PUTNAM
GLOBAL
GOVERNMENTAL
INCOME TRUST
[GRAPHIC OMITTED:
art work]
ANNUAL REPORT
October 31, 1995
[LOGO:
BOSTON - LONDON - TOKYO]
<PAGE>
FUND HIGHLIGHTS
o "PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST IS ON ITS WAY TO HAVING A GOOD
YEAR....MANAGER BILL KOHLI ATTRIBUTES MUCH OF THE FUND'S SUCCESS TO LOW
WORLDWIDE INFLATION AND THE FACT THAT MOST CENTRAL BANKS ARE IN AN EASING
MODE. HE SAYS THAT ALL THREE OF THE MAJOR ECONOMIC POWERS (UNITED STATES,
GERMANY, AND JAPAN) ARE `ON THE SAME PAGE' FOR THE FIRST TIME IN A LONG
WHILE. THE RESULTING COOPERATION HAS BEEN POSITIVE FOR FINANCIAL ASSETS."
--THE VALUE LINE MUTUAL FUND SURVEY,
OCTOBER 17, 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
19 Financial statements
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
Like the U.S. bond market, global fixed-income markets are having a much better
year in 1995 than they did in 1994. Putnam Global Governmental Income Trust is
among the beneficiaries of this improved environment.
Thanks to this more hospitable environment, your fund made good progress in
regaining the ground lost in the troubled markets of 1994. Among the factors
behind the improved economic and investment environment were the sustained
decline in interest rates and continued control over inflation.
The progress made in fiscal 1995 could continue in the months ahead. Your fund
is well positioned to take advantage of what your managers believe will be
attractive opportunities in Western Europe and in certain Latin American markets
during the fiscal year just beginning.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
December 20, 1995
<PAGE>
REPORT FROM THE FUND MANAGERS
D. WILLIAM KOHLI
JONATHAN FRANCIS
MARK SIEGEL
JENNIFER E. LEICHTER
Following 1994's much-discussed difficulties, the combination of slow growth,
increased fiscal discipline, and subdued inflation -- resulting in declining
interest rates -- made bond markets worldwide a far more hospitable
environment for investors in 1995. Accordingly, Putnam Global Governmental
Income Trust continued its rebound by posting solid results for fiscal 1995.
For the 12 months ended October 31, the fund's total returns of 9.38% and
8.63% for class A and class B shares, respectively -- while trailing the
15.20% return measured (in U.S. dollar terms) by the Salomon Brothers World
Government Bond Index -- nevertheless represent significant improvement over
fiscal 1994.
The fund's underperformance relative to the index is a result, primarily, of
the January to March 1995 period, when our currency-hedging strategy was not
successful. From that period to the end of the fiscal year, however, the fund
outperformed its benchmark significantly, benefiting from effective decisions
with respect to both currencies and bond markets.
o BOND MARKET HIGHLIGHTS
Relative to the Salomon Brothers Index, we maintained overweighted positions
in core markets, such as the United States, Germany, the Netherlands, and
France, throughout most of the fiscal year. Moreover, we emphasized an
aggressive interest-rate stance during the fiscal year's first half. This
aggressive approach hurt performance at the beginning of the fiscal year, but
helped it considerably in January and beyond as the global-bond rally
accelerated.
The fund's holdings in Germany -- which represented the third largest country
weighting at the fiscal year's end -- performed well, buoyed by slow economic
growth, declining interest rates, and uncertainty over European monetary
coordination. (Since Germany is viewed as the most stable European economy,
its bonds frequently benefit from "flight to quality" when uncertainty grips
European investors.)
<PAGE>
As we anticipated in the fund's semiannual report dated April 30, 1995, the
peripheral European markets -- including Denmark, Italy, Spain, and Sweden --
were the star performers during the summer. Lower yields in core European
markets, coupled with a positive bond environment in the U.S., created ideal
conditions for strong performance by these higher-yielding countries, which
face high budget deficits and significant funding needs. In August and
September, after capturing strong returns, we took profits on some of the
fund's high-yield holdings and reallocated these proceeds back into core
European markets.
We increased the fund's Canadian exposure from 8.0% of net assets at the
fiscal year's midpoint, to approximately 14.1% by year's end on expectations
of an improving budget picture at both the federal and provincial levels.
Canada had posted mixed performance during most of calendar 1995. However,
the narrow defeat of the Quebec-secession referendum on October 30 resulted
in a strong bond rally over the month's final two trading days, as market
participants reacted favorably to the vote's outcome.
The Japanese market performed extremely well over most of the fiscal year and
your fund participated in its rally. However, in the face of Japan's growing
budget deficit, we concluded that the country's fiscal deterioration would
continue at a rapid pace and cause its bond performance to suffer.
Consequently, we began reducing the fund's Japanese holdings during the
fiscal year's second half, believing the risk of sharply declining
performance outweighed the market's potential to extend its rally. This shift
proved timely: the
[GRAPHIC OMITTED: pie chart: GEOGRAPHICAL BREAKDOWN (10/31/95)* showing
United States 30.2%; Canada 14.1%; Germany 12.4%; France 10.6%;
Netherlands 6.5%; United Kingdom 4.9%; Italy 4.7%; Denmark 4.4%; Other 12.2%
Footnote reads:
*Based on percentage of net assets. Country allocations will vary over time.
See page 18 for a complete listing of foreign markets represented in
the portfolio.]
<PAGE>
Japanese market was among the worst performers in local-currency terms for
the July through October period as a whole.
o EMERGING MARKETS: VALUE SEEN IN LATIN AMERICA IN WAKE OF MEXICAN WEAKNESS
In contrast to the fiscal year's first half, the second half was a period of
relative stability and positive returns in the emerging fixed-income markets.
Following a 22.8% surge in the April to June period, the J.P. Morgan Emerging
Markets Bond Index moderated to a 6.0% gain for the July to September quarter
and declined by one percentage point in October.
Compared with their price levels prior to the devaluation of the Mexican peso
last December, most emerging-market bonds remained relatively cheap. However,
as U.S. Treasury yields continue to inch downward -- causing investors to
look elsewhere for higher yields and better value -- the emerging markets are
slowly becoming more fully valued.
