Putnam
Global
Governmental
Income Trust
SEMIANNUAL REPORT
April 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Inflation -- a bond buyer's worst enemy -- could fall as low as 1%
this year, many economists say. Further Asian economic weakness could also
help boost bonds in the months ahead."
-- The Wall Street Journal, May 8, 1998
* "We will continue to seek opportunities for income and price
appreciation outside the government sector, taking advantage of the
private sector's growing presence in the global fixed-income market."
-- D. William Kohli, manager,
Putnam Global Governmental Income Trust
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
15 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
In periods of market volatility, when forces sometimes converge to produce
disappointing short-term investment results, it is useful to note the prudence
of a long-term commitment. For most fixed-income investors, this is such a
time. Continued unrest in the world's fixed-income markets and strength in the
dollar combined to dampen results for the first half of Putnam Global
Governmental Income Trust's fiscal year.
A look at your fund's longer-term performance, however, provides a more
positive picture, though past performance should never be taken as an
assurance of future results. Your fund's strategy of investing in bonds issued
by governmental agencies around the globe gives it access to a wide variety of
securities in a number of important markets.
In the following report, your fund's managers discuss performance in the
challenging markets of the past several months and look at prospects for the
months ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 17, 1998
Report from the Fund Managers
D. William Kohli
Gail S. Attridge
A rising U.S. dollar and continued volatility in the emerging markets were
potent forces during the six months ended April 30, 1998, creating a
challenging environment for fixed-income investors with holdings outside the
United States. Putnam Global Governmental Income Trust provided a -1.57%
return for class A shares at net asset value (-6.28% at public offering
price) for the period. By comparison, the Salomon Brothers World Government
Bond Index, which does not invest in developing markets, returned 0.52%. For
more information about the fund's performance, including returns for other
share classes, please see pages 8 and 9.
* U.S. DOLLAR STRENGTHENS AS EMERGING MARKETS TUMBLE
During the fall and winter, the U.S. dollar strengthened dramatically against
most other major currencies. The fund's exposure to those currencies (roughly
40% of the portfolio was invested in foreign-denominated bonds at the end of
October) dampened returns for the first half of the 1998 fiscal year. On the
flip side, the fund's sizable weighting in U.S. Treasuries (52% of portfolio
assets on October 31) helped boost performance, as the prices of those
securities were bid higher.
Understanding how exchange rate fluctuations affect your fund is integral to
understanding the fund's performance. Bonds purchased in another country are
paid for after an investor's dollars are converted into that country's local
currency -- in the same way that one must exchange U.S. dollars for another
currency when traveling abroad. Later, when those bonds are sold, payment is
made in local currency, which then must be converted back to dollars. If the
value of the dollar rises dramatically versus the currency in which your
investment is denominated, gains realized on the investment may be reduced or
even turned into a loss.
The dollar's recent ascent is a result of the extraordinary vigor of the U.S.
economy. Technological innovations, ongoing corporate restructurings,
heightened global competition, and near-full employment are just some of the
factors enabling the economy to grow at an annualized rate of more than 4%,
while inflation recedes to levels not seen since the 1950s. Also helping to
keep the dollar strong was a so-called flight to quality in the fourth quarter
of 1997. With the Asian financial crisis at its peak, Southeast Asian
currencies plummeted to new lows, as investors worried about the possibility
of debt-payment suspension and economic meltdown. Demand for
dollar-denominated assets such as U.S. Treasuries soared. In April, the yen
declined to a six-year low against the dollar after Moody's Investors Service,
a bond rating agency, downgraded its outlook for Japanese bonds.
* INVESTMENT STRATEGY FOCUSED ON EUROPE
With respect to owning foreign-denominated bonds, our chief focus was in
Europe, particularly the United Kingdom. After a period of monetary tightening
last year, Britain's yield curve was actually inverted -- in other words,
short-term government bonds provided higher yields than long-term bonds. When
it appeared that the U.K. economy was slowing and that its central bank might
begin to ease monetary policy, we increased the fund's overall position to
roughly 25% of the portfolio, concentrating on bonds most likely to benefit
from a reduction in interest rates.
