Putnam
Global
Governmental
Income Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Investor perception is one of the most difficult and perplexing aspects of
investment management. Analysts can crunch numbers and fund managers can
make all sorts of inferences from the steady inflow of data. But so far no
one has found a reliable way of measuring what investors are going to
think at any given point.
During Putnam Global Governmental Income Trust's fiscal year that ended on
October 31, 1999, there were challenges aplenty as the world's central
banks either raised interest rates or considered raising them, and
inflation looked as though it might heat up as a result of economic growth
around the globe. In general, investors' cautious response to these
uncertainties during the period had a definite dampening effect on the
markets and, therefore, on your fund's results.
In the following report, your fund's managers discuss in detail the global
economic environment that prevailed during the period, the strategies they
pursued in response to events in individual markets, the fund's
performance during fiscal 1999, and their view of prospects for the next
fiscal year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 15, 1999
Report from the Fund Managers
D. William Kohli
Jeffrey A. Kaufman
Global fixed-income investors had a difficult time making money in 1999.
Strong economic growth in many regions spurred higher interest rates and
raised the specter of inflation, a frequent concern for fixed-income
investors since it decreases the value of a bond's payments. Your fund was
able to benefit from a few bright spots, however, resulting in a roughly
flat overall total return for the 12 months ended October 31, 1999. The
fund's 30-day SEC yield for class A shares at NAV was 4.97% at the end of
October, reflecting slightly higher rates worldwide.
Total return for 12 months ended 10/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------------
-0.85% -5.56% -1.58% -6.22% -1.52% -2.44% -1.10% -4.32%
- ----------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* GLOBAL ECONOMY SHIFTS INTO HIGH GEAR
After years of sluggish economic growth, Europe, Japan, and the emerging
markets turned the corner in late 1998 and delivered uniformly strong
growth throughout the period, keeping pace with the United States. While
this benefited stock investors in many parts of the world, bond investors
fared less well. Stronger-than-expected economic growth in the United
States and Europe fostered an atmosphere of unease as investors braced
themselves for inflation and higher interest rates.
During the fiscal year's second half, preemptive increases in short-term
interest rates by the Federal Reserve Board and the Bank of England --
along with indications by other national banks that similar actions would
follow -- drove yields higher and prices lower in the United States and
across the Continent. Inflation concerns restrained these markets through
the period's end despite the fact that their fundamental underpinnings
were sound. Another negative during the period was the weakness of the
euro, Europe's common currency. The euro lost more than 10% of its value
relative to the dollar in 1999, and the weak currency magnified losses in
the region as euro-based returns were converted to a relatively stronger
dollar.
[GRAPHIC OMITTED: horizontal bar chart SAMPLE BOND MARKET RETURNS]
SAMPLE BOND MARKET RETURNS
(12 months through 10/31/99 in U.S. dollars)
Brazil 20.8%
Japan 11.8%
Mexico 10.4%
Canada 6.7%
United Kingdom -0.2%
United States -0.7%
Sweden -4.4%
Denmark -10.6%
Germany -11.7%
Footnote reads:
Sources: Salomon Smith Barney and J.P. Morgan Securities, Inc. The fund's
investments in these markets produced returns that may not match those
shown. Past performance is no indication of future results.
Investments that made a positive contribution to the portfolio during the
year include those in Japan and the emerging markets. Investors renewed
their interest in Japanese government bonds in response to proposed fiscal
stimulatory packages. A stronger yen relative to the dollar gave the
fund's Japanese investments an added boost in the same way that the
declining euro detracted from the fund's European investments.
Latin American markets performed extremely well during the period. The
attractive valuations and higher-yielding potential of most
emerging-markets debt became too compelling for investors to ignore,
particularly in light of accelerating global economic growth. The
possibility that Mexico's bonds might be elevated to investment-grade
status in 2000 further enhanced perceptions of its sovereign
creditworthiness. The fund's emerging-markets holdings also provided
exceptional yields, more than seven percentage points above comparable
U.S. Treasuries in some cases.
[GRAPHIC OMITTED: horizontal bar chart GEOGRAPHIC DIVERSIFICATION (10/31/99)]
GEOGRAPHIC DIVERSIFICATION (10/31/99)*
United States 35.7%
United Kingdom 13.5%
Other 11.2%
Canada 9.8%
Germany 8.7%
Sweden 6.7%
Netherlands 4.4%
France 4.1%
Australia 3.3%
Spain 3.2%
Footnote reads:
*Based on net assets. Country allocations will vary over time.
