Putnam
Global
Governmental
Income Trust
ANNUAL REPORT
October 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* A testament to its long-term performance potential, Putnam Global
Governmental Income Trust's class A share total return for the
10 years ended October 31, 1997, ranked 1 out of 12 world
government funds, according to Lipper Analytical Services, placing
the fund in the top 8% of its category.*
* "This fund is still a decent choice for investors looking for a
global offering that is very active at managing currency risk."
-- Morningstar Mutual Funds, June 6, 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
17 Financial statements
* Lipper Analytical Services, an independent research organization,
ranks funds according to total return performance. Their rankings
vary over time and do not reflect the effects of sales charges.
For periods ended 10/31/97, class A shares ranked 91 out of 137
and 34 out of 48 for 1- and 5-year performance, respectively;
class B and class M shares ranked 107 and 97, respectively, out
of 137 funds for 1-year performance. Class B and class M shares
were not ranked over longer periods. Past performance is not
indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Global fixed-income portfolio managers had their hands full during the 12
months ended October 31, 1997, what with worry over renewed inflation and
rising interest rates at home and currency crises abroad. During this
challenging period, Putnam Global Governmental Income Trust continued to post
returns well above its benchmark index.
Given the ever-changing and sometimes tumultuous events in Europe, Asia, and
the United States, you should find the following fiscal 1997 report from fund
managers D. William Kohli and Gail S. Attridge timely reading. Bill and Gail
also provide insights into their strategies for the months ahead.
Finally I will add my voice to those reminding you that starting with the
dividend payable in January 1998, your fund is changing from a quarterly to a
monthly distribution schedule. Under the new policy, dividends will be paid on
the last day of each month.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 17, 1997
Report from the Fund Managers
D. William Kohli, lead manager
Gail S. Attridge
Putnam Global Governmental Income Trust successfully navigated a number of
hurdles this year - including rising U.S. interest rates, a stronger U.S.
dollar, and heightened volatility in the emerging markets - to produce a small
but positive total return. For the 12 months ended October 31, 1997, your
fund's class A shares returned 3.38% at net asset value. Class A share
performance at public offering price was -1.51%. For more performance
information, including the results for other share classes, please see pages 8
through 10.
* GLOBAL MARKET HIGHLIGHTS
In the United States, economic activity was vigorous and widespread. Consumer
spending rose, unemployment fell, sales of new homes set records, and
manufacturing capacity became increasingly strained. Anticipating a potential
spike in inflation, the Federal Reserve Board raised short-term interest rates
by a quarter of a percentage point in late March. The adjustment briefly
dampened bond market returns. However, the lost ground was regained later in
the year, as evidence of noninflationary growth bolstered investor confidence.
In Europe, the peripheral markets of Spain, Italy, and Sweden, buoyed by
improving fiscal deficits and a benign inflation outlook, continued to
outperform the core markets of Germany and France. Prospects for a broader
European Economic and Monetary Union (EMU) continued to squeeze yields among
potential participants. Earlier in the decade, when EMU was more theory than
reality, less fiscally virtuous countries such as Italy and Spain paid a stiff
yield premium to borrow in the markets. After the exchange rate mechanism
crumbled in late 1992, Italian 10-year bonds traded as high as seven
percentage points above German bonds. Today that spread has narrowed to 60
basis points (less than two thirds of one percentage point). In part, this
reflects Italy's success at curbing inflation and the growth of government
borrowing. But it also reflects the market's perception that Italy and Germany
will one day share the same currency. Strong performance also came from the
U.K. market this year, as talk of eventual British participation in EMU led to
a dramatic rally in long-term bonds.
Although Japan's economy showed signs of improvement early in the fiscal year,
it faltered again when already beleaguered Japanese consumers were hit with a
tax increase in April. Part of the Japanese government's plan to reduce the
country's bulging budget deficit by cutting fiscal spending and raising taxes,
the higher consumption tax coincided with the announcement of major
deregulation measures related to land reform and to Japan's troubled banking
sector. Growth plunged at more than an 11% annual rate in the second quarter
and bonds rallied. As Japan's economic situation worsened over the summer, we
increased our investment stake. Although the severely low yields on these
securities effectively capped their return potential, our Japanese position
helped soften the impact of declines in emerging markets.