[GRAPHIC OMITTED: horizontal bar chart GEOGRAPHIC BREAKDOWN (4/30/98)]
GEOGRAPHIC BREAKDOWN (4/30/98)*
United States 42.5%
United Kingdom 23.4%
Germany 11.6%
France 4.6%
Denmark 3.6%
Italy 2.6%
Argentina 2.5%
South Africa 2.4%
Other 17.0%
Footnote reads:
*Based on total net assets. Country allocations will vary over time.
We increased holdings in Germany, where the bond market has benefited from low
interest rates and moderate economic growth. Germany's economic recovery has
not been as strong as that in the United States, and consumer spending remains
sluggish. As a result, we believe monetary policy will be relatively stable
for the remainder of the year. The resiliency of the deutschemark adds to the
attractiveness of the investment, since German central bank officials have
expressed their desire for a stable exchange rate in the run-up to European
Economic and Monetary Union. At the end of the period, roughly 10% of the
portfolio was allocated to Germany.
* OTHER OPPORTUNITIES
The government sector is shrinking around the world. In the United States, for
example, the federal budget is expected to be in surplus this year for the
first time in more than 20 years. That means the government doesn't need to
borrow as much and will issue fewer bonds in the future. We see the same trend
in Europe, particularly in light of the approach of the euro. In general, debt
issuance is shifting from the government to the growing private sector as
corporations borrow to finance growth. Unlike governments, corporations cannot
pay creditors with tax revenue. As a result, their bonds usually are
considered more speculative investments and must offer higher yields to
provide sufficient incentive to investors. Examples of corporate bonds
purchased during the period include Colt Telecommunications and KFW
International Finance in Europe and Sumitomo Bank in Japan. While these
holdings, as well as others discussed in this report, were viewed favorably at
the end of the reporting period, all portfolio holdings are subject to review
and adjustment in accordance with the fund's investment strategy and may vary
in the future.
In the United States, we chose to divide the fund's government holdings
between Treasuries and mortgage-backed securities, which proved beneficial to
your Fund's performance. Mortgage-backed securities such as GNMAs offer higher
yields -- roughly one percentage point higher -- than government securities of
comparable maturity. The higher yields are intended to compensate investors
for the risk of prepayment inherent in these securities. When interest rates
fall, many homeowners refinance their mortgages, returning principal to
mortgage investors. In addition to disrupting an investor's income stream,
this prepayment of principal forces the investor to reinvest at lower
prevailing rates.
Exposure to emerging markets provides important diversification for the fund
as well as opportunities to earn double-digit yields and potential price
appreciation. Emerging-markets bonds typically yield more than bonds from
developed markets because developing countries generally have less political
and economic stability and therefore are more likely to default on payments of
interest and principal. With the advent of the Asian financial crisis, the
disparity of yields between developed and developing markets became much wider
than usual. For example, a small (less than 1% of portfolio assets) position
in B-rated Turkish bonds provided yields as high as 84%. Unfortunately the
price volatility associated with emerging markets overshadowed any benefits
derived from owning these bonds during the period, and the fund's performance
suffered as a result. Among the hardest hit were the fund's Indonesian
holdings, which were subsequently sold. Other emerging-markets investments
included dollar-denominated holdings in South Korea, Bulgaria, Russia,
Argentina, Poland, and the Philippines.
* LOOKING AHEAD
In the coming months, we expect to continue to favor European bonds over those
in the United States. After several quarters of above-trend economic growth,
the risk of a shift in U.S. monetary policy, in our view, has increased.
Although the fund's emerging-markets holdings hurt returns during the period,
we remain committed to the diversification and investment opportunities they
offer. In addition, we will continue to seek opportunities for income and
price appreciation outside the government sector, taking advantage of the
private sector's growing presence in the global fixed-income market.
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 4/30/98, there is no guarantee the fund will continue to hold
these securities in the future. Foreign investments are subject to certain
risks, such as those related to currency fluctuations, political developments,
and economic instability, that are not present with domestic investments.
Performance summary
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 or
U.S. governmental entities, including supranational issuers. Preservation
of capital and long-term total return are secondary objectives.