Until the year's second quarter, the fund's corporate bond holdings shared
in a sector-wide rebound from the sharp losses associated with 1998's
flight to quality. Stronger economic growth and rapid industry
consolidation also contributed to performance. Toward the end of the year,
however, these bonds suffered from a flood of new supply that came to
market. Corporations were seeking to refinance their debt ahead of rising
interest rates, and some firms wanted to secure financing in advance of
the new year to avoid any potential Y2K problems.
* STRATEGY FOCUSED ON HIGHER-YIELDING SECTORS
As the period progressed, we gradually increased the fund's allocation to
emerging-markets debt, taking it from roughly 5% of net assets at the
start of the year up to 8.5% at year-end, including Brady bonds. In our
estimation, the valuations and yields in this sector are especially
attractive at present. Year to date, emerging-markets bonds have been the
best performing fixed-income asset class in the world largely because of
the recoveries under way in many world economies and a willingness on the
part of investors to participate in these markets after the so-called
Asian flu of 1998. At the end of October, the fund had emerging-markets
representation in Mexico, Brazil, Argentina, and Venezuela.
Outside the emerging markets, we added to the fund's high-yielding
corporate bonds, particularly in Europe. At the moment, Europe is going
through a corporate renaissance similar to the restructuring that took
place in the United States in the early 1990s. Industries are becoming
less rigidly regulated and corporations are increasingly focused on
delivering shareholder value.
Corporations that previously went to banks for financing are now gaining
flexibility and saving money by going directly to the debt markets.
Telecommunications is a particularly active sector. Recently deregulated,
the industry is dominated by aggressive companies striving to carve out
market share in this growing business, often through mergers and
acquisitions. In October, for example, German wireless giant Mannesmann
made a bid for Britain's Orange PLC, a portfolio holding. Less than a
month later, Vodafone AirTouch, a British corporation, offered $137
billion for Mannesmann in what would amount to the biggest takeover ever.
Mannesmann's shareholders rejected the bid.
"With exposure to Europe, the emerging markets, and the growing market for
corporate bonds, we believe Putnam Global Governmental Income Trust is well
positioned for the coming months."
- -- D. William Kohli, portfolio manager
Other corporate bond issues that performed well for the fund during the
period include Nextel, Charter Communications, and Microcel
Telecommunications. While the securities discussed in this report were
viewed favorably at the end of the period, all holdings are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
In the government sector, we reduced the fund's position in Europe in the
first half of the year because growth predictions were strong and the
implications for interest rates negative. In hindsight, this proved to be
a good move, since the bond markets in the region generally delivered poor
results. However, by the end of the period we had begun to reinstate our
position in these markets. We also began to increase the fund's exposure
to the euro, which we believe has passed its low point relative to the
dollar and may benefit from stronger European economic growth in the
coming months.
We phased out the fund's position in Japanese bonds gradually during the
year. Although this market provided one of the few positive returns over
the period, we believe it offers limited potential for further gains.
Because the yields on Japanese bonds are already among the lowest in the
world, committing more of the fund's assets to Japan may also hurt the
fund's yield. Beyond these immediate concerns, we believe there are
structural problems in Japan that make it a poor investment choice.
Perhaps the greatest difficulty is Japan's enormous fiscal deficit, now
more than 10% of annual gross domestic product and the largest in the
world in dollar terms. An aging population will only increase the need for
government bond issuance, which is likely to tip the supply/demand balance
in favor of too much supply and result in higher yields down the road,
making today's low-yielding bonds less attractive by comparison.
* MARKET FUNDAMENTALS SEEN IMPROVING
Even though yields are still relatively low from a historical standpoint,
the outlook for the world's government bonds is good from a price
appreciation standpoint. At the moment, every major government but Japan
is running a fiscal surplus, which reduces the need to borrow and
therefore affects the supply of bonds. If this trend continues, investor
demand for income may outstrip supply, resulting in higher bond prices in
many markets. Although economic growth has picked up around the world, new
technologies and fierce global competition continue to keep inflation at
bay.