As of October 31, approximately 10% of the portfolio was committed to
emerging markets. We maintained a broadly diversified group of holdings, with
select investments in Europe, Asia, and Africa complementing our
predominantly Latin-American focus. In October, Latin America underperformed
non-Latin markets, largely as a result of a late-month slump in Mexico
brought on by speculative selling of the peso. We believe these recent price
declines have created some buying opportunities in markets that have been
disproportionately (and unjustifiably) affected by the current weakness in
Mexico.
o DOLLAR IMPACT FAVORABLE IN FISCAL SECOND HALF
While our U.S. dollar hedging strategy detracted from performance during the
first half of the fiscal year, it contributed to the fund's improved
performance during the second half. We removed dollar hedges in early March
and kept the portfolio unhedged until late July. At that point, coordinated
central-bank currency policy, combined with market intervention, emerged as
the overriding theme in the currency markets. This resulted in a significant
rebound of the dollar versus the Japanese yen, and in a meaningful
improvement in the market's attitude toward the dollar.
<PAGE>
[GRAPHIC OMITTED: vertical bar chart:
PERFORMANCE OF SELECTED GOVERNMENT-BOND MARKETS*
Legend reads: RETURNS IN LOCAL CURRENCIES
Sweden 17.4%
Japan 16.1%
Canada 16.1%
Denmark 15.5%
Netherlands 15.1%
United States 14.4%
Germany 14.2%
France 13.4%
Italy 13.3%
Footnote reads:
*For 12 months ended 10/31/95. Returns quoted represent price appreciation
only. Source: J.P. Morgan Single-Country Traded Indexes, as quoted by
Bloomberg. Securities in the fund do not reflect all markets shown above, do
not match those in the indexes and may pose different risks. Index returns do
not take into account brokerage commissions or other costs. It is not possible
to invest directly in an index.]
During the July to October period, we positioned the fund to benefit from the
dollar's appreciation. By the end of October, approximately 60% of the
portfolio's assets were exposed to the dollar -- either through
dollar-denominated securities held in the portfolio, or through foreign
investments whose returns are hedged back into dollars.+
o SLOW GROWTH, LOW INFLATION PROVIDE FAVORABLE GLOBAL BACKDROP
We continue to anticipate a slow-growth, low-inflation scenario in most of
the world's major economies as we move into 1996. Accordingly, we believe the
environment for global bonds will likely remain positive. While there can be
no assurances, your fund is positioned to take advantage of anticipated
favorable conditions in Western Europe. Over the near term, we are somewhat
cautious toward the U.S. market. Although we are witnessing what is perhaps
an unprecedented level of commitment to reducing the U.S. budget deficit, we
believe that much of the immediate benefit from any agreement is already
reflected in bond prices.
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 10/31/95, there is no guarantee the fund will continue to
hold these securities in the future. Foreign investments are subject to
certain additional risks related to currency fluctuations, economic
instability, and political developments.
+ Returns on the fund's foreign investments must always be translated back into
U.S. dollars. Thus, the goal behind our dollar-hedging activity is to protect
the fund's foreign returns by locking in specific exchange rates between the
dollar and the currencies of foreign countries in which we invest.
<PAGE>
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 OR 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 10/31/95
CLASS A CLASS B CLASS M
(6/1/87) (2/1/94) (3/17/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------------
1 year 9.38% 4.22% 8.63% 3.63% -- --
- --------------------------------------------------------------------------------
5 years 41.76 35.00 -- -- -- --
Annual average 7.23 6.19 -- -- -- --
- --------------------------------------------------------------------------------
Life of class 129.38 118.55 -1.71 -5.25 10.87% 7.27%
Annual average 10.36 9.73 -0.98 -3.03 -- --
- --------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/95
SALOMON BROS.
WORLD GOVT. CONSUMER
BOND INDEX PRICE INDEX
- --------------------------------------------------------------------------------
1 year 15.20% 2.81%
- --------------------------------------------------------------------------------
5 years 69.44 15.13
Annual average 11.12 2.86
- --------------------------------------------------------------------------------
Life of class A 122.32 35.90
Annual average 9.95 3.71
- --------------------------------------------------------------------------------
Life of class B 18.27 5.13
Annual average 10.08 2.90
- --------------------------------------------------------------------------------
Life of class M 5.01* 1.86
- --------------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance, and
will differ for each share class. They do not take into account any adjustment
for taxes payable on reinvested distributions. Investment returns and 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 5%
maximum contingent deferred sales charge.
*Index calculation is based upon month-end numbers beginning 3/31/95.
<PAGE>
[GRAPHIC OMITTED: line chart: GROWTH OF A $10,000 INVESTMENT
Legend reads:
Cumulative total return of a $10,000 investment since 06/01/87
Y-axis reads (top to bottom) 23400 to 9400 in 2000 decrements
X-axis reads (left to right) 6/1/87, then 10/31/87 through 10/31/95 in one
year increments
A solid white line represents Fund's class A shares at POP, ranging from
$9,525 to $21,855 (see plot points below: "Shares")
A solid black line represents Salomon Bros. World Govt. Bond Index, ranging
from $10,000 to $22,232 (see plot points below: "Salomon")
A solid gray line represents Consumer Price Index, ranging from $10,000 to
$13,590 (see plot points below: "CPI")
Shares Salomon CPI
- ------- ------- -------
$ 9,525 $10,000 $10,000
10,041 10,238 10,195
12,529 11,473 10,628
12,890 11,777 11,105
15,415 13,121 11,804
17,325 14,603 12,149
19,219 16,631 12,538
21,239 18,624 12,882
19,981 19,298 13,218
21,855 22,232 13,590
Caption 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 $9,829
on 10/31/95 ($9,475 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 $11,087 at NAV ($10,727 at POP) on 10/31/95.]
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/95
DISTRIBUTIONS: CLASS A CLASS B CLASS M
- --------------------------------------------------------------------------------
Number 8 8 4
- --------------------------------------------------------------------------------
Income $0.615 $0.551 $0.402
Return of capital(2) 0.285 0.256 0.186
- --------------------------------------------------------------------------------
Total $0.900 $0.807 $0.588
- --------------------------------------------------------------------------------
SHARE VALUE NAV POP NAV NAV POP
- --------------------------------------------------------------------------------
10/31/94 $13.33 $13.99 $13.31 -- --
- --------------------------------------------------------------------------------
3/17/95 (inception
of class M shares) -- -- -- $12.81 $13.24
- --------------------------------------------------------------------------------
10/31/95 13.62 14.30 13.60 13.59 14.05
- --------------------------------------------------------------------------------
CURRENT RETURNS
- --------------------------------------------------------------------------------
End of period
- --------------------------------------------------------------------------------
Current 30-day
SEC yield(1) 7.10 6.75 6.49 6.72 6.48
- --------------------------------------------------------------------------------
(1)Based on investment income, calculated using SEC guidelines. (2)See page 30
for additional information.