TOTAL RETURN FOR PERIODS ENDED 4/30/98
Class A Class B Class M
(inception date) (6/1/87) (2/1/94) (3/17/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months -1.57% -6.28% -1.93% -6.67% -1.81% -5.02%
- ------------------------------------------------------------------------------
1 year 2.83 -2.07 2.09 -2.70 2.48 -0.84
- ------------------------------------------------------------------------------
5 years 22.44 16.65 17.99 16.25 20.58 16.66
Annual average 4.13 3.13 3.36 3.06 3.81 3.13
- ------------------------------------------------------------------------------
10 years 113.24 103.17 97.00 97.00 106.54 99.80
Annual average 7.87 7.35 7.02 7.02 7.52 7.17
- ------------------------------------------------------------------------------
Life of fund 162.49 150.10 140.22 140.22 153.00 144.73
Annual average 9.25 8.77 8.36 8.36 8.88 8.55
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/98
Salomon Bros.
World Govt. Consumer
Bond Index Price Index
- ------------------------------------------------------------------------------
6 months 0.52% 0.56%
- ------------------------------------------------------------------------------
1 year 8.01 1.44
- ------------------------------------------------------------------------------
5 years 36.44 12.85
Annual average 6.41 2.45
- ------------------------------------------------------------------------------
10 years 115.22 38.77
Annual average 7.97 3.33
- ------------------------------------------------------------------------------
Life of fund 141.61 43.68
Annual average 8.42 3.38
- ------------------------------------------------------------------------------
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 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.
PRICE AND DISTRIBUTION INFORMATION
6 months ended/ 4/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 5 5 5
- ------------------------------------------------------------------------------
Income $0.519 $0.461 $0.518
- ------------------------------------------------------------------------------
Capital gains -- -- --
- ------------------------------------------------------------------------------
Total $0.519 $0.461 $0.518
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/97 $13.94 $14.64 $13.90 $13.89 $14.36
- ------------------------------------------------------------------------------
4/30/98 13.20 13.86 13.17 13.12 13.56
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 6.45% 6.15% 5.74% 6.31% 6.11%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 6.46 6.15 5.72 6.21 6.01
- ------------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/98
(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
- ------------------------------------------------------------------------------
6 months -3.27% -7.89% -3.64% -8.32% -3.42% -6.58%
- ------------------------------------------------------------------------------
1 year 0.54 -4.22 -0.20 -4.91 0.21 -3.02
- ------------------------------------------------------------------------------
5 years 23.09 17.27 18.57 16.83 21.22 17.30
Annual average 4.24 3.24 3.47 3.16 3.92 3.24
- ------------------------------------------------------------------------------
10 years 110.61 100.58 94.49 94.49 104.05 97.44
Annual average 7.73 7.21 6.88 6.88 7.39 7.04
- ------------------------------------------------------------------------------
Life of class 158.32 146.12 136.54 136.54 149.18 141.04
Annual average 9.16 8.67 8.27 8.27 8.80 8.46
- ------------------------------------------------------------------------------
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 of 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 charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Salomon Brothers World Government Bond Index is a market-capitalization
weighted benchmark that tracks the performance of government-bond markets
in 14 countries. The index assumes reinvestment of all distributions and
interest payments and does not take into account brokerage fees or taxes.
