------
1 year 5.36% 2.99%
- ------------------------------------------------------------------------
5 years 60.40 15.21
Annual average 9.91 2.87
- ------------------------------------------------------------------------
Life of class A 134.24 39.96
Annual average 9.46 3.63
- ------------------------------------------------------------------------
Life of class B 24.61 8.28
Annual average 8.33 2.93
- -----------------------------------------------------------------------
Life of class M 10.64 4.56
Annual average 6.57 2.77
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustments for taxes payable on reinvested distributions,
or for payments under the fund's class A distribution plan prior to its
implementation. Investment returns and net asset 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%.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 6/1/87
Starting value (Insert ending Total)
$9,525 Fund's class A shares at POP $24,577
$10,000 Salomon Bros. World Govt. Bond Index $23,424
$10,000 Consumer Price Index $13,996
(plot points for 10-year total return mountain chart)
Salomon Bros.
Date/year Fund at POP WGB Index CPI
- --------- ----------- ------------ -----
6/01/87 9,525 10,000 10,000
10/31/87 10,041 10,238 10,195
10/31/88 12,529 11,473 10,628
10/31/89 12,890 11,777 11,105
10/31/90 15,415 13,121 11,804
10/31/91 17,325 14,603 12,149
10/31/92 19,219 16,631 12,538
10/31/93 21,239 18,624 12,882
10/31/94 19,981 19,298 13,218
10/31/95 21,855 22,232 13,590
10/31/96 24,577 23,424 13,996
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 2/1/94 would have been
valued at $10,967 on 10/31/96 ($10,685 with a redemption at the end of
the period). A $10,000 investment in the fund's class M shares at
inception on 3/17/95 would have been valued at $12,432 at net asset
value on 10/31/96 ($12,028 at public offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/96
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions: (number) 4 4 4
- -----------------------------------------------------------------------
Income $0.775 $0.681 $0.750
- -----------------------------------------------------------------------
Total $0.775 $0.681 $0.750
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
10/31/95 $13.62 $14.30 $13.60 $13.59 $14.05
- ------------------------------------------------------------------------
10/31/96 14.49 15.21 14.45 14.44 14.93
- ------------------------------------------------------------------------
Current return (end of period)
- -----------------------------------------------------------------------
Current dividend rate1 6.21% 5.92% 5.54% 6.04% 5.84%
- ------------------------------------------------------------------------
Current 30-day SEC yield2 6.85 6.52 6.19 6.53 6.31
- -----------------------------------------------------------------------
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.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (6/1/87) (2/1/94) (3/17/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 12.05% 6.72% 11.21% 6.21% 11.60% 7.95%
- ------------------------------------------------------------------------
5 years 40.81 34.11 -- -- -- --
Annual average 7.08 6.04 -- -- -- --
- ------------------------------------------------------------------------
Life of class 152.80 140.85 7.54 4.78 21.82 17.87
Annual average 10.44 9.87 2.77 1.77 13.68 11.27
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 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
Salomon Brothers World Government Bond Index is a market-capitalization
weighted benchmark that tracks the performance of government-bond
markets in 14 countries. The index assumes reinvestment of all
distributions and interest payments and does not take into account
brokerage fees or taxes. Securities in the fund do not match those in
the index and performance of the fund will differ. 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.