<PAGE>
TOTAL RETURN FOR PERIODS ENDED 9/30/95
(most recent calendar quarter)
CLASS A CLASS B CLASS M
(6/1/87) (2/1/94) (3/17/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------------
1 year 8.27% 3.16% 7.49% 2.49% -- --
- --------------------------------------------------------------------------------
5 years 44.75 37.90 -- --
Annual average 7 68 6.64 -- --
- --------------------------------------------------------------------------------
Life of class 125.62 114.96 -3.30 -6.83 9.15% 5.61%
Annual average 10.26 9.62 -2.00 -4.17 -- --
- --------------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance, and
will differ for each share class. They do not take into account any adjustment
for taxes payable on reinvested distributions. Investment returns and 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.
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is a market-capitalization weighted
benchmark that tracks the performance of government-bond markets in 14
countries.
J.P. MORGAN EMERGING MARKETS BOND INDEX is a total-return index -- weighted for
market capitalization -- that tracks the traded market for U.S.
dollar-denominated Brady and other similar sovereign restructured bonds.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
Securities in the fund do not match those in the indexes and may pose different
risks. Index returns do not take into account brokerage commissions or other
costs. It is not possible to invest directly in an index.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended October 31, 1995
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 (the "Trust"), including the portfolio of
investments owned, as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Trust'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, 1995 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, 1995, 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 15, 1995
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS OWNED
October 31, 1995
FOREIGN GOVERNMENT BONDS AND NOTES(56.7%)<F1>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <C> <S> <C>
CAD 37,975,000 Canada (Government of) bonds, 6 1/2s, 2004 $ 26,494,844
CAD 3,990,000 Canada (Government of) deb. 8 3/4s, 2005 3,224,978
CAD 13,750,000 Canada (Government of) deb. 9s, 2004 11,221,147
DKK 87,410,000 Denmark (Kingdom of) bonds 9s, 2000 17,320,471
FRF 124,700,000 France (Government of) OAT deb. 8 1/2s, 2002 27,711,214
FRF 67,050,000 France (Government of) Treasury Bill 7 3/4s, 2000 14,357,558
DEM 33,425,000 Germany (Republic of) bonds 6 1/4s, 2024 20,989,998
DEM 14,460,000 Germany (Republic of) bonds 7 3/8s, 2005 10,882,215
DEM 21,820,000 Germany (Republic of) bonds 8 1/4s, 2001 17,280,944
ITL 2,285,000,000 Italy (Government of) bonds 10 1/2s, 2005 1,349,897
ITL 29,080,000,000 Italy (Government of) notes 8 1/2s, 1999 16,989,348
USD 1,545,000 Morocco (Government of) bonds 6.6875s, 2009 919,275
USD 415,000 Morocco (Government of) notes 6.6875s, 2004 288,425
NLG 35,295,000 Netherlands (Government of) bonds 9s, 2000 25,439,046
CAD 16,580,000 Ontario (Province of) bonds 9 1/2s, 2022 13,851,646
USD 950,000 Panama (Republic of) FRN 7 1/4s, 2002 769,500
ESP 1,237,300,000 Spain (Government of) bonds 12 1/4s, 2000 10,731,177
THB 18,000,000 Thailand (Kingdom of) bonds FRN 11s, 1996 717,210
GBP 3,140,000 United Kingdom Treasury notes 8s, 2013 4,899,208
------------
TOTAL FOREIGN GOVERNMENT BONDS AND NOTES
(cost $ 216,370,225) $225,438,101
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (16.0%)<F1>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
$22,806,300 Government National Mortgage Association 8s,
from March 15, 2023 to October 15, 2025 $ 23,483,554
9,920,000 U.S. Treasury Bonds 7 5/8s, February 15, 2025 11,516,525
19,685,000 U.S. Treasury Notes 7 1/2s, February 15, 2005 21,708,815
6,925,000 U.S. Treasury Notes 6 1/2s, August 15, 2005 7,171,669
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $62,471,238) $ 63,880,563
CORPORATE BONDS AND NOTES (7.9%)<F1>
PRINCIPAL AMOUNT VALUE
AEROSPACE AND DEFENSE (-%)
- -------------------------------------------------------------------------------------------
$ 150,000 BE Aerospace sr. notes, 9 3/4s, 2003 $ 150,750
AGRICULTURE (0.1%)
- -------------------------------------------------------------------------------------------
500,000 PSF Finance (L.P.) sr. notes 12s, 2000 521,250
AUTOMOTIVE (0.3%)
- -------------------------------------------------------------------------------------------
1,031,000 P.T. Astra International bonds 9 3/4s, 2001 (Indonesia) 1,063,219
AUTOMOTIVE PARTS (0.1%)
- -------------------------------------------------------------------------------------------
350,000 Exide Corp. sr. notes 10s, 2005 376,250
<PAGE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
BANKS (3.7%)
- -------------------------------------------------------------------------------------------
<C> <C> <S> <C>
$ 50,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 $ 51,125
GBP 8,500,000 European Invest Bank bonds 10 1/2s, 1999
(United Kingdom) 14,634,527
------------
14,685,652
<CAPTION>
BROADCASTING (0.3%)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
$ 15,000 Echostar Communications sr. disc. notes stepped-coupon
zero %, (12 7/8s, 6/1/99), 2004<F2> 8,700
750,000 New City Broadcasting Corp. sr. sub. notes 11 3/8s, 2003 705,000
150,000 Outlet Broadcasting, Inc. sr. sub. notes 10 7/8s, 2003 165,188
250,000 SFX Broadcasting, Inc. sr. sub. notes 11 3/8s, 2000 264,375
------------
1,143,263
BUILDING AND CONSTRUCTION (0.2%)
- -------------------------------------------------------------------------------------------
700,000 Presley Co. sr. notes 12 1/2s, 2001 575,750
250,000 Schuller International Corp. sr. notes 10 7/8s, 2004 277,813
------------
853,563
<CAPTION>
CABLE TELEVISION (0.6%)
- -------------------------------------------------------------------------------------------
<C> <C> <S> <C>
50,000 Cablevision Systems Corp. sr. sub. reset deb.