This year, investors witnessed how the emerging markets can respond in tandem
to negative economic events in any one market. Although the fund did not hold
any Southeast Asian bonds in October, when those markets experienced their
most dramatic declines, our investments in Latin America and other developing
regions were adversely affected by events in that corner of the world. In the
roughly two years leading up to this summer, Japan's and China's currencies
were in decline relative to the U.S. dollar. As a result, both nations were
benefiting from cheaper exports relative to their Southeast Asian competitors.
The pressure for countries such as Thailand, Indonesia, and Malaysia to become
more competitive through cheaper exports culminated this year in a series of
currency devaluations. Several monetary policy missteps in the aftermath of
the devaluations left investors wary of emerging markets in general.
[GRAPHIC OMITTED: horizontal bar chart GEOGRAPHICAL BREAKDOWN (10/31/97)]
GEOGRAPHICAL BREAKDOWN (10/31/97)*
United States 61.1%
Germany 6.6%
United Kingdom 5.1%
South Africa 4.3%
New Zealand 2.8%
Denmark 2.8%
Australia 2.5%
Other 11.1%
Footnote reads:
*Based on total net assets as of 10/31/97. Country allocations will
vary over time.
* FLIGHT TO QUALITY BENEFITS JAPAN AND UNITED STATES
With the yield advantage in peripheral European markets disappearing and with
heightened volatility in the emerging markets, global fixed-income investors
have increasingly turned to the United States and Japan. Of the developed
countries, the U.S. now has one of the highest-yielding bond markets, along
with a shrinking budget deficit, a strong currency, and negligible inflation.
The fund's sizable stake in U.S. securities (61.1% of net assets as of October
31, 1997) aided overall performance during the year, despite the market's
pullback in March related to the Fed rate increase.
In Japan, leading indicators have sunk to levels not seen since before the
recession of the early 1990s. Given their recently devalued currencies,
Japan's Asian trading partners are expected to reduce their imports of
relatively expensive Japanese goods. At the same time, the more burdensome tax
structure in Japan is likely to quell domestic consumption. Despite yields of
less than 2% on 10-year bonds, the Japanese market is a relatively safe haven,
since any interest-rate increase appears unlikely well into 1998.
* EMERGING-MARKETS TURMOIL SPARKS OPPORTUNITIES
In the coming months, we expect to continue to hold emerging-markets bonds. In
our view, bonds from markets such as Brazil, Poland, and Mexico - where
ongoing reforms are creating more favorable terms for investors - are the most
likely to receive credit rating upgrades. (Historically, when bonds are
upgraded by rating agencies, their prices rise.) We also expect to take
advantage of opportunities in Southeast Asia and in select emerging-markets
currencies on the grounds that markets tend to overreact in the face of
economic crises.
In Europe, we expect to focus more on the principal markets of Germany, the
United Kingdom, and France than on the smaller peripheral markets. The
secondary markets have been the undisputed leaders in performance for most of
this decade. At this point, we believe they have discounted convergence and
hold more potential for corrections than rallies.
In the United States, we expect to maintain a somewhat cautious stance with
respect to interest-rate exposure. The U.S. economy has registered four
calendar quarters of GDP growth above 3%, and the Fed may see fit to raise
rates in the new year. Given the relative strength of the U.S. economy, we
intend to overweight the dollar.
With a stake in the world's developed and developing markets and a cautious
eye toward the future direction of interest rates, we believe your fund is
well positioned to make the most of the fixed-income opportunities that lie
ahead.
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 10/31/97, there is no guarantee the fund will continue to hold
these securities in the future. International investing involves certain
risks, such as currency fluctuations, economic instability, and political
developments, not present with domestic investments. While U.S. government
backing of individual securities does not insure principal, which will
fluctuate, it does guarantee that the fund's government-backed holdings will
make timely payments of interest and principal. This fund includes investments
in mortgage-backed securities, which are subject to prepayment risk.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its 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. government entities, including supranational issuers. Preservation of
capital and long-term total return are secondary objectives.
TOTAL RETURN FOR PERIODS ENDED 10/31/97
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 3.38% -1.51% 2.62% -2.19% 3.15% -0.23%
- ------------------------------------------------------------------------------
5 years 32.19 25.89 27.36 25.64 30.30 26.07
Annual average 5.74 4.71 4.96 4.67 5.44 4.74
- ------------------------------------------------------------------------------
10 years 153.02 140.95 133.38 133.38 145.10 137.20
Annual average 9.73 9.19 8.84 8.84 9.38 9.02
- ------------------------------------------------------------------------------
Life of fund 166.68 154.09 144.94 144.94 157.65 149.23
Annual average 9.87 9.36 8.98 8.98 9.51 9.16
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/97
Salomon Bros.