Report of independent accountants
For the fiscal year ended October 31, 1996
To the Trustees and Shareholders of
Putnam Global Governmental Income Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Global Governmental Income Trust, including the portfolio of
investments owned, as of October 31, 1996, and the related statement of
operations for the year then ended, 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 October 31, 1996,by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Global Governmental Income Trust as of
October 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 13, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1996
<S> <C> <C> <C>
FOREIGN GOVERNMENT BONDS AND NOTES (50.3%) *
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
AUD 15,365,000 Australia (Government of) bonds Ser. 803, 9 1/2s, 2003 $ 13,612,964
CAD 3,080,000 Canada (Government of) bonds 7s, 2006 2,397,550
CAD 8,222,000 Canada (Government of) deb. 9s, 2004 7,224,501
CAD 7,375,000 Canada (Government of) deb. Ser. A-76, 9s, 2025 6,789,342
DKK 120,110,000 Denmark (Government of) bonds 8s, 2003 22,495,133
FRF 170,010,000 France Treasury bill 4 1/2s, 1998 33,575,341
FRF 26,690,000 France (Government of) bonds 6s, 2025 4,661,622
DEM 12,430,000 Germany (Federal Republic of) bonds Ser. 118, 5 1/4s, 2001 8,348,080
DEM 10,185,000 Germany (Federal Republic of) bonds Ser. 96, 6 1/4s, 2006 6,823,547
ITL 26,910,000,000 Italy (Government of) bonds 9 1/2s, 2001 19,047,878
USD 25,481,000 Russia (Government of) non performing + 18,632,982
ESP 782,400,000 Spain (Government of) deb. 10.1s, 2001 6,818,405
SEK 59,700,000 Sweden (Government of) bonds 10 1/4s, 2000 10,244,056
GBP 6,764,000 United Kingdom Conversion stock 9s, 2011 12,081,238
GBP 2,560,000 United Kingdom Treasury bonds 9 3/4s, 2002 4,623,153
GBP 10,270,000 United Kingdom Treasury notes 7 3/4s, 2006 16,808,556
------------
Total Foreign Government Bonds and Notes (cost $185,694,787) $194,184,348
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (28.1%) *
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bonds
$23,970,000 6 3/4s, August 15, 2026 $ 24,254,523
7,375,000 6s, February 15, 2026 6,727,401
U.S. Treasury Notes
31,310,000 7s, July 15, 2006 32,689,519
23,856,000 6 5/8s, July 31, 2001 24,359,123
20,525,000 6 1/4s, October 31, 2001 20,659,644
------------
Total U.S. Government and Agency Obligations (cost $106,784,050) $ 108,690,210
BRADY BONDS (5.3%) *
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
$12,625,340 Argentina (Republic of) FRN 6.625s, 2005 $ 10,352,779
12,342,000 United Mexican States deb. Ser. C, 6.352s, 2019 10,143,581
------------
Total Brady Bonds (cost $21,203,749) $ 20,496,360
<CAPTION>
PURCHASED OPTIONS OUTSTANDING (0.6%) *(cost $1,341,867)
NUMBER OF EXPIRATION DATE/
CONTRACTS STRIKE PRICE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
JPY 3,358,000,000 Japanese Government Bond Futures Contracts (Call) Nov 96/JPY 117.5 $ 2,351,013
<CAPTION>
COMMON STOCKS (0.1%) *(cost $403,384)
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11,327 PSF Holdings LLC Class A $ 192,559
CORPORATE BONDS AND NOTES(--%)*(cost $121,616)
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
$124,734 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003 (2 double daggers) $ 126,605
SHORT-TERM INVESTMENTS (13.0%)*(cost $50,007,653)
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
$50,000,000 Interest in $356,650,000 joint repurchase agreement dated October 31,
1996 with Morgan (J.P.) & Co. Inc. due November 1, 1996 with respect
to various U.S. Treasury obligations -- maturity value of $50,007,653
for an effective yield of 5.51% $50,007,653
- -----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $365,557,106)*** $ 376,048,748
- -----------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $386,123,569.
*** The aggregate identified cost on a tax basis is
$368,255,057, resulting in gross unrealized appreciation and
depreciation of $8,799,649 and $1,005,958, respectively,
or net unrealized appreciation of $7,793,691.
+ Non-income-producing security.
(2 double daggers) Income may be received in cash or additional securities at
the discretion of the issuer.
The rate shown on Floating rate notes (FRN)
are the current interest rates shown at October 31, 1996,
which are subject to change based on the terms of the security.