Securities in the fund do not match those in the index and performance of
the fund will differ. It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Portfolio of investments owned
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
FOREIGN GOVERNMENT BONDS AND NOTES (49.6%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAD 16,975,000 Canada (Government of) bonds
Ser. WB60, 7 1/4s, 2007 $ 13,444,722
DKK 132,230,000 Denmark (Government of) bonds 7s, 2007 21,777,774
DEM 33,955,000 Germany (Federal Republic of) bonds
Ser. 98, 5 5/8s, 2028 19,147,557
DEM 45,910,000 Germany (Federal Republic of) bonds
Ser. 98, 5 1/4s, 2008 26,093,654
ITL 27,085,000,000 Italy (Government of) bonds 5 3/4s, 2002 15,841,054
USD 6,510,000 Korea (Republic of) unsub. 8 7/8s, 2008 6,402,715
FRF 168,115,000 France Treasury bill bonds 4 s, 2000 27,872,470
USD 12,085,000 Panama (Republic of) bonds 8 7/8s,2027 11,782,875
USD 9,330,000 Russia (Government of) deb. principal loans
FRB 6.719s, 2020 (POR) 5,901,225
ZAR 73,714,000 South Africa (Republic of) bonds Ser. 153,
13s, 2010 14,567,812
GBP 20,070,000 United Kingdom Treasury bonds 8s, 2007 37,013,415
GBP 17,100,000 United Kingdom Treasury bonds 8s, 2000 29,720,552
GBP 42,795,000 United Kingdom Treasury bonds 7s, 2002 73,878,720
--------------
Total Foreign Government Bonds and Notes
(cost $300,563,307) $ 303,444,545
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (27.7%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (10.0%)
- -------------------------------------------------------------------------------------------------------------
$ 60,618,000 Government National Mortgage Association 7s, TBA,
May 15, 2028 $ 61,337,536
U.S. Treasury Obligations (17.7%)
- -------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes
34,080,000 6 1/8s, August 15, 2007 (SEG) 35,001,182
9,020,000 5 1/2s, February 15, 2008 8,898,771
64,490,000 5 1/2s, March 31, 2003 64,066,946
--------------
107,966,899
--------------
Total U.S. Government and Agency Obligations
(cost $169,134,809) $ 169,304,435
BRADY BONDS (11.2%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 4,966,600 Argentina (Republic of) deb. FRB 6.625s, 2005 $ 4,556,856
14,282,000 Argentina (Republic of) Ser. L-GP, stepped-coupon
5 3/4s, (6s, 3/31/99), 2023 (STP) 10,854,320
5,818,453 Brazil (Government of) stepped-coupon 5s,
(8s, 4/30/00), 2014 (STP) 4,814,770
5,890,000 Bulgaria (Government of) Ser. A, FRB 2 1/4s, 2012 3,946,300
7,865,000 Bulgaria (Government of) deb. Ser. PDI, FRB
6.563s, 2011 6,468,963
10,247,691 Ecuador (Republic of) deb. Ser. PDI, FRB . 2015 6,571,332
14,990,000 Peru (Government of) 144A Ser. PDI, 4s, 2017 6,120,000
4,312,000 Philippines (Government of) Ser. B, 6 1/2s, 2017 3,805,340
14,745,000 Poland (Government of) bonds ser. PDI, stepped-
coupon 4s (5s, 10/1/98), 2014 (STP) 13,417,950
9,335,000 United Mexican States sec. Ser. B, 6 1/4s, 2019 7,864,738
--------------
Total Brady Bonds (cost $68,323,179) $ 68,420,569
CORPORATE BONDS AND NOTES (4.7%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 1,450,000 Central European Media Enterprises Ltd. sr. notes
Ser. RG, 8 1/8s, 2004 (United Kingdom) $ 799,499
2,090,000 Colt Telecommunications Group PLC sr. notes
8 7/8s, 2007 (United Kingdom) 1,280,423
1,450,000 Grupo Iusacel S.A. de C.V. 144A sr. notes
10s, 2004 (Mexico) 1,504,375
DEM 28,950,000 Kreditanstalt Fuer Wiederauf bonds
5s, 2009 (Germany) 15,967,565
$ 2,310,000 Reliance Industries Ltd. 144A sr. unsub. 8 3/4s,
2007 (India) 3,576,122
2,925,000 Sumitomo Bank Treasury Co. 144A bonds
Ser. A, FRB, 9.4s, 2049 (Japan) 2,995,902
3,150,000 Transamerican Energy 144A sr. disc. notes
stepped-coupon zero % (13s, 6/15/99), 2002 (STP) 2,677,500
--------------
Total Corporate Bonds and Notes (cost $28,620,736) $ 28,801,386
COMMON STOCKS (0.1%) (a) (cost $403,384)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
11,327 PSF Holdings LLC Class A (NON) $ 339,810
PURCHASED OPTION OUTSTANDING (--%) (a) (cost $69,888)
EXPIRATION DATE/
CONTRACT AMOUNT STRIKE PRICE VALUE
- -------------------------------------------------------------------------------------------------------------
ITL 80,000,000 Italian Government Bond
Futures Contract (Put) Jun 98/118 ITL $ 13,552
SHORT-TERM INVESTMENTS (16.9%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 10,060,000 Delaware Funding Corp. effective yield
of 5.55%, May 8, 1998 $ 10,049,144
10,000,000 Deutsche Bank Financial Inc. effective
yield of 5.50%, July 8, 1998 9,896,111
25,000,000 Federal Home Loan Mortgage Corp
effective yield of 5.44%, May 29, 1998 24,894,222
20,590,000 U.S. Dollar GKO Pass Through Structured
Note (Issued by Deutsche Bank. The
principal at redemption is linked to the
bid price for the Russian Treasury Bill at
maturity, and the change in the spot rate
of the Russian Ruble from issue date to
maturity date) zero %, October 28, 1998 2,960,842
TRL 444,760,000,000 Turkey Treasury bills zero %, July 29, 1998 1,419,976
TRL 256,480,000,000 Turkey Treasury bills zero %, June 17, 1998 926,847
TRL 238,280,000,000 Turkey Treasury bills zero %, June 4, 1998 877,013
$ 27,000,000 Interest in $550,000,000 joint repurchase
agreement dated April 30, 1998 with
Goldman, Sachs & Co., due May 1, 1998
with respect to various U.S. Treasury
obligations - maturity value of
$27,004,140 for an effective yield of 5.52%. 27,004,140
25,256,000 Interest in $320,256,000 joint repurchase
agreement dated April 30, 1998 with
Morgan (J.P.) & Co., Inc. due May 1, 1998
with respect to various U.S. Treasury
obligations - maturity value of
$25,259,866 for an effective yield of 5.51%. 25,259,866
--------------