In our opinion, interest rates may move up slightly in the near term but a
trend toward significantly higher rates is unlikely. This is particularly
true in Europe, where there is still a serious unemployment problem. With
exposure to Europe, the emerging markets, and the growing market for
corporate bonds, we believe your fund is well positioned for the coming
months.
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 10/31/99, 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. Any government backing only
guarantees that the fund's government-backed holdings will make timely
payment of interest and principal. Mortgage-backed securities may be
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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 10/31/99
Class A Class B Class C Class M
(inception dates) (6/1/87) (2/1/94) (7/26/99) (3/17/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year -0.85% -5.56% -1.58% -6.22% -1.52% -2.44% -1.10% -4.32%
- -----------------------------------------------------------------------------------------------
5 years 24.66 18.78 20.13 18.35 20.14 20.14 23.06 19.04
Annual average 4.51 3.50 3.74 3.43 3.74 3.74 4.24 3.55
- -----------------------------------------------------------------------------------------------
10 years 93.22 84.02 79.16 79.16 79.34 79.34 88.27 82.19
Annual average 6.81 6.29 6.00 6.00 6.02 6.02 6.53 6.18
- -----------------------------------------------------------------------------------------------
Life of fund 161.43 149.08 136.58 136.58 138.23 138.23 151.54 143.32
Annual average 8.04 7.62 7.18 7.18 7.24 7.24 7.71 7.42
- -----------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/99
Salomon Bros.
World Govt. Consumer
Bond Index price index
- ----------------------------------------------------------------------
1 year -2.46% 2.69%
- ----------------------------------------------------------------------
5 years 36.73 12.51
Annual average 6.46 2.39
- ----------------------------------------------------------------------
10 years 124.06 33.92
Annual average 8.40 2.96
- ----------------------------------------------------------------------
Life of fund 163.87 48.72
Annual average 8.13 3.25
- ----------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. 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: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 10/31/89
Salomon Bros.
Fund's class A World Govt. Consumer price
Date shares at POP Bond Index index
10/31/89 9,523 10,000 10,000
10/31/90 11,389 11,141 10,629
10/31/91 12,800 12,400 10,939
10/31/92 14,200 14,122 11,290
10/31/93 15,692 15,814 11,600
10/31/94 14,762 16,386 11,903
10/31/95 16,146 18,877 12,237
10/31/96 18,158 19,890 12,604
10/31/97 18,772 20,409 12,866
10/31/98 18,559 22,970 13,041
10/31/99 $18,402 $22,406 $13,392
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 and class C shares
would have been valued at $17,916 and $17,934, respectively, and no
contingent deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $18,827 ($18,219 at public
offering price).
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/99
Class A Class B Class C Class M
- -------------------------------------------------------------------------------
Distributions (number) 12 12 3 12
- -------------------------------------------------------------------------------
Income $0.717 $0.635 $0.162 $0.689
- -------------------------------------------------------------------------------
Return of capital 0.093 0.083 0.021 0.089
- -------------------------------------------------------------------------------
Capital gains -- -- -- --
- -------------------------------------------------------------------------------
Total $0.810 $0.718 $0.183 $0.778
- -------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- -------------------------------------------------------------------------------
10/31/98 $12.82 $13.46 $12.79 -- $12.77 $13.20
- -------------------------------------------------------------------------------
7/26/99* -- -- -- $12.05 -- --
- -------------------------------------------------------------------------------
10/31/99 11.91 12.50 11.88 11.91 11.86 12.26
- -------------------------------------------------------------------------------
Current return (end of period)
- -------------------------------------------------------------------------------
Current dividend rate1 6.55% 6.24% 5.76% 5.94% 6.27% 6.07%
- -------------------------------------------------------------------------------
Current 30-day SEC yield2 4.97 4.73 4.21 4.18 4.71 4.56
- -------------------------------------------------------------------------------
* Inception of class C shares.
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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99
Class A Class B Class C Class M
(inception dates) (6/1/87) (2/1/94) (7/26/99) (3/17/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 2.62% -2.24% 1.88% -2.93% 1.87% 0.92% 2.37% -0.98%
- --------------------------------------------------------------------------------------------
5 years 25.50 19.58 20.96 19.17 20.90 20.90 23.82 19.78
Annual average 4.65 3.64 3.88 3.57 3.87 3.87 4.37 3.68
- --------------------------------------------------------------------------------------------
10 years 94.58 85.33 80.45 80.45 80.35 80.35 89.51 83.42
Annual average 6.88 6.36 6.08 6.08 6.07 6.07 6.60 6.25
- --------------------------------------------------------------------------------------------
Life of fund 161.52 149.17 136.83 136.83 138.24 138.24 151.70 143.47
Annual average 8.11 7.69 7.24 7.24 7.29 7.29 7.77 7.48
- --------------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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.