10 3/4s, 200452,250
450,000 Century Communications Corp. sr. sub. deb.
11 7/8s, 2003478,125
300,000 Continental Cablevision, Inc. sr. deb. 9s, 2008 310,500
150,000 Insight Communications Co. sr. sub. notes
stepped-coupon 8 1/4s (11 1/4s, 3/1/96), 2000<F2> 150,750
CAD 2,000,000 Rogers Cablesystem 9.65s, 2014 (Canada) 1,315,711
$ 170,000 Telewest Communications PLC deb. stepped-coupon
zero %, (11s, 10/1/00), 2007 (United Kingdom)<F2> 100,513
------------
2,407,849
<CAPTION>
CELLULAR COMMUNICATIONS (0.2%)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
500,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (11 1/2s, 9/1/98), 2003<F2> 290,000
250,000 NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero % (9 3/4s, 2/15/99), 2004<F2> 126,250
500,000 Pricellular Wireless Ser. B, sr. disc. notes stepped-coupon
zero % (14s, 11/15/97), 2001<F2> 425,000
------------
841,250
CHEMICALS (0.2%)
- -------------------------------------------------------------------------------------------
500,000 G-I Holdings, Inc. Ser. B, sr. disc. notes zero %, 1998 372,500
150,000 Harris Chemical Corp. sr. secd. disc. notes
stepped-coupon zero % (10 1/4s, 1/15/96), 2001<F2> 134,250
100,000 OSI Specialties Inc. sr. sub. notes 9 1/4s, 2003 110,000
------------
616,750
CONGLOMERATES (-%)
- -------------------------------------------------------------------------------------------
150,000 ADT Ltd. sr. sub. notes 9 1/4s, 2003 158,625
CONSUMER PRODUCTS (-%)
- -------------------------------------------------------------------------------------------
250,000 International Semi-Tech. Corp. sr. secd. disc. notes
stepped-coupon zero % (11 1/2s, 8/15/00), 2003 (Canada)<F2> 128,750
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
ELECTRIC UTILITIES (0.2%)
- -------------------------------------------------------------------------------------------
$ 100,000 Cleveland Electric Illuminating Co. 1st mtge. Ser. B,
9 1/2s, 2005 $ 100,000
200,000 First PV Funding deb. 10.15s, 2016 202,500
500,000 Midland Funding Corp. II deb. Ser. A, 11 3/4s, 2005 527,500
------------
830,000
ENTERTAINMENT (0.1%)
- -------------------------------------------------------------------------------------------
250,000 Viacom International, Inc. sub. deb. 8s, 2006 247,500
FOOD (0.1%)
- -------------------------------------------------------------------------------------------
500,000 Fresh Del Monte Produce Corp. NV Ser. B, 144A sr. notes,
10s, 2003 (Netherlands) 420,000
FOOD CHAINS (-%)
- -------------------------------------------------------------------------------------------
150,000 Southland Corp. deb. Ser. A, 4 1/2s, 2004 113,250
FOREST PRODUCTS (0.1%)
- -------------------------------------------------------------------------------------------
100,000 Gaylord Container Corp. sr. sub. disc. deb. stepped-coupon
zero % (12 3/4s, 5/15/96), 2005<F2> 97,500
50,000 Stone Container Corp. deb. sr. sub. notes 11 1/2s, 1999 51,250
250,000 Stone Container Corp. sr. sub. notes 10 3/4s, 1997 258,750
------------
407,500
HEALTH CARE (0.1%)
- -------------------------------------------------------------------------------------------
300,000 McGaw, Inc. sr. notes 10 3/8s, 1999 311,250
25,000 Tenet Healthcare Corp. sr. notes 8 5/8s, 2003 25,688
100,000 Tenet Healthcare Corp. sr. sub. notes 10 1/8s, 2005 108,000
------------
444,938
HOSPITAL MANAGEMENT (0.1%)
- -------------------------------------------------------------------------------------------
250,000 Genesis Health Ventures Inc. sr. sub. notes 9 3/4s, 2005 258,750
100,000 Paracelsus Healthcare Corp. sr. sub. notes 9 7/8s, 2003 101,000
------------
359,750
INSURANCE (0.1%)
- -------------------------------------------------------------------------------------------
50,000 American Life Holding Co. sr. sub. notes 11 1/4s, 2004 52,750
300,000 Penn Corp. Financial Group sr. sub. notes 9 1/4s, 2003 304,500
------------
357,250
METALS AND MINING (0.3%)
- -------------------------------------------------------------------------------------------
1,009,000 Essar Gujarat Ltd. 144A deb. FRN 8.4s, 1999 (India) 1,001,433
OIL AND GAS (0.4%)
- -------------------------------------------------------------------------------------------
95,000 Flores & Rucks, Inc. sr. notes 13 1/2s, 2004 106,875
250,000 Maxus Energy Corp. global notes 9 7/8s, 2002 246,250
250,000 Trans Texas Gas Corp. sr. secd. notes 11 1/2s, 2002 261,250
1,000,000 Triton Energy sr. sub. disc. notes stepped-coupon zero %
(9 3/4s, 12/15/96), 2000<F2> 925,000
------------
1,539,375
PACKAGING & CONTAINER (0.2%)
- -------------------------------------------------------------------------------------------
500,000 Ivex Packaging Corp. sr. sub. notes 12 1/2s, 2002 537,500
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
PAPER (0.1%)
- -------------------------------------------------------------------------------------------
$ 250,000 Container Corp. of America sr. notes Ser. A, 11 1/4s, 2004 $ 263,125
PIPELINES (0.1%)
- -------------------------------------------------------------------------------------------
250,000 OPI International sr. notes 12 7/8s, 2002 283,125
PUBLISHING (-%)
- -------------------------------------------------------------------------------------------
100,000 General Media Corp. sr. secd. notes 10 5/8s, 2000 77,000
RECREATION (0.3%)