Total Short-Term Investments (cost $103,109,874) $ 103,288,161
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $670,225,177) (b) $ 673,612,458
- -------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $611,036,742.
(b) The aggregate identified cost on a tax basis is $672,361,189
resulting in gross unrealized appreciation and depreciation of
$2,360,717 and $1,109,448 respectively, or net unrealized appreciation
of $1,251,269.
(NON) Non-income-producing security.
(STP) 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.
(POR) A portion of the income will be received in additional securities.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at April 30, 1998.
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.
TBA after the name of a security represents to be announced
securities (Note 1).
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at April 30, 1998,
which are subject to change based on the terms of the security.
Diversification by Country
Distribution of investments by country of issue at April 30, 1998
(as a percentage of Market Value):
United States 38.5% Poland 2.0
United Kingdom 21.2 Panama 1.7
Germany 10.6 Bulgaria 1.5
France 4.1 Mexico 1.4
Denmark 3.2 Russia 1.3
Italy 2.4 Ecuador 1.0
Argentina 2.3 Korea 1.0
South Africa 2.2 Other 3.6
Canada 2.0 -----
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at April 30, 1998 (Unaudited)
(aggregate face value $795,738,291)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brazilian Real $ 7,601,579 $ 7,208,206 10/05/98 $ 393,373
Australian Dollars 21,171,549 21,409,073 6/17/98 (237,524)
Canadian Dollar 5,402,177 5,501,600 6/17/98 (99,423)
Deutschemarks 317,771,394 315,359,114 6/17/98 2,412,280
French Franc 17,811,898 17,654,151 6/17/98 157,747
Italian Lira 14,945,939 14,806,118 6/17/98 139,821
Japanese Yen 313,583,789 328,228,503 6/17/98 (14,644,714)
Mexican Peso 6,748,079 6,538,784 9/11/98 209,295
Mexican Peso 573,189 537,183 5/12/98 36,006
Mexican Peso 711,501 671,482 5/11/98 40,019
New Zealand Dollar 7,650,511 7,819,785 6/17/98 (169,274)
Polish Zloty 5,360,723 5,321,973 4/21/99 38,750
South Korean Won 8,029,665 7,545,270 3/11/99 484,395
Spanish Peseta 18,273,148 18,146,814 6/17/98 126,334
Swedish Krona 22,477,043 21,737,367 6/17/98 739,676
Swiss Franc 16,714,828 17,252,868 6/17/98 (538,040)
- -------------------------------------------------------------------------------------------------------------
$(10,911,279)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at April 30, 1998 (Unaudited)
(aggregate face value $678,911,758)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 14,026,989 $ 14,274,921 6/17/98 $ 247,932
British Pounds 104,142,310 102,955,687 6/17/98 (1,186,623)
Deutschemarks 291,317,947 288,276,565 6/17/98 (3,041,382)
Japanese Yen 225,927,283 235,798,277 6/17/98 9,870,994
New Zealand Dollar 7,214,852 7,493,207 6/17/98 278,355
Swedish Krona 13,124,299 12,657,339 6/17/98 (466,960)
Swiss Franc 16,916,529 17,455,762 6/17/98 539,233
- -------------------------------------------------------------------------------------------------------------
$ 6,241,549
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 1998 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Market Value Value Date (Depreciation)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Euro DM (Long) $122,939,753 123,091,877 Mar 99 $(152,124)
Euro DM (Short) 124,594,342 124,678,904 Mar 99 84,562
US Treasury
Bond (Short) 27,049,219 27,242,579 Jun 98 193,360
Municipal Bond
Index (Long) 27,239,063 27,584,001 Jun 98 (344,938)
- -------------------------------------------------------------------------------------------------------------
$(219,140)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Written Options Outstanding at April 30, 1998 (Unaudited)
(premiums received $48,880)
Contract Expiration Date/ Market
Amount Strike Price Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$157,500 U.S. Dollars in exchange for
Deutschemarks (put) Jun 98/1.07 DEM $18,947
- -------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $670,225,177) (Note 1) $673,612,458
- ---------------------------------------------------------------------------------------------------
Foreign currency 133,226
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 8,855,752
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,604,383
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 54,826,230
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 15,943,113
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 2,080,451
- ---------------------------------------------------------------------------------------------------
Total assets 758,055,613
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustiodian (Note 2) 423,226
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 116,692
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 3,785
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 117,719,598
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,262,209
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,150,441
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 107,289
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,182
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 896
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 204,100
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 20,612,843
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 5,232,087
- ---------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $48,880) (Note 3) 18,947
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 155,576
- ---------------------------------------------------------------------------------------------------