</TABLE>
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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 4.75% maximum 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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Salomon Brothers World Government Bond Index is an index that tracks the
performance of the 14 government bond markets of Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, Netherlands,
Spain, Sweden, United Kingdom and the United States. Country eligibility
is determined by market capitalization and investability criteria. 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.
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New features will be added to the site regularly. So be sure to bookmark us at
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A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended October 31, 1999
To the Trustees and Shareholders of
Putnam Global Governmental Income Trust
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam Global
Governmental Income Trust (the "fund") at October 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of investments owned at October 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 1999
<TABLE>
<CAPTION>
The fund's portfolio
October 31, 1999
FOREIGN GOVERNMENT BONDS AND NOTES (52.8%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
USD 3,135,000 Argentina (Republic of) unsub. 11 3/4s, 2009 $ 3,072,300
AUD 16,815,000 Australia (Government of) bonds
Ser. 808, 8 3/4s, 2008 12,183,164
USD 3,812,000 Brazil (Federal Republic of) notes
14 1/2s, 2009 3,950,376
CAD 48,270,000 Canada (Government of) bonds
4 1/2s, 2001 32,208,439
USD 3,500,000 Colombia (Republic of) unsub.
8 5/8s, 2008 2,988,300
DKK 58,805,000 Denmark (Kingdom of) bonds 4s, 2001 8,325,530
EUR 14,815,000 France (Government of) deb. 4s, 2009 14,217,467
EUR 8,445,000 Germany (Federal Republic of) bonds
Ser. 98, 5 5/8s, 2028 8,678,504
EUR 8,625,000 Germany (Federal Republic of) notes
Ser. 99, 3s, 2001 8,986,206
EUR 7,535,000 Netherlands (Government of) bonds
5 1/2s, 2028 7,501,115
EUR 2,602,382 Spain (Government of) bonds 6s, 2029 2,756,626
EUR 8,730,000 Spain (Government of) bonds 5.15s, 2009 9,044,996
SEK 16,700,000 Sweden (Government of) bonds Ser. 1041,
6 3/4s, 2014 2,184,177
SEK 67,000,000 Sweden (Government of) bonds Ser. 1035,
6s, 2005 8,364,887
SEK 111,700,000 Sweden (Government of) bonds Ser. 1039,
5 1/2s, 2002 13,773,976
GBP 11,435,000 United Kingdom Treasury bonds 10s, 2003 21,157,145
GBP 15,490,000 United Kingdom Treasury bonds 7s, 2002 25,947,827
USD 3,265,000 United Mexican States bonds Ser. XW,
10 3/8s, 2009 3,322,138
USD 5,360,000 Venezuela (Government of) bonds
9 1/4s, 2027 3,604,600
--------------
Total Foreign Government Bonds and Notes
(cost $196,967,376) $ 192,267,773
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (20.2%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Treasury Obligations (20.2%)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
$11,490,000 6 3/8s, August 15, 2027 $ 11,450,474
7,370,000 6 1/8s, August 15, 2029 7,337,719
U.S. Treasury Notes
3,250,000 6 5/8s, April 30, 2002 (SEG) 3,306,355
8,415,000 6 1/8s, August 15, 2007 8,382,097
11,140,000 5 1/2s, May 15, 2009 10,685,711
U.S. Treasury Notes
12,335,000 4 1/4s, November 15, 2003 11,589,103
21,152,683 3 7/8s, January 15, 2009 20,756,070
--------------
Total U.S. Government and Agency Obligations
(cost $75,797,059) $ 73,507,529
CORPORATE BONDS AND NOTES (19.1%) (a)
PRINCIPAL AMOUNT VALUE
Airlines (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
$ 500,000 Canadian Airlines Corp. secd. notes
10s, 2005 (Canada) $ 412,500
Automotive Parts (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Navistar International Corp. sr. notes Ser. B, 8s, 2008 478,750
Banks (4.0%)
- --------------------------------------------------------------------------------------------------------------------------
750,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 696,660
DEM 3,915,000 Hypothekenbank in Essen AG 144A jumbo brief
Ser. 524, 4s, 2009 (Germany) 3,688,598
EUR 9,811,900 Kreditanstalt Fuer Wiederauf bonds 5s, 2009 (Germany) 10,056,310