- -------------------------------------------------------------------------------------------
250,000 Casino America, Inc. 1st mtge. deb. 11 1/2s, 2001 242,500
600,000 Grate Bay Property Funding Corp. 1st mtge. 10 7/8s, 2004 507,000
225,000 Louisiana Casino Cruises Corp. 1st mtge. 11 1/2s, 1998 220,500
150,000 Stratosphere Corp. 1st mtge. 14 1/4s, 2002 160,125
------------
1,130,125
RETAIL (0.1%)
- -------------------------------------------------------------------------------------------
400,000 Loehmanns' Holdings, Inc. sr. sub. notes 13 3/4s, 1999 384,000
------------
TOTAL CORPORATE BONDS AND NOTES (cost $33,287,158) $ 31,343,042
BRADY BONDS (6.3%)<F1>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 2,055,000 Argentina (Government of) FRN 6.813s, 2005 $ 1,220,156
10,437,000 Argentina (Government of) bonds 5s, 2023 4,970,621
4,882,000 Argentina (Government of) bonds 6.563s, 2023 2,746,125
750,000 Brazil (Federative Republic of) bonds 4s, 2024 362,813
800,000 Brazil (Federative Republic of) FRN 6 7/8s, 2012 438,000
2,828,150 Brazil (Federative Republic of) FRN 6.688s, 2001 2,418,068
4,045,000 Brazil (Federative Republic of) FRN 6.813s, 2006 2,679,813
1,645,000 Bulgaria (Government of) disc. FRN 6 3/4s, 2024 828,669
3,965,000 Ecuador (Government of) FRN 6.813s, 2025 1,962,675
1,200,000 Philippines (Central Bank of) bonds 6 1/4s, 2017 877,500
1,186,000 Poland (Government of) 144A FRN 6 7/8s, 2024 907,290
860,000 Poland (Government of) Ser. RSTA, bonds stepped-coupon
2 3/4s (with various rates from 3 1/4s to 5s, and dates from
10/96 to 10/14), 2024<F2> 398,825
500,000 United Mexican States FRN 7.609s, 2008 428,750
3,000,000 United Mexican States Ser. A, FRB 6.766s, 2019 2,006,250
3,950,000 United Mexican States Ser. A, deb. 6 1/4s, 2019 2,310,750
516,000 United Mexican States deb. Ser. B, 6 1/4s, 2019 301,860
349,000 United Mexican States disc. FRN Ser. C, 6.969s, 2019 233,394
------------
TOTAL BRADY BONDS (cost $23,378,508) $ 25,091,559
<CAPTION>
PURCHASED OPTIONS OUTSTANDING (0.4%)<F1>
EXPIRATION DATE/
CONTRACT AMOUNT STRIKEPRICE VALUE
- -------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
ITL 39,815,300,000 Italian (Government of) deb.
10 1/2s, April 2005 January 96/ITL 94.25 $ 377,885
$ 34,450,000 U.S. Dollar In Exchange for
Deutschemarks December 95/1.49 96,460
28,300,000 U.S. Dollars In Exchange for
Japanese Yen December 95/102.50 421,670
40,100,000 UST Dec Bond Futures November 95/116.00 651,625
------------
TOTAL PURCHASED OPTIONS (cost $1,895,023) $ 1,547,640
<PAGE>
<CAPTION>
PREFERRED STOCKS(0.1%)<F1>
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
500 Cablevision System Corp Ser. G, $11.75 exch. pfd. $ 51,625
1,000 California Federal Bank Ser. B, $10.625 exch. pfd. 108,750
2,000 First Nationwide Bank $11.50 pfd. 228,000
------------
TOTAL PREFERRED STOCKS (cost $364,000) $ 388,375
UNITS (0.1%)<F1> (cost $250,000)
NUMBER OF UNITS VALUE
- -------------------------------------------------------------------------------------------
250,000 Decorative Home Accents 144A units 13s, 2002 $ 250,000
COMMON STOCKS (-%)<F1> (cost $150,594)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------
7,070 Grand Union Co. (acquired 1,767 shares 12/2/94
cost $39,500; acquired 5,303 shares 1/10/95,
cost $111,094)<F4><F3> $ 76,003
CONVERTIBLE BONDS AND NOTES(-%)<F1> (cost $61,125)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 103,000 Pricellular Wireless 144A cv. sub. notes stepped-coupon
zero %, (10 3/4s, 8/15/00), 2004<F2> $ 62,315
<CAPTION>
WARRANTS (-%)<F1><F3>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1,290 Echostar Communications Corp. 6/1/04 $ 14,513
95 General Media Corp. 12/31/00 950
6,622 President Riverboat Casinos, Inc. 9/30/99 26,488
------------
TOTAL WARRANTS (cost $35,177) $ 41,951
<CAPTION>
SHORT-TERM INVESTMENTS (11.4%)<F1>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <C> <S> <C>
IDR 3,000,000,000 Bank Tabungan Negara certificate of deposit
zero %, February 12, 1996 (Indonesia) $ 1,255,511
$ 20,000,000 Federal National Mortgage Assn. 5.43s,
February 8, 1996 19,695,285
TRL 70,300,000,000 Turkey (Republic of) Treasury Bills zero %,
December 29, 1995 1,204,292
$ 751,008 U.S. Dollar Certificate of Deposit (Issued by
J.P. Morgan Securities, Inc. The principal at
redemption is linked to the bid price for the
Polish Treasury Bill, at maturity, and the change in
the spot rate of the Polish Zloty from issue date to
maturity date) zero %, January 25, 1996 685,970
1,461,582 U.S. Dollar Certificate of Deposit, (Issued by
J.P. Morgan Securities, Inc. The principal at redemption
is linked to the bid price for the Polish Treasury Bill,
at maturity, and the change in the spot rate of the
Polish Zloty from issue date to maturity date.)
zero %, April 17, 1996 1,309,139
21,234,000 Interest in $357,916,000 joint repurchase agreement
dated October 31, 1995 with Lehman Brothers Inc.
due November 1, 1995 with respect to various
U.S. Treasury obligations-maturity value of
$21,237,456 for an effective yield of 5.86% 21,237,456
------------
TOTAL SHORT-TERM INVESTMENTS (cost $45,356,085) $ 45,387,653
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $383,619,133)<F5> $393,507,202
<PAGE>
<FN>
<F1> Percentages indicated are based on net assets of $397,895,057.