World Govt. Consumer
Bond Index Price Index
- ------------------------------------------------------------------------------
1 year 2.61% 2.08%
- ------------------------------------------------------------------------------
5 years 44.52 13.96
Annual average 7.64 2.65
- ------------------------------------------------------------------------------
10 years 134.78 40.16
Annual average 8.91 3.43
- ------------------------------------------------------------------------------
Life of fund 140.36 42.88
Annual average 8.78 3.48
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% and 3.25%, respectively. Class B share returns for
the 1-, 5-, and 10-year (where available), and life-of-fund periods
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and, in the
case of class B and class M shares, the higher operating expenses
applicable to such shares. All returns assume reinvestment of
distributions at NAV and represent past performance; they do not guarantee
future results. Investment return and principal value will fluctuate so
that an investor's shares when redeemed may be worth more or less than
their original cost.
[GRAPHIC OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 10/31/87
Salomon Bros.
World Governmental
Date/year Fund at POP Bond Index CPI
10/31/87 9425 10000 10000
10/31/88 11882 11207 10425
10/31/89 12224 11503 10893
10/31/90 14619 12816 11578
10/31/91 16430 14264 11917
10/31/92 18226 16245 12298
10/31/93 20142 18192 12637
10/31/94 18948 18850 12966
10/31/95 20725 21715 13330
10/31/96 23307 22880 13729
10/31/97 24095 23478 14016
Footnote reads:
Past performance is no assurance of future results. At the
end of the same time period, a $10,000 investment in the fund's
class B shares would have been valued at $23,338 and no contingent
deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $24,510 ($23,720
at public offering price). See first page of performance section
for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 4 4 4
- ------------------------------------------------------------------------------
Income $1.015 $0.910 $0.982
- ------------------------------------------------------------------------------
Total $1.015 $0.910 $0.982
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/96 $14.49 $15.21 $14.45 $14.44 $14.93
- ------------------------------------------------------------------------------
10/31/97 13.94 14.64 13.90 13.89 14.36
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 6.46% 6.15% 5.70% 6.22% 6.02%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 6.32 6.01 5.56 6.05 5.85
- ------------------------------------------------------------------------------
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 9/30/97
(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 5.65% 0.61% 4.88% -0.04% 5.42% 1.96%
- ------------------------------------------------------------------------------
5 years 32.51 26.23 27.67 25.96 30.62 26.40
Annual average 5.79 4.77 5.01 4.72 5.49 4.80
- ------------------------------------------------------------------------------
10 years 156.91 144.73 136.92 136.92 148.65 140.60
Annual average 9.90 9.36 9.01 9.01 9.54 9.18
- ------------------------------------------------------------------------------
Life of fund 167.06 154.45 145.47 145.47 158.02 149.58
Annual average 9.98 9.46 9.08 9.08 9.61 9.26
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales 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, 1997
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, 1997, and the related statement of operations for the
year then ended and the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Putnam Global Governmental Income Trust as of October 31, 1997, the results of
its operations for the year then ended and the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the periods indicated therein, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 9, 1997
Portfolio of investments owned
October 31, 1997
<TABLE>
<CAPTION>
FOREIGN GOVERNMENT BONDS AND NOTES (31.3%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUD 5,085,000 Australia (Government of) bonds
Ser. 1007, 10s, 2007 $ 4,616,138
AUD 5,595,000 Australia (Government of) bonds
Ser. 302, 9 3/4s, 2002 4,549,630