--------------
14,441,568
Broadcasting (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
$ 500,000 Fox/Liberty Networks LLC sr. notes 8 7/8s, 2007 507,500
550,000 Sinclair Broadcast Group, Inc. company guaranty
9s, 2007 517,000
--------------
1,024,500
Building Products (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
EUR 500,000 American Standard, Inc. company guaranty
7 1/8s, 2006 508,555
DEM 1,000,000 Geberit International AG company guaranty
10 1/8s, 2007 (Switzerland) 603,570
EUR 750,000 Go Outdoor Systems Holding S.A. 144A sr. sub. notes
10 1/2s, 2009 (France) 818,168
EUR 750,000 Kappa Beheer BV 144A company guaranty
10 5/8s, 2009 (Netherlands) 802,358
--------------
2,732,651
Business Services (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
$ 500,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 528,750
GBP 500,000 TDL Infomedia Group Ltd. 144A sr. sub. notes
12 1/8s, 2009 (United Kingdom) 799,346
--------------
1,328,096
Cable Television (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
$ 220,000 Adelphia Communications Corp. sr. notes
7 7/8s, 2009 198,000
270,000 Charter Communications Holdings LLC sr. notes
8 5/8s, 2009 253,800
500,000 CSC Holdings, Inc. sr. notes 7 1/4s, 2008 472,680
130,000 TeleWest Communications PLC 144A sr. disc. notes
stepped-coupon zero %, (9 1/4s, 4/15/04) 2009
(United Kingdom) (STP) 78,975
--------------
1,003,455
Cellular Communications (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
CAD 1,000,000 Clearnet Communications, Inc. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/04), 2009
(Canada) (STP) 380,745
$ 200,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (10.65s, 9/15/02), 2007 (STP) 150,000
GBP 500,000 Orange PLC sr. notes 8 5/8s, 2008 (United Kingdom) 838,389
--------------
1,369,134
Chemicals (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
EUR 500,000 Huntsman ICI Chemicals Inc. sr. sub. notes
10 1/8s, 2009 520,413
Computer Services and Software (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
$ 500,000 Unisys Corp. sr. notes 7 7/8s, 2008 478,750
Cosmetics (--%)
- --------------------------------------------------------------------------------------------------------------------------
280,000 Revlon Consumer Products sr. sub. notes
8 5/8s, 2008 148,400
Electric Utilities (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Calpine Corp. sr. notes 7 7/8s, 2008 470,000
500,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 549,885
500,000 Midwest Energy Co. 144A notes 8.7s, 2009 504,125
180,000 York Power Funding 144A notes 12s, 2007
(Cayman Islands) 183,600
--------------
1,707,610
Electronics (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Celestica International Ltd. 144A sr. sub. notes
10 1/2s, 2006 (Canada) 523,750
Entertainment (--%)
- --------------------------------------------------------------------------------------------------------------------------
150,000 Premier Parks, Inc. sr. notes 9 3/4s, 2007 147,000
Financial Services (8.9%)
- --------------------------------------------------------------------------------------------------------------------------
DKK 6,147,000 Realkredit Danmark mortgage 7s, 2029 (Denmark) 853,544
EUR 500,000 BSN Financing Co S.A. 144A company guaranty
10 1/4s, 2009 (Luxembourg) 533,588
$ 220,000 Contifinancial Corp. sr. notes 7 1/2s, 2002 37,400
EUR 9,025,000 DSL Finance NV bonds 5 3/4s, 2009 (Netherlands) 4,912,223
$ 7,130,000 Fannie Mae notes 6 1/2s, 2004 7,142,264
19,675,000 Fannie Mae notes 5 1/8s, 2004 18,703,449
280,000 RBF Finance Co. company guaranty 11s, 2006 296,800
--------------
32,479,268
Food Chains (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Southland Corp. sr. sub. deb. 5s, 2003 431,250
Gaming (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
110,000 Argosy Gaming Co. company guaranty 10 3/4s, 2009 113,300
170,000 Hollywood Casino Corp. company guaranty
11 1/4s, 2007 170,850
--------------
284,150
Health Care (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 217,323
DEM 750,000 Fresenius Medical Capital Trust II company guaranty
7 3/8s, 2008 (Germany) 410,239