Total liabilities 147,018,871
- ---------------------------------------------------------------------------------------------------
Net assets $611,036,742
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $643,404,596
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (8,948,387)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions (Note 1) (21,758,543)
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets
and liabilities in foreign currencies (1,660,924)
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $611,036,742
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($272,942,618 divided by 20,676,962 shares) $13.20
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $13.20)* $13.86
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($38,158,229 divided by 2,898,406 shares)** $13.17
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($299,935,895 divided by 22,867,284 shares) $13.12
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $13.12)* $13.56
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended April 30, 1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $ 18,231,665
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,051,385
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 502,908
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,197
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,653
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 364,027
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 197,408
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 474,877
- --------------------------------------------------------------------------------------------------
Reports to shareholders 17,883
- --------------------------------------------------------------------------------------------------
Registration fees 82,509
- --------------------------------------------------------------------------------------------------
Auditing 27,467
- --------------------------------------------------------------------------------------------------
Legal 3,673
- --------------------------------------------------------------------------------------------------
Postage 29,582
- --------------------------------------------------------------------------------------------------
Other 14,403
- --------------------------------------------------------------------------------------------------
Total expenses 3,777,972
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (78,742)
- --------------------------------------------------------------------------------------------------
Net expenses 3,699,230
- --------------------------------------------------------------------------------------------------
Net investment income 14,532,435
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,685,603
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (55,366)
- --------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 1,027,266
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (16,837,974)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (7,980,307)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures,
and written options during the period 2,446,881
- --------------------------------------------------------------------------------------------------
Net loss on investments (19,713,897)
- --------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (5,181,462)
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 14,532,435 $ 18,130,714
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (14,180,471) 464,718
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets
and liabilities in foreign currencies (5,533,426) (6,794,962)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (5,181,462) 11,800,470
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (11,312,298) (13,468,566)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,366,567) (1,549,654)
- ----------------------------------------------------------------------------------------------------------------------
Class M (8,634,524) (90,042)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (10,002,099)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (1,150,812)
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (66,867)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 276,867,085 (10,931,491)
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 250,372,234 (25,459,061)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 360,664,508 386,123,569
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income of $8,948,387 and
$2,167,433, respectively) $611,036,742 $360,664,508
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.94 $14.49 $13.62 $13.33 $15.25 $15.98
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .38 (c) .71 (c) .83 (c) 1.00 .97 1.07
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.60) (.24) .82 .19 (1.84) .44
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.22) .47 1.65 1.19 (.87) 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.52) (.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 (.52) (1.02) (.78) (.90) (1.05) (2.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.20 $13.94 $14.49 $13.62 $13.33 $15.25
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.57) * 3.38 12.46 9.38 (5.93) 10.44
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $272,943 $316,837 $343,125 $366,476 $461,506 $554,963
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .64 * 1.29 1.32 1.34 1.27 1.27
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.82 * 4.90 5.93 7.19 6.57 6.12