USD 7,000,000 Bank of Economic Affairs of Russia
(Vnesheconombank) non performing
loan 1999 + 5,950,000
USD 2,911,000 Bank of Foreign Economic Affairs of Russia
(Vnesheconombank) principal loan FRN,
Libor plus 13/16s, 2020 +##+++ 1,717,490
CAD 8,565,000 Canada (Government of) bonds
Ser. WB60, 7 1/4s, 2007 6,858,929
DEM 19,750,000 Germany (Federal Republic of) bonds
Ser. 92, 8s, 2002 12,868,985
DEM 12,815,000 Germany (Federal Republic of) bonds
Ser. 97, 6 1/2s, 2027 7,733,574
DEM 5,360,000 Germany (Federal Republic of) bonds
Ser. 97, 6s, 2007 3,202,017
NZD 5,910,000 New Zealand (Government of) bonds
10s, 2002 4,114,345
NZD 9,160,000 New Zealand (Government of) bonds
8s, 2004 6,083,794
DKK 70,900,000 Denmark (Government of) bonds 6s, 2026 9,984,775
USD 9,890,000 Peru (Government of) 144A
Ser. US, 4s, 2017 5,538,400
ZAR 81,811,000 South Africa (Republic of) bonds
Ser. 153, 13s, 2010 15,442,230
SEK 45,000,000 Sweden (Government of) bonds
Ser. 1037, 8s, 2007 6,689,278
GBP 9,315,000 United Kingdom Treasury bonds
7 1/2s, 2006 16,581,636
GBP 530,000 United Kingdom Treasury bonds 7s, 2002 900,178
--------------
Total Foreign Government Bonds and Notes
(cost $113,723,904) $ 112,831,399
U.S. TREASURY OBLIGATIONS (52.1%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 34,080,000 U.S. Treasury Bond 6 3/8s, August 15, 2027 # $ 35,123,530
U.S. Treasury Notes
4,495,000 6 1/4s, February 15, 2007 4,605,982
17,095,000 6 1/4s, August 31, 2002 17,428,865
29,655,000 6 1/8s, August 15, 2007 30,299,107
22,225,000 6s, July 31, 2002 # 22,436,804
61,615,000 5 7/8s, September 30, 2002 61,932,933
16,050,000 5 3/4s, September 30, 1999 16,085,150
--------------
Total U.S. Treasury Obligations (cost $186,068,604) $ 187,912,371
BRADY BONDS (1.9%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 1,992,000 Philippines (Government of) Ser. B, FRB 6 1/4s, 2017 $ 1,648,380
5,870,000 United Mexican States Ser. C, FRB 6.820s, 2019 5,224,300
--------------
Total Brady Bonds (cost $7,168,551) $ 6,872,680
CORPORATE BONDS AND NOTES (2.5%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 1,450,000 Central European Media Enterprises Ltd. sr. notes
Ser. RG, 8 1/8s, 2004 (United Kingdom) $ 832,174
1,450,000 Grupo Iusacell S.A. de C.V. 144A sr. notes
10s, 2004 (Mexico) 1,406,500
726,000 Pindo Deli Finance Mauritius Ltd. 144A company
guaranty 10 3/4s, 2007 (India) 653,400
2,310,000 Reliance Industries Ltd. 144A sr. unsub.
8 3/4s, 2007 (India) 3,602,057
3,150,000 Transamerican Energy 144A sr. disc. notes stepped-
coupon zero % (13s 6/15/1999), 2002 ++ 2,630,250
--------------
Total Corporate Bonds and Notes (cost $9,348,224) $ 9,124,381
COMMON STOCKS (0.1%) * (cost $403,384)
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
11,327 PSF Holdings LLC Class A $ 339,810
PURCHASED OPTIONS OUTSTANDING (0.4%) *
CONTRACT EXPIRATION DATE/
AMOUNT STRIKE PRICE VALUE
- ------------------------------------------------------------------------------------------------------------
DEM 14,995,000 U.S. Dollars in exchange for Nov. 97/
Deutschemarks (Put) 1.78 DEM $ 19,494
JPY 6,600,000 U.S. Dollars in exchange for Nov. 97/
Japanese Yen (Put) 128 JPY 1,428,215
--------------
Total Purchased Options Outstanding
(cost $1,293,420) $ 1,447,709
SHORT-TERM INVESTMENTS (8.0%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
25,000,000 Asset Securitization Cooperative Corp.
effective yield of 5.52%, November 19, 1997 $ 24,931,000
TRL 336,320,000,000 Turkey Treasury Bill zero %, 1998 904,050
2,927,000 Interest in $269,350,000 joint repurchase
agreement dated October 31, 1997 with
S.B.C. Warburg due November 3, 1997
with respect to various U.S. Treasury
obligations -- maturity value of
$2,928,378 for an effective yield of 5.65% 2,927,459
--------------
Total Short-Term Investments (cost $28,762,509) $ 28,762,509
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $346,768,596) *** $ 347,290,859
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $360,664,508.
*** The aggregate identified cost on a tax basis is $348,904,608, resulting in gross unrealized
appreciation and depreciation of $1,675,235 and $3,288,984, respectively, or net unrealized
depreciation of $1,613,749.
+ Non-income-producing security.