<CAPTION>
- ----------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at October 31, 1996
(aggregate face value $257,486,252)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $6,089,912 $6,058,795 12/18/96 $31,117
British Pounds 3,455,698 3,370,655 12/18/96 85,043
Canadian Dollar 321,771 320,975 12/18/96 796
Deutschemarks 170,072,821 171,645,457 12/18/96 (1,572,636)
Euro Currency 5,441 5,452 12/18/96 (11)
French Franc 10,045,925 10,188,985 12/18/96 (143,060)
Italian Lira 1,359,905 1,356,209 12/18/96 3,696
Japanese Yen 60,525,560 61,836,108 12/18/96 (1,310,548)
Spanish Peseta 2,369,011 2,345,068 12/18/96 23,943
Swedish Krona 360,431 358,548 12/18/96 1,883
- ----------------------------------------------------------------------------------------------
($2,879,777)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at October 31, 1996
(aggregate face value $233,497,579)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------------
Canadian Dollar $6,955,093 $6,776,861 12/18/96 $(178,232)
Danish Krone 17,806,418 18,111,379 12/18/96 304,961
Deutschemarks 95,475,065 96,370,669 12/18/96 895,604
French Franc 23,038,815 23,473,069 12/18/96 434,254
Italian Lira 4,467,452 4,458,078 12/18/96 (9,374)
Japanese Yen 28,435,661 29,667,551 12/18/96 1,231,890
Swedish Krona 4,663,263 4,647,685 12/18/96 (15,578)
Swiss Franc 49,648,613 49,992,287 12/18/96 343,674
- ----------------------------------------------------------------------------------------------
$3,007,199
- ----------------------------------------------------------------------------------------------
Diversification by Country
- ----------------------------------------------------------------------------------------------
Distribution of Investment by country of issue at October 31, 1996
(as a percentage of net assets)
Argentina 2.7%
Australia 3.5
Canada 4.3
Denmark 5.8
France 9.9
Germany 3.9
Japan 0.6
Italy 4.9
Mexico 2.6
Russia 4.8
Spain 1.8
Sweden 2.7
United Kingdom 8.7
United States 41.2
- ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31,1996
<S> <C>
Assets
- ------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $365,557,106) (Note 1) $376,048,748
- ------------------------------------------------------------------------------------------------------
Cash 764,118
- ------------------------------------------------------------------------------------------------------
Foreign currency 992,761
- ------------------------------------------------------------------------------------------------------
Interest and other receivables 6,634,264
- ------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 374,492
- ------------------------------------------------------------------------------------------------------
Receivable for securities sold 57,658,920
- ------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,661,052
- ------------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 6,668,071
- ------------------------------------------------------------------------------------------------------
Total assets 452,802,426
Liabilities
- ------------------------------------------------------------------------------------------------------
Distributions payable to shareholders 11,958
- ------------------------------------------------------------------------------------------------------
Payable for securities purchased 56,885,908
- ------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 920,850
- ------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 770,448
- ------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 94,148
- ------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,594
- ------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,960
- ------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 109,147
- ------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 3,533,630
- ------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 4,223,416
- ------------------------------------------------------------------------------------------------------
Other accrued expenses 123,798
- ------------------------------------------------------------------------------------------------------
Total liabilities 66,678,857
- ------------------------------------------------------------------------------------------------------
Net Assets $386,123,569
Represented by
- ------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $388,597,132
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 7,219,472
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (20,360,499)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 10,667,464
- ------------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $386,123,569
- ------------------------------------------------------------------------------------------------------
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($343,125,368 divided by 23,672,253 shares) $14.49
- ------------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $14.49)* $15.21
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($41,106,146 divided by 2,844,008 shares)** $14.45
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,892,055 divided by 131,002 shares) $14.44
- ------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $14.44)* $14.93
- ------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering
price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales
charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended October 31, 1996
<S> <C>
Investment income:
- ------------------------------------------------------------------------------------------------------
Interest income: (net of foreign tax of $258,314) $28,042,910
- ------------------------------------------------------------------------------------------------------
Dividends 14,156
- ------------------------------------------------------------------------------------------------------
Total investment income 28,057,066
- ------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,116,163
- ------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 758,013
- ------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 19,749
- ------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,043
- ------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 878,837
- ------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 361,600
- ------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 6,075
- ------------------------------------------------------------------------------------------------------
Reports to shareholders 39,007
- ------------------------------------------------------------------------------------------------------
Registration fees 550
- ------------------------------------------------------------------------------------------------------
Auditing 53,430
- ------------------------------------------------------------------------------------------------------
Legal 9,823
- ------------------------------------------------------------------------------------------------------
Postage 142,740
- ------------------------------------------------------------------------------------------------------
Other 16,886
- ------------------------------------------------------------------------------------------------------
Total expenses 5,411,916
- ------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (150,679)
- ------------------------------------------------------------------------------------------------------
Net expenses 5,261,237
- ------------------------------------------------------------------------------------------------------
Net investment income 22,795,829
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 12,801,966