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 330.10 * 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 Feb. 1, 1994+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.90 $14.45 $13.60 $13.31 $15.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .33 (c) .59 (c) .72 (c) .77 .64
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.60) (.23) .81 .33 (2.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.27) .36 1.53 1.10 (1.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.46) (.52) (.68) (.55) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.39) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.26) (.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.91) (.68) (.81) (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.17 $13.90 $14.45 $13.60 $13.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.93) * 2.62 11.57 8.63 (9.52) *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $38,158 $41,322 $41,106 $30,910 $22,387
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.02 * 2.04 2.07 2.09 1.49 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.45 * 4.22 5.13 6.59 4.76 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 330.10 * 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 Mar. 17, 1995+
operating performance (Unaudited) Year ended October 31 to Oct. 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.89 $14.44 $13.59 $12.81
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .38 (c) .66 (c) .77 (c) .49
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.63) (.23) .83 .88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.25) .43 1.60 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.52) (.56) (.75) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.42) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.19)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.52) (.98) (.75) (.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.12 $13.89 $14.44 $13.59
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.81) * 3.15 12.14 10.87 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $299,936 $2,506 $1,892 $509
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77 * 1.54 1.58 .96 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.71 * 4.74 5.52 4.78 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 330.10 * 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
April 30, 1998 (Unaudited)
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 in 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 basis.
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 six months ended April 30, 1998 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. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the next $5
billion, 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.
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 six months ended April 30, 1998, fund expenses were reduced by $78,742
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.
Each Trustee of the funds receives an annual Trustee fee, of which $910 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 six months April 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $11,214 and $855,534 from the sale of
class A and class M shares, respectively and $74,840 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended April 30, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $440 on class A redemptions.
Note 3
Purchase and sales of securities
During the period ended April 30, 1998, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $1,127,611,444 and $858,276,281, respectively. Purchases and sales
of U.S. government obligations aggregated $750,125,173 and $770,966,534,
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
- ------------------------------------------------------------
Written options
outstanding
at beginning
of period $ 14,995,000 $ 186,688
- ------------------------------------------------------------
Options opened 139,457,500 889,458
- ------------------------------------------------------------
Options expired (154,295,000) (1,027,266)
- ------------------------------------------------------------
Options closed -- --
- ------------------------------------------------------------
Written options
outstanding at
end of period $ 157,500 $ 48,880
- ------------------------------------------------------------
Note 4
Capital shares
At April 30, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 1,617,720 $ 21,741,227
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 681,246 9,086,313
- ------------------------------------------------------------
2,298,966 30,827,540
Shares
repurchased (4,346,491) (58,288,919)
- ------------------------------------------------------------
Net decrease (2,047,525) $(27,461,379)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 795,754 $ 10,617,297
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 83,537 1,111,401
- ------------------------------------------------------------
879,291 11,728,698
Shares
repurchased (953,535) (12,700,556)
- ------------------------------------------------------------
Net decrease (74,244) $ (971,858)
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 23,300,569 $313,376,464
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,329 84,025
- ------------------------------------------------------------
23,306,898 313,460,489
Shares
repurchased (620,064) (8,160,167)
- ------------------------------------------------------------
Net increase 22,686,834 $305,300,322
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
William J. Curtin
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
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
- --------------------
SA031-42869-041/220/906 6/98