++ The interest or dividend rate and date shown parenthetically represent the new interest or dividend
rate to be paid and the date the fund will begin receiving interest or dividend income at this rate.
+++ A portion of the income will be received in additional securities.
# A portion of these securities was pledged and segregated with the custodian to cover margin
requirements for the futures contracts at October 31, 1997.
## When-issued securities (Note 1).
The rate shown on Floating Rate Notes (FRN) and Floating Rate Bonds (FRB) are the current interest rates
shown at October 31, 1997, which are subject to change based on the terms of the security.
144A after the name of a security represents those exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
Diversification by Country
Distribution of investments by country of issue at October 31,
1997 (as percentage of Market Value):
U.S. 63.4% Canada 2.0
Germany 6.9 Sweden 1.9
United Kingdom 5.3 Mexico 1.9
South Africa 4.4 Peru 1.6
New Zealand 2.9 India 1.2
Denmark 2.9 Philippines 0.5
Australia 2.6 Turkey 0.3
Russia 2.2 -----
Total 100.0%
=====
<CAPTION>
- ------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at October 31, 1997
(aggregate face value $528,516,982)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 2,968,267 $ 3,177,331 12/17/97 $ (209,064)
British Pounds 10,069,005 10,076,395 12/17/97 (7,390)
Canadian Dollars 29,250,472 30,030,568 12/17/97 (780,096)
Columbian Peso 657,700 670,861 4/22/98 (13,161)
Deutschemarks 193,767,428 188,473,979 12/17/97 5,293,449
El Salvador Colon 302,501 297,399 4/13/98 5,102
El Salvador Colon 806,669 794,448 4/20/98 12,221
French Francs 25,453,206 24,934,270 12/17/97 518,936
Guatemala Quetzal 1,097,704 1,078,227 4/13/98 19,477
Indonesian Rupiah 3,255,192 3,322,617 2/23/98 (67,425)
Indonesian Rupiah 1,465,514 1,415,374 6/23/98 50,140
Italian Lira 16,944,148 16,312,194 12/17/97 631,954
Japanese Yen 200,916,602 200,781,796 12/17/97 134,806
Philippines Peso 991,836 1,025,427 3/25/98 (33,591)
Polish Zloty 3,820,983 4,034,039 6/5/98 (213,056)
Spanish Peseta 10,433,671 10,028,010 12/17/97 405,661
Swedish Krona 14,882,609 14,560,942 12/17/97 321,667
Swiss Francs 16,777,995 15,884,746 12/17/97 893,249
Venezuelan Bolivar 383,147 382,256 6/19/98 891
Venezuelan Bolivar 1,268,561 1,236,103 6/5/98 32,458
- ------------------------------------------------------------------------------------------
6,996,228
- ------------------------------------------------------------------------------------------
<CAPTION>
Forward Currency Contracts to Sell at October 31, 1997
(aggregate face value $258,024,907)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 8,430,059 $ 8,807,793 12/17/97 $ 377,734
Danish Krone 4,688,973 4,479,849 12/17/97 (209,124)
Deutschemarks 113,406,934 109,826,525 12/17/97 (3,580,409)
Japanese Yen 87,851,100 87,815,578 12/17/97 (35,522)
New Zealand Dollar 16,058,834 16,386,980 12/17/97 328,146
South African Rand 14,580,564 14,759,029 12/17/97 178,465
Swiss Francs 16,834,459 15,949,153 12/17/97 (885,306)
- ------------------------------------------------------------------------------------------
$(3,826,016)
- ------------------------------------------------------------------------------------------
<CAPTION>
Futures Contracts Outstanding at October 31, 1997
Unrealized
Market Aggregate Expiration Appreciation/
Value Face Value Date (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Government
Bond 10YR Future
Mar 98 (Short) $41,014,067 41,048,638 Mar. 98 $ 34,571
Japanese Government
Bond 10YR Future
Dec 97 (Long) 41,305,037 41,333,296 Dec. 97 (28,259)
Spanish 10YR Future
Dec 97 (Short) 2,337,594 2,336,045 Dec. 97 (1,549)
German 10YR Future
Dec 97 (Long) 2,368,852 2,367,229 Dec. 97 1,623
GILT Future
Mar. 98 (Long) 77,471,714 76,892,710 Mar. 98 579,004
GILT Future
Dec 97 (Short) 79,636,235 79,217,160 Dec. 97 (419,075)
- ------------------------------------------------------------------------------------------
$166,315
- ------------------------------------------------------------------------------------------
<CAPTION>
Written Options Outstanding at October 31, 1997
(premiums received $186,688)
Contract Expiration Date/ Market
Amount Strike Price Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$14,995,000 U.S. Dollars in exchange for Nov. 97/1.73 DEM $190,437
Deutschemarks (call)
- ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $346,768,596) (Note 1) $347,290,859
- ---------------------------------------------------------------------------------------------------
Cash 12,979,167
- ---------------------------------------------------------------------------------------------------
Foreign currency (cost $44,941) 45,722
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 4,112,125
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 305,882
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 73,626,803
- ---------------------------------------------------------------------------------------------------
Receivable for variation margin 151,572
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 9,508,250
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 3,155,004
- ---------------------------------------------------------------------------------------------------
Total assets 451,175,384
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 76,164,559
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 717,123
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 758,379
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 63,138
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 14,329
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 645
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 103,609
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 6,338,038
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 6,136,915
- ---------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $186,688) (Note 3) 190,437
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 23,704
- ---------------------------------------------------------------------------------------------------
Total liabilities 90,510,876
- ---------------------------------------------------------------------------------------------------
Net assets $360,664,508
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $366,537,511
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (2,167,433)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment and
foreign currency transactions (Note 1) (7,578,072)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 3,872,502
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $360,664,508
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($316,836,914 divided by 22,724,487 shares) $13.94
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $13.94)* $14.64
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($41,321,598 divided by 2,972,650 shares)** $13.90
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,505,996 divided by 180,450 shares) $13.89
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $13.89)* $14.36
- ---------------------------------------------------------------------------------------------------
* 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, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest (net of foreign tax of $17,854) $23,006,964