- ------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 357,435
- ------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 5,485,279
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of asset and liabilites
in foreign currencies during the year 3,604,760
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and written options during the year 470,940
- ------------------------------------------------------------------------------------------------------
Net gain on investments 22,720,380
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $45,516,209
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $22,795,829 $30,301,284
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions 18,644,680 (14,477,198)
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and asset and liabilities
in foreign currencies 4,075,700 19,742,989
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 45,516,209 35,567,075
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (19,095,421) (18,227,414)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (1,769,324) (1,110,752)
- ------------------------------------------------------------------------------------------------------------------------------
Class M (70,261) (9,838)
- ------------------------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (8,449,809)
- ------------------------------------------------------------------------------------------------------------------------------
Class B -- (514,919)
- ------------------------------------------------------------------------------------------------------------------------------
Class M -- (4,560)
- ------------------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (36,352,691) (93,246,935)
- ------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (11,771,488) (85,997,152)
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of year 397,895,057 483,892,209
- ------------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of $7,219,472
and $ 2,117,949 respectively) $386,123,569 $397,895,057
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
March 17, 1995
(commencement of
Year ended operations) to Year ended
October 31 October 31 October 31
----------------------------------------------------
1996 1995 1996
----------------------------------------------------
Class M Class B
----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.59 $12.81 $13.60
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .77(c) .49 .72(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .83 .88 .81
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.60 1.37 1.53
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.75) (.40) (.68)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.19) --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (.59) (.68)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.44 $13.59 $14.45
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 12.14 10.87* 11.57
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,892 $509 $41,106
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.58 .96* 2.07
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.52 4.78* 5.13
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 429.38 300.66 429.38
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
February 1, 1994
(commencement
Year ended of operations) to
October 31 October 31
----------------------------------------------------
1995 1994 1996
----------------------------------------------------
Class B Class B
----------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.31 $15.38 $13.62
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .77 .64 .83(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .33 (2.10) .82
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.10 (1.46) 1.65
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.55) (.14) (.78)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
From return of capital (.26) (.47) --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.81) (.61) (.78)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.60 $13.31 $14.49
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 8.63 (9.52)* 12.46
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $30,910 $22,387 $343,125
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 2.09 1.49* 1.32
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 6.59 4.76* 5.93
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 300.66 359.88 429.38
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended October 31
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.33 $15.25 $15.98
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 1.00 .97 1.07
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .19 (1.84) .44
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.19 (.87) 1.51
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.62) (.10) (.98)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.50)
- ---------------------------------------------------------------------------------------------------------------------------
From return of capital (.28) (.80) --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.15) (.76)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.90) (1.05) (2.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.62 $13.33 $15.25
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 9.38 (5.93) 10.44
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $366,476 $461,506 $554,963
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.34 1.27 1.27
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 7.19 6.57 6.12
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 300.66 359.88 444.28
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
- ---------------------------------------------------------------------------------
1992
- ---------------------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------
Net asset value, beginning of period $15.70
- ---------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------
Net investment income 1.07
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .56
- ---------------------------------------------------------------------------------
Total from investment operations 1.63
- ---------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------
From net investment income (1.17)
- ---------------------------------------------------------------------------------
In excess of net investment income --
- ---------------------------------------------------------------------------------
From return of capital --
- ---------------------------------------------------------------------------------
From net realized gain on investments (.18)
- ---------------------------------------------------------------------------------
Total distributions (1.35)
- ---------------------------------------------------------------------------------
Net asset value, end of period $15.98
- ---------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 10.93
- ---------------------------------------------------------------------------------
Net assets, end of period (in thousands) $437,006
- ---------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.46
- ---------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 6.77
- ---------------------------------------------------------------------------------
Portfolio turnover (%) 406.70
- ---------------------------------------------------------------------------------
* 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 period ended October 31, 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
October 31, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, open-end management investment company.