<F2> The interest rate and date shown parenthetically represent the new interest rate to
be paid and the date the fund will begin receiving interest at this rate.
<F3> Non-income-producing security.
<F4> Restricted, excluding 144A securities, as to public resale. At the date of
acquisition, these securities were valued at cost. Total market value of restricted
securities owned at October 31, 1995 was $76,003 or less than 0.1% of net assets.
<F5> The aggregate identified cost for federal income tax purposes is $384,673,218,
resulting in gross unrealized appreciation and depreciation of $10,038,800 and
$1,204,816, respectively, or net unrealized appreciation of $8,833,984.
144A after the name of a security represents those exempt from registration under
rule 144A of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified institutional buyers.
The rates shown on Floating Rate Notes (FRN) and Floating Rate Bonds (FRB) are the
current interest rates at October 31, 1995, which are subject to change based on the
terms of the security.
</FN>
<CAPTION>
FORWARD CURRENCY CONTRACTS TO BUY OUTSTANDING
at October 31, 1995
UNREALIZED
AGGREGATE DELIVERY APPRECIATION/
MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollar $ 25,229,063 $ 25,063,122 12/13/95 $ 165,941
British Pounds 1,421,573 1,378,620 12/13/95 42,953
Canadian Dollars 21,932,405 21,907,537 12/13/95 24,868
Deutschemarks 98,549,154 95,381,472 12/13/95 3,167,682
Japanese Yen 10,139,958 10,252,174 12/13/95 (112,216)
Japanese Yen 32,123,388 32,916,465 12/14/95 (793,077)
New Zealand
Dollars 6,885,806 6,871,916 12/13/95 13,890
Spanish Peseta 14,381,144 13,857,104 12/13/95 524,040
Swedish Krona 6,865,985 6,321,191 12/13/95 544,794
------------ ------------ ----------
TOTAL FORWARD
CURRENCY CONTRACTS
TO BUY $217,528,476 $213,949,601 $ 3,578,875
FORWARD CURRENCY CONTRACTS TO SELL OUTSTANDING
at October 31, 1995
UNREALIZED
AGGREGATE DELIVERY APPRECIATION/
MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
Canadian Dollars $ 37,760,065 $ 37,295,554 12/13/95 $ (464,511)
Danish Krona 10,355,992 10,219,509 12/13/95 (136,483)
Deutschemarks 142,808,053 137,745,328 12/13/95 (5,062,725)
Deutschemarks 356,521 340,136 1/25/96 (16,385)
Deutschemarks 665,654 658,780 4/17/96 (6,874)
French Francs 17,284,955 16,667,828 12/13/95 (617,127)
Italian Lira 3,206,983 3,125,032 12/13/95 (81,951)
Japanese Yen 32,024,944 32,648,125 12/13/95 623,181
Japanese Yen 3,977,946 4,064,795 12/14/95 86,849
<PAGE>
FORWARD CURRENCY CONTRACTS TO SELL OUTSTANDING
at October 31, 1995 (continued)
UNREALIZED
AGGREGATE DELIVERY APPRECIATION/
MARKET VALUE FACE VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
Netherland Guilders $ 6,430,709 $ 6,120,661 12/13/95 $ (310,048)
Spanish Peseta 16,437,926 15,779,371 12/13/95 (658,555)
Swiss Francs 19,013,475 18,766,344 12/13/95 (247,131)
------------ ------------ -----------
TOTAL FORWARD
CURRENCY CONTRACTS
TO SELL $290,323,223 $283,431,463 $(6,891,760)
<CAPTION>
FORWARD CROSS CURRENCY CONTRACTS OUTSTANDING
at October 31, 1995 (aggregate face value $309,541,997)
IN UNREALIZED
MARKET EXCHANGE MARKET DELIVERY APPRECIATION/
CONTRACTS VALUE FOR VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
British Pounds
(Buy) $16,443,919 Deutschemarks $ 16,790,708 12/5/95 $ (346,789)
British Pounds
(Buy) 9,663,132 Deutschemarks 9,612,806 12/13/95 50,326
Deutschemarks
(Sell) 10,311,088 Danish Krona 10,305,174 12/13/95 (5,914)
Deutschemarks
(Sell) 15,656,652 French Francs 15,656,652 12/13/95 (--)
Deutschemarks
(Sell) 8,991,326 Swedish Krona 9,092,328 12/13/95 101,002
-----------
$ (201,375)
<CAPTION>
WRITTEN OPTIONS OUTSTANDING premium received $148,135
CONTRACT EXPIRATION DATE/
AMOUNT STRIKE PRICE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$34,450,000 U.S. Dollars In Exchange For
Deutschemarks December 95/1.57 $ 15,503
<CAPTION>
DIVERSIFICATION OF INVESTMENTS
at October 31, 1995 (as a percentage of net assets):
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Argentina 2.25% Mexico 1.33%
Brazil 1.48% Morocco 0.30%
Bulgaria 0.21% Netherlands 6.50%
Canada 14.13% Panama 0.19%
Denmark 4.35% Philippines 0.22%
Ecuador 0.49% Poland 0.50%
France 10.57% Spain 2.70%
Germany 12.38% Thailand 0.18%
Japan 0.11% Turkey 0.30%
India 0.25% United Kingdom 4.93%
Indonesia 0.58% United States 30.23%
Italy 4.70%
<PAGE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<S> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost $383,619,133) (Note 1) $393,507,202
- ----------------------------------------------------------------------------------------------------------------------------------
Foreign currency (cost $892,811) 897,323
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 30,870
- ----------------------------------------------------------------------------------------------------------------------------------
Interest, dividends and other receivables 10,250,277
- ----------------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 420,279
- ----------------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 942,329
- ----------------------------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 5,460,678
- ----------------------------------------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 1,416,407
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $412,925,365
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 402,312
- ----------------------------------------------------------------------------------------------------------------------------------
Written options outstanding at value (premium received $148,135) (Note 1) 15,503
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 531,696
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions payable to shareholders 7,533
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 805,733
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 847
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 182,702
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 328
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 106,098
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 8,974,938
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 3,908,974
- ----------------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 93,644
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 15,030,308
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $397,895,057
REPRESENTED BY
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $424,949,662
- ----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,117,949
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions and foreign currency transactions (Note 1) (35,764,318)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment transactions and assets and liabilities in foreign currencies (Note 1) 6,591,764
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES OUTSTANDING $397,895,057
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares ($366,475,898 divided by 26,905,446 shares) $13.62
- ----------------------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $13.62)* $14.30
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares ($30,910,143 divided by 2,273,627 shares)** $13.60
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares ($509,016 divided by 37,442 shares) $13.59
- ----------------------------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $13.59)* $14.05
- ----------------------------------------------------------------------------------------------------------------------------------
* 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>
<PAGE>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
INTEREST INCOME (net of foreign tax of $489,743) $36,000,764
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,349,137
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 942,670
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 20,084
- -------------------------------------------------------------------------------
Auditing 50,287
- -------------------------------------------------------------------------------
Legal 16,599
- -------------------------------------------------------------------------------
Administrative services (Note 2) 11,223
- -------------------------------------------------------------------------------
Distribution fees-- Class A (Note 2) 994,661
- -------------------------------------------------------------------------------