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,005,982
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 760,362
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 28,479
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,888
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 819,344
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 419,234
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 11,439
- --------------------------------------------------------------------------------------------------
Reports to shareholders 23,289
- --------------------------------------------------------------------------------------------------
Registration fees 175
- --------------------------------------------------------------------------------------------------
Auditing 50,702
- --------------------------------------------------------------------------------------------------
Legal 8,250
- --------------------------------------------------------------------------------------------------
Other 12,127
- --------------------------------------------------------------------------------------------------
Total expenses 5,147,271
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (271,021)
- --------------------------------------------------------------------------------------------------
Net expenses 4,876,250
- --------------------------------------------------------------------------------------------------
Net investment income 18,130,714
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 787,069
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (24,419)
- --------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 570,880
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (868,812)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 3,011,851
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures, and
written options during the year (9,806,813)
- --------------------------------------------------------------------------------------------------
Net loss on investments (6,330,244)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $11,800,470
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
----------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 18,130,714 $ 22,795,829
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 464,718 18,644,680
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and asset and liabilities in foreign currencies (6,794,962) 4,075,700
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,800,470 45,516,209
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (13,468,566) (19,095,421)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,549,654) (1,769,324)
- ----------------------------------------------------------------------------------------------------------------------
Class M (90,042) (70,261)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A (10,002,099) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,150,812) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (66,867) --
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (10,931,491) (36,352,691)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (25,459,061) (11,771,488)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 386,123,569 397,895,057
- ----------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income and undistributed net investment
income of $2,167,433 and $7,219,472, respectively) $360,664,508 $386,123,569
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.49 $13.62 $13.33 $15.25 $15.98
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .71 (c) .83 (c) 1.00 .97 1.07
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.24) .82 .19 (1.84) .44
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .47 1.65 1.19 (.87) 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.59) (.78) (.62) (.10) (.98)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.43) -- -- -- (.50)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.28) (.80) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.15) (.76)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) (.78) (.90) (1.05) (2.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.94 $14.49 $13.62 $13.33 $15.25
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.38 12.46 9.38 (5.93) 10.44
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $316,837 $343,125 $366,476 $461,506 $554,963
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.29 1.32 1.34 1.27 1.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.90 5.93 7.19 6.57 6.12
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 638.66 429.38 300.66 359.88 444.28
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 1, 1994+
operating performance Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $14.45 $13.60 $13.31 $15.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .59 (c) .72 (c) .77 .64
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.23) .81 .33 (2.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .36 1.53 1.10 (1.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.52) (.68) (.55) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.39) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.26) (.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.91) (.68) (.81) (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.90 $14.45 $13.60 $13.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.62 11.57 8.63 (9.52) *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $41,322 $41,106 $30,910 $22,387
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.04 2.07 2.09 1.49 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.22 5.13 6.59 4.76 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 638.66 429.38 300.66 359.88
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Mar. 17, 1995+
operating performance Year ended October 31 to Oct. 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.44 $13.59 $12.81
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .66 (c) .77 (c) .49
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.23) .83 .88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .43 1.60 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.56) (.75) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.42) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.19)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.98) (.75) (.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.89 $14.44 $13.59
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.15 12.14 10.87 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,506 $1,892 $509
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.54 1.58 .96 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.74 5.52 4.78 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 638.66 429.38 300.66
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the 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, 1997
Note 1 Significant accounting policies
Putnam Global Governmental Income Trust (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 debt securities of foreign or U.S. governmental entities,
including supranational issuers. 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. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. 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.