--------------
627,562
Metals and Mining (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
$ 270,000 AK Steel Corp. company guaranty 7 7/8s, 2009 245,700
250,000 P & L Coal Holdings Corp. company guaranty
Ser. B, 9 5/8s, 2008 238,125
350,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 342,125
--------------
825,950
Oil and Gas (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 CMS Energy Corp. pass-through certificates 7s, 2005 471,975
750,000 Gulf Canada Resources Ltd. sr. sub. notes
9 5/8s, 2005 (Canada) 759,375
--------------
1,231,350
Packaging and Containers (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 483,060
250,000 Riverwood International Corp. company guaranty
10 1/4s, 2006 251,250
--------------
734,310
Paper and Forest Products (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
200,000 Repap New Brunswick sr. notes 10 5/8s,
2005 (Canada) 177,500
500,000 Tembec Industries, Inc. company guaranty 8 5/8s,
2009 (Canada) 487,500
--------------
665,000
Pharmaceuticals (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 162,350
Telecommunications (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
630,000 Carrier1 Intl. S.A. sr. notes Ser. B, 13 1/4s, 2009
(Luxembourg) 645,750
EUR 500,000 Esat Telecom Group PLC sr. unsub. notes
11 7/8s, 2009 (Ireland) 538,858
EUR 1,000,000 Hermes Europe Railtel BV 144A sr. notes
10 3/8s, 2006 (Netherlands) 1,075,080
$ 750,000 Microcell Telecommunications sr. disc. notes
stepped-coupon Ser. B, zero % (14s, 12/1/01), 2006
(Canada) (STP) 616,875
GBP 250,000 NTL Inc. sr. unsub. notes 9 1/2s, 2008 396,591
DEM 750,000 RSL Communications PLC bonds stepped-coupon
zero % (10s, 3/15/03), 2008 (United Kingdom) (STP) 230,380
EUR 750,000 United Pan-Europe NV 144A sr. notes
10 7/8s, 2009 (Netherlands) 770,738
$ 700,000 Versatel Telecom BV sr. notes 13 1/4s, 2008 (Netherlands) 693,000
--------------
4,967,272
Telephone Services (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
140,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon
zero % (8.94s, 8/15/03), 2008 (Canada) (STP) 81,200
180,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 159,300
DEM 1,000,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12.4s, 4/15/03), 2008 (STP) 299,090
--------------
539,590
Utilities (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
$ 360,000 Public Service Co. of New Mexico sr. notes
Ser. A, 7.1s, 2005 355,810
--------------
Total Corporate Bonds and Notes
(cost $73,056,369) $ 69,620,439
BRADY BONDS (3.3%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 8,898,895 Brazil (Republic of) bonds 8s, 2014 (POR) $ 5,940,013
8,375,000 United Mexican States Sec. Ser. W-B, 6 1/4s, 2019 6,260,313
--------------
Total Brady Bonds (cost $12,281,176) $ 12,200,326
PURCHASED OPTIONS OUTSTANDING (2.9%) (a) EXPIRATION DATE/
CONTRACT AMOUNT STRIKE PRICE VALUE
- --------------------------------------------------------------------------------------------------------------------------
3,600,000,000 U.S. Dollars in exchange for
Japanese Yen (Call) Feb. 00/100 JPY $ 10,692,145
222,500 U.S. Dollars in exchange for
Japanese Yen (Put) Dec. 99/87 JPY 8,900
--------------
Total Purchased Options Outstanding
(cost $9,575,411) $ 10,701,045
WARRANTS (--%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
630 Network Plus Corp. 2/19/09 $ 12,600
90 R&B Falcon Corp. 144A 5/1/09 22,500
50 Telehub Communications Corp. 7/31/05 250
950 Versatel Telecom B.V. 144A (Netherlands) 5/15/08 137,750
--------------
Total Warrants (cost $43,245) $ 173,100
COMMON STOCKS (--%) (a) (cost $403,384)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
11,327 PSF Holdings LLC, Class A (NON) $ 141,588
PREFERRED STOCKS (--%) (a) (cost $84,091)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
93 R&B Falcon Corp. $13.875 pfd. $ 91,140
SHORT-TERM INVESTMENTS (2.2%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 3,700,000 Merrill Lynch & Co. effective yield of 5.23%,
November 5, 1999 $ 3,697,850
4,310,000 Interest in $462,305,000 joint repurchase agreement
dated October 29, 1999 with Warburg Securities
due November 1, 1999 with respect to various U.S.