Distribution fees-- Class B (Note 2) 263,480
- -------------------------------------------------------------------------------
Distribution fees-- Class M (Note 2) 797
- -------------------------------------------------------------------------------
Reports to shareholders 98,186
- -------------------------------------------------------------------------------
Postage 104,225
- -------------------------------------------------------------------------------
Registration 9,917
- -------------------------------------------------------------------------------
Other expenses 32,119
- -------------------------------------------------------------------------------
TOTAL EXPENSES 5,893,385
- -------------------------------------------------------------------------------
EXPENSE REDUCTION (Note 2) (193,905)
- -------------------------------------------------------------------------------
NET EXPENSES 5,699,480
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 30,301,284
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 3,654,863
- -------------------------------------------------------------------------------
Net realized loss on written options (Notes 1 and 3) (100,830)
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 116,647
- -------------------------------------------------------------------------------
Net realized loss on forward currency contracts
and foreign currency translation (Note 1) (18,147,878)
- -------------------------------------------------------------------------------
Net unrealized depreciation on forward currency contracts
and foreign currency translation during the year (2,651,526)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, written options
and futures contracts during the year 22,394,515
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 5,265,791
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $35,567,075
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED
OCTOBER 31
-----------------------------
1995 1994
- -------------------------------------------------------------------------------
DECREASE IN NET ASSETS
- -------------------------------------------------------------------------------
OPERATIONS:
- -------------------------------------------------------------------------------
Net investment income $ 30,301,284 $35,302,209
- -------------------------------------------------------------------------------
Net realized loss on investment transactions
and foreign currency transactions (14,477,198) (62,054,115)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities
in foreign currencies 19,742,989 (7,696,746)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 35,567,075 (34,448,652)
- -------------------------------------------------------------------------------
Distributions to shareholders :
- -------------------------------------------------------------------------------
From net investment income:
- -------------------------------------------------------------------------------
Class A (18,227,414) (1,716,766)
- -------------------------------------------------------------------------------
Class B (1,110,752) (141,353)
- -------------------------------------------------------------------------------
Class M (9,838) --
- -------------------------------------------------------------------------------
Return of capital:
- -------------------------------------------------------------------------------
Class A (8,449,809) (31,434,912)
- -------------------------------------------------------------------------------
Class B (514,919) (611,290)
- -------------------------------------------------------------------------------
Class M (4,560) --
- -------------------------------------------------------------------------------
From net realized gain on investments (Note 1)
- -------------------------------------------------------------------------------
Class A -- (5,552,161)
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (93,246,935) 2,834,450
- -------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (85,997,152) (71,070,684)
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of year 483,892,209 554,962,893
- -------------------------------------------------------------------------------
END OF YEAR (including undistributed net
investment income of $2,117,949 and
$800,688, respectively) $397,895,057 $483,892,209
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
FOR THE PERIOD FOR THE PERIOD
MARCH 17, 1995 FEBRUARY 1, 1994
(COMMENCEMENT OF (COMMENCEMENT
OPERATIONS) TO YEAR ENDED OF OPERATIONS) TO
OCTOBER 31 OCTOBER 31 OCTOBER 31
- ----------------------------------------------------------------------------------------------------
1995 1995 1994
- ----------------------------------------------------------------------------------------------------
CLASS M CLASS B
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.81 $13.31 $15.38
- ----------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income .49 .77 .64
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .88 .33 (2.10)
- ----------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.37 1.10 (1.46)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
- ----------------------------------------------------------------------------------------------------
From net investment income (.40) (.55) (.14)
- ----------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ----------------------------------------------------------------------------------------------------
Return of capital (.19) (.26) (.47)
- ----------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- --
- ----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.59) (.81) (.61)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.59 $13.60 $13.31
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(a) 10.87(b) 8.63 (9.52)(b)
- ----------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $509 $30,910 $22,387
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .96(b) 2.09 1.49(b)
- ----------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 4.78(b) 6.59 4.76(b)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 300.66 300.66 359.88
- ----------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS [continued]
(For a share outstanding throughout the period) [continued]
YEAR ENDED OCTOBER 31
- ----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.33 $15.25 $15.98 $15.70 $15.95
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 1.00 .97 1.07 1.07 1.24
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .19 (1.84) .44 .56 .58
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.19 (.87) 1.51 1.63 1.82
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (.62) (.10) (.98) (1.17) (1.24)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.50) -- --
- ----------------------------------------------------------------------------------------------------------------------
Return of capital (.28) (.80) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.15) (.76) (.18) (.83)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.90) (1.05) (2.24) (1.35) (2.07)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.62 $13.33 $15.25 $15.98 $15.70
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(a) 9.38 (5.93) 10.44 10.93 12.39
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $366,476 $461,506 $554,963 $437,006 $343,333
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.34 1.27 1.27 1.46 1.48
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 7.19 6.57 6.12 6.77 7.97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 300.66 359.88 444.28 406.70 313.87
- ----------------------------------------------------------------------------------------------------------------------
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the year ended October 31, 1995 includes amounts paid through
expense offset arrangements. Prior period ratios exclude these amounts. (See note 2)
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
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. The fund commenced its
public offering of class M shares on March 17, 1995. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares 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 higher than class A and lower than class B 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 should 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
policies are in conformity with generally accepted accounting principles.