The fund seeks high current income by investing principally in
a portfolio of governmental or supranational debt securities denominated
in any currency, and to a lesser extent, in other debt and equity
securities. The fund's secondary objectives are preservation of capital
and long-term total return, consistent with high current income.
The fund offers class A, class B and class M 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 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 3.25% 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, 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.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rate. Gains and losses that arise from changes
in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments. The effects on net
investment income arising from changes in exchange rates are also not
segregated.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash 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. Discounts on zero coupon bonds, original issue,
stepped-coupon bonds and payment in kind bonds are accreted according to
the effective yield method.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is "marked to market" daily and
the change in market value is recorded as an unrealized gain or loss.
When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. The fund could be
exposed to risk if the value of the currency changes unfavorably, if the
counterparties to the contracts are unable to meet the terms of their
contracts or if the fund is unable to enter into a closing position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
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. 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 October 31, 1996, the fund had a capital loss carryover of
approximately $17,662,000 available to offset future capital gains, if
any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------------- ----------------------
$11,156,000 October 31, 2002
$6,506,000 October 31, 2003
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 annually. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include treatment of losses on wash sale transactions,
realized and unrealized gains and losses on foward foreign currency
contracts, currency gains and losses on foreign bonds, and market
discount. 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 October 31, 1996, the fund reclassified $3,240,700 to increase
undistributed net investment income and $161 to increase paid-in-
capital, with an increase to accumulated net realized loss on
investments of $3,240,861. The calculation of net investment income per
share in the financial highlights table excludes these adjustments.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.80% of the
first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million and 0.60% of any amount over
$1.5 million subject, under current law, to reduction in any year by the
amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management on the fund's portfolio
transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended October 31, 1996, fund expenses were reduced by
$150,679 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the 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 $1,020 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted 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 year ended October 31, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $41,632 and $1,663 from the
sale of class A and class M shares, respectively and $94,408 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 October 31, 1996, Putnam Mutual Funds
Corp., acting as underwriter received $1,394 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended October 31, 1996, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $937,729,795 and $1,016,846,943,
respectively. Purchases and sales of U.S. government obligations
aggregated $534,896,301 and $487,319,530, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
Written option transactions during the year are summarized as follows:
Contract Premiums
Amounts Received
- ----------------------------------------------------
Written options
outstanding
at beginning
of year $ 34,450,000 $148,135
- ----------------------------------------------------
Options opened 64,400,000 209,300
- ----------------------------------------------------
Options expired (98,850,000) (357,435)
- ----------------------------------------------------
Written
options
outstanding at
end of year $ -- $ --
- ----------------------------------------------------
Note 4
Capital shares
At October 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
October 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 4,861,140 $68,523,418
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,039,954 14,416,219
- ----------------------------------------------------
5,901,094 82,939,637
Shares
repurchased (9,134,287) (128,468,462)
- ----------------------------------------------------
Net decrease (3,233,193) $(45,528,825)
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 3,675,721 $ 48,666,295
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,486,907 19,506,341
- ----------------------------------------------------
5,162,628 68,172,636
Shares
repurchased (12,878,253) (169,764,839)
- ----------------------------------------------------
Net decrease (7,715,625) $(101,592,203)
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 2,002,326 $ 28,059,178