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. Discounts on zero coupon bonds, original issue
discount bonds, stepped-coupon bonds and payment in kind bonds are accreted
according to the yield-to-maturity 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 gains and losses are included with the
net realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign currencies
and the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized appreciation and
depreciation of assets and liabilities in foreign currencies arise from
changes in the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from changes
in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using current forward currency
exchange rates supplied by a quotation service. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The fund could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet the
terms of their contracts or if the fund is unable to enter into a closing
position.
G) 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. 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. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
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) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the year ended October 31, 1997, the fund
had no borrowings against the line of credit.
I) 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, 1997, the fund had a capital loss carryover of approximately
$5,422,000 available to offset future capital gains, if any, which will expire
on October 31, 2003.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include temporary
and permanent differences of realized and unrealized gains and losses on
forward foreign currency contracts, realized and unrealized gains and losses
on certain future contracts, market discount and currency gains and losses on
foreign bonds. 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, 1997,
the fund reclassified $1,189,579 to increase distributions in excess of net
investment income and $11,128,130 to decrease paid-in-capital, with a decrease
to accumulated net realized gains and losses of $12,317,709. The calculation
of net investment income per share in the financial highlights table excludes
these adjustments.
Note 2
Management fee,
administrative services
and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the next $500
million, 0.60% of the next $5 billion, 0.575% of the next $5 billion, 0.555%
of the next $5 billion, 0.54% of the next $5 billion and 0.53% thereafter.
Prior to February 20, 1997, any amount over $1.5 billion was based on a rate
of 0.60%.
The fund reimburses Putnam Management an allocated amount or 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 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, 1997, fund expenses were reduced by $271,021
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the funds receive an annual Trustees fee of which $975 has been
allocated to the fund and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit payment by the fund to 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, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $36,675 and $1,093 from the sale of
class A and class M shares, respectively and $96,814 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, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $2,400 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended October 31, 1997, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $1,267,077,659 and $1,340,314,444, respectively. Purchases and
sales of U.S. government obligations aggregated $894,417,758 and $817,504,367,
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 $-- $--
- ------------------------------------------------------------
Options opened 78,511,300 931,636
- ------------------------------------------------------------
Options expired (30,980,000) (245,517)
- ------------------------------------------------------------
Options closed (32,536,300) (499,431)
- ------------------------------------------------------------
Written options
outstanding at
end of year 14,995,000 $186,688
- ------------------------------------------------------------
Note 4
Capital shares
At October 31, 1997, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
Year ended
October 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 5,148,613 $72,510,042
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,316,265 18,393,725
- ------------------------------------------------------------
6,464,878 90,903,767
Shares
repurchased (7,412,644) (104,404,420)
- ------------------------------------------------------------
Net decrease (947,766) $(13,500,653)
- ------------------------------------------------------------
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, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 1,542,262 $21,647,617
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 153,475 2,140,026
- ------------------------------------------------------------
1,695,737 23,787,643
Shares
repurchased (1,567,095) (21,917,232)
- ------------------------------------------------------------
Net increase 128,642 $1,870,411
- ------------------------------------------------------------
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, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 111,086 $1,556,478
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,204 141,924
- ------------------------------------------------------------
121,290 1,698,402
Shares
repurchased (71,842) (999,651)
- ------------------------------------------------------------
Net increase 49,448 $698,751
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1998 will show the tax
status of all distributions paid to your account in
calendar 1997.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Alan Bankart
Vice President
D. William Kohli
Vice President and Fund Manager
Gail S. Attridge
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam 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 the principal amount
invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
36861 041/220/906 12/97