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, except that
certain U.S. government obligations are stated at the mean between the bid and
asked prices. 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
<PAGE>
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 and 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 and stepped-coupon bonds are accreted
according to the effective yield method.
E 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 purchase
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.
F 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.
<PAGE>
G 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 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 maximum potential loss from forward currency contracts is the
aggregate face value in U.S. dollars at the time the contract was opened. The
fund could be exposed to risk of the value of the currency changes unfavorably,
if the counter-parties to the contracts are unable to meet the terms of their
contracts or if the fund is unable to enter into a closing position.
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 of securities held and excise tax on income and
capital gains.
At October 31, 1995 the fund a capital loss carryover of approximately
$35,418,000 which may be available to offset realized gains, if any. The amount
of the carryover and the expiration date are:
LOSS CARRYOVER EXPIRATION
- ------------------------------
$28,912,000 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 realized and
unrealized gains and losses on forward foreign currency contracts and certain
option contracts, losses on wash sale transactions 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, 1995, the fund reclassified $9,636,019 to
decrease undistributed net investment income and $189 to decrease
paid-in-capital, with a decrease to accumulated net realized loss of $9,636,208.
The calculation of net investment income per share in the financial highlights
table excludes these adjustments.
<PAGE>
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 for the
quarter. Such fee is based on the following annual rates: 0.80% of the first
$500 million of average net assets, 0.70% of the next $500 million, 0.65% of the
next $500 million and 0.60% of any amount over $1.5 billion, subject to
reduction in any year to the extent that expenses (exclusive of brokerage,
interest and taxes) of the fund exceed 2.5% of the first $30 million of average
net assets, 2.0% of the next $70 million and 1.5% of any amount over $100
million, and 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 also 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.
Trustees of the fund receive an annual Trustee's fee of $1,100 and an additional
fee for each Trustees' 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.
During the year ended October 31, 1995, 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 the fund or in other Putnam funds until
distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust
Company (PFTC), a 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, 1995, fund expenses were reduced by $193,905
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
offset arrangements in an income producing asset if it had not entered into such
arrangements.
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, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $48,061 and $683 from the sale of class
A and class M shares, respectively. There were $73,187 in contingent
<PAGE>
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, 1995, Putnam Mutual Funds Corp., acting as underwriter
received $16,531 on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended October 31, 1995, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $713,806,813 and $867,632,830, respectively. Purchases and sales of
U.S. Government obligations aggregated $444,225,957 and $408,010,409,
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 period are summarized as follows:
CONTRACT PREMIUMS
AMOUNTS RECEIVED
- --------------------------------------------------------------------------------
Contracts outstanding at beginning of period $ 31,357,000 $ 137,187
- --------------------------------------------------------------------------------
Options opened 251,279,000 2,992,149
- --------------------------------------------------------------------------------
Options closed (248,186,000) (2,981,201)
- --------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AT END OF PERIOD $ 34,450,000 $ 148,135
- --------------------------------------------------------------------------------
<PAGE>
NOTE 4
CAPITAL SHARES
At October 31, 1995, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
YEAR ENDED OCTOBER 31
1995 1994
- --------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
Shares sold 3,675,721 $ 48,666,295 9,595,670 $140,467,719
- --------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,486,907 19,506,341 1,887,452 26,856,105
- --------------------------------------------------------------------------------
5,162,628 68,172,636 11,483,122 167,323,824
- --------------------------------------------------------------------------------
Shares repurchased (12,878,253) (169,764,839) (13,251,878) (188,605,364)
- --------------------------------------------------------------------------------
NET DECREASE (7,715,625) $(101,592,203) (1,768,756) $(21,281,540)
- --------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 1994
(COMMENCEMENT OF OPERATIONS)
YEAR ENDED OCTOBER 31 TO OCTOBER 31
1995 1994
- --------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
Shares sold 1,183,419 $15,684,905 2,439,453 $34,493,046
- --------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 99,884 1,312,528 45,301 615,670
- --------------------------------------------------------------------------------
1,283,303 16,997,433 2,484,754 35,108,716
- --------------------------------------------------------------------------------
Shares repurchased (691,375) (9,154,571) (803,055) (10,992,726)
- --------------------------------------------------------------------------------
NET INCREASE 591,928 $ 7,842,862 1,681,699 $24,115,990
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
FEDERAL TAX INFORMATION
(Unaudited)
For the period, a portion of the fund's distribution represents a return of
capital. The return of capital is the result of a provision in federal tax law
which requires that certain capital losses on foreign currency transactions be
reclassified as deductions from ordinary income for tax purposes. As a result,
such losses reduce the amount of net investment income available for
distribution.
The form 1099 you will receive in January 1996 will show the tax status of all
distributions paid to your account in calendar 1995, as well as the amount of
distributions not subject to tax.
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER OFFICERS
Putnam Investment George Putnam
Management, Inc. President
One Post Office Square
Boston, MA 02109 Charles E. Porter
Executive Vice President
MARKETING SERVICES
Putnam Mutual Funds Corp. Patricia C. Flaherty
One Post Office Square Senior Vice President
Boston, MA 02109
John D. Hughes
CUSTODIAN Senior Vice President and Treasurer
Putnam Fiduciary Trust Company
Lawrence J. Lasser
LEGAL COUNSEL Vice President
Ropes & Gray
Gordon H. Silver
INDEPENDENT ACCOUNTANTS Vice President
Coopers & Lybrand L.L.P.
Gary N. Coburn
TRUSTEES Vice President
George Putnam, Chairman
D. William Kohli
William F. Pounds, Vice Chairman Vice President and Fund Manager
Jameson Adkins Baxter Jonathan Francis
Vice President and Fund Manager
Hans H. Estin
Mark Siegel
John A. Hill Vice President and Fund Manager
Elizabeth T. Kennan Jennifer E. Leichter
Vice President and Fund Manager
Lawrence J. Lasser
William N. Shiebler
Robert E. Patterson Vice President
Donald S. Perkins Paul O'Neil
Vice President
George Putnam, III
John R. Verani
Eli Shapiro Vice President
A.J.C. Smith Beverly Marcus
Clerk and Assistant Treasurer
W. Nicholas Thorndike
This report is for the information of shareholders of Putnam Global Government
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.
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.
<PAGE>
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Boston, Massachusetts 02109 Putnam
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