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 103,798 1,437,147
- ----------------------------------------------------
2,106,124 29,496,325
Shares
repurchased (1,535,743) (21,630,414)
- ----------------------------------------------------
Net increase 570,381 $ 7,865,911
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 1,183,419 $ 15,684,905
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 99,884 1,312,528
- ----------------------------------------------------
1,283,303 16,997,433
Shares
repurchased (691,375) (9,154,571)
- ----------------------------------------------------
Net increase 591,928 $ 7,842,862
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 133,470 $1,874,460
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,710 65,154
- ----------------------------------------------------
138,180 1,939,614
Shares
repurchased (44,620) (629,391)
- ----------------------------------------------------
Net increase 93,560 $1,310,223
- ----------------------------------------------------
For the period
March 17, 1995
commencement of
operations) to
October 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 41,248 $ 554,013
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 996 13,312
- ----------------------------------------------------
42,244 567,325
Shares
repurchased (4,802) (64,919)
- ----------------------------------------------------
Net increase 37,442 $ 502,406
- ----------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Putnam Global Governmental Income Trust
Results of October 3, 1996 shareholder meeting (Unaudited)
An annual meeting of shareholders of the fund was held on October 3,
1996. At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes
Votes for withheld
Jameson Adkins Baxter 17,579,164 298,646
Hans H. Estin 17,577,235 300,575
John A. Hill 17,575,025 302,785
R.J. Jackson 17,578,730 299,080
Elizabeth T. Kennan 17,577,907 299,903
Lawrence J. Lasser 17,581,400 296,410
Robert E. Patterson 17,576,683 301,127
Donald S. Perkins 17,578,760 299,050
William F. Pounds 17,578,940 298,870
George Putnam 17,573,897 303,913
George Putnam, III 17,581,535 296,275
Eli Shapiro 17,571,174 306,636
A.J.C. Smith 17,574,858 302,952
W. Nicholas Thorndike 17,574,397 303,413
A proposal to ratify Coopers & Lybrand L.L.P. as auditors for the fund
was approved as follows: 17,355,110 votes for, and 149,902 votes
against, with 372,798 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments was approved as follows:
15,887,689 votes for, and 941,020 votes against, with 1,049,101
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 15,751,535 votes for, and 917,904 votes against, with
1,208,371 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
15,257,364 votes for, and 1,233,579 votes against, with 1,386,867
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in real estate was approved as follows:
15,463,022 votes for, and 1,093,248 votes against, with 1,321,540
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in senior securities was approved as follows:
15,920,454 votes for, and 771,836 votes against, with 1,185,520
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities or commodity contracts was
approved as follows: 15,472,670 votes for, and 1,289,846 votes against,
with 1,115,294 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
15,723,182 votes for, and 995,155 votes against, with 1,159,473
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in securities of issuers in which management
of the fund or Putnam Investment Management, Inc. owns securities was
approved as follows: 15,642,859 votes for, and 1,027,233 votes against,
with 1,207,718 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to margin transactions was approved as follows: 15,315,507
votes for, and 1,378,732 votes against, with 1,183,571 abstentions and
broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to short sales was approved as follows: 15,400,154 votes
for, and 1,264,084 votes against, with 1,213,572 abstentions and broker
non-votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was approved as
follows: 15,332,314 votes for, and 1,311,596 votes against, with
1,233,900 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in certain oil, gas and mineral interests
was approved as follows: 15,789,123 votes for, and 965,600 votes
against, with 1,123,087 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investing to gain control of a company's management was
approved as follows: 15,562,845 votes for, and 1,151,090 votes against,
with 1,163,875 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in other investment companies was approved
as follows: 15,674,139 votes for, and 1,048,627 votes against, with
1,155,044 abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Cooper & 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
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Alan J. Bankart
Vice President
D. William Kohli
Vice President and Fund Manager
Jonathan H. Francis
Vice President and Fund Manager
Mark J. Siegel
Vice President and Fund Manager
Jennifer E. Leichter
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 of Putnam Global
Governmental Income Trust. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance
Summary. For more information, or to request a prospectus, call toll
free: 1-800-225-1581. You can also learn more at Putnam Investments'
website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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29196-041/220/906 12/96