Treasury obligations -- maturity value of $4,311,875
for an effective yield of 5.22% 4,310,000
--------------
Total Short-Term Investments (cost $8,007,850) $ 8,007,850
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $376,215,961) (b) $ 366,710,790
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $364,388,241.
(b) The aggregate identified cost on a tax basis is $379,417,891, resulting in gross unrealized appreciation and
depreciation of $4,395,269 and $17,102,370, respectively, or net unrealized depreciation of $12,707,101.
(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 October 31, 1999.
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 31,1999 (as percentage of Market Value)
United States 35.4%
United Kingdom 13.4
Canada 9.7
Germany 8.7
Sweden 6.6
Netherlands 4.3
France 4.1
Australia 3.3
Spain 3.2
Brazil 2.7
Mexico 2.6
Denmark 2.5
Venezuela 1.0
Other 2.5
-----
Total 100.0%
=====
- -------------------------------------------------------------------------------
Forward Currency Contracts to Buy at October 31, 1999
(aggregate face value $661,789,716)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
Australian Dollars $ 9,231,183 $ 9,527,429 2/3/2000 $ (296,246)
Euro Dollar 247,937,418 250,226,700 2/3/2000 (2,289,282)
Japanese Yen 380,547,142 366,842,790 2/3/2000 13,704,352
Swiss Franc 35,221,515 35,192,797 2/3/2000 28,718
- -------------------------------------------------------------------------------
$11,147,542
- -------------------------------------------------------------------------------
Forward Currency Contracts to Sell at October 31, 1999
(aggregate face value $604,679,414)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
Australian Dollars $ 5,627,304 $ 5,731,513 2/3/2000 $ 104,209
Canadian Dollar 27,901,035 27,485,743 2/3/2000 (415,292)
Danish Krone 6,706,514 6,760,746 2/3/2000 54,232
Euro Dollar 198,278,831 199,816,374 2/3/2000 1,537,543
British Pounds 34,149,849 33,914,956 2/3/2000 (234,893)
Japanese Yen 326,743,476 314,612,538 2/3/2000 (12,130,938)
Swedish Krona 16,282,689 16,357,544 2/3/2000 74,855
- -------------------------------------------------------------------------------
$(11,010,284)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at October 31, 1999
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
Euro Euribor (long) $84,067,769 $84,040,460 Jun-00 $ 27,309
Euro Euribor (long) 56,081,693 56,080,345 Mar-00 1,348
Euro Euribor (long) 112,524,000 112,473,120 Sep-00 50,880
Euro Euribor (long) 121,266,781 121,778,353 Dec-99 (511,572)
Euro Euribor (short) 28,456,433 28,597,479 Dec-00 141,046
Euro Euribor (short) 20,333,759 20,409,917 Dec-99 76,158
Euro Euribor (short) 29,123,721 29,260,589 Jun-00 136,868
Euro Euribor (short) 27,110,502 27,198,090 Jun-01 87,588
Euro Euribor (short) 21,336,060 21,425,800 Mar-00 89,740
Euro Euribor (short) 27,669,069 27,802,007 Mar-01 132,938
Euro Euribor (short) 28,799,879 28,939,298 Sep-00 139,419
Euro Euribor (short) 139,958,469 139,893,192 Sep-00 (65,277)
U.S. Treasury Bond
(long) 11,245,781 11,343,745 Dec-99 (97,964)
U.S. Treasury Notes
10yr (short) 21,943,750 21,899,270 Dec-99 (44,480)
- -------------------------------------------------------------------------------
$164,001
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $376,215,961) (Note 1) $366,710,790
- -----------------------------------------------------------------------------------------------
Cash 54,059
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $2,299,977) 2,326,148
- -----------------------------------------------------------------------------------------------
Interest and other receivables 7,190,816
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 115,609
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 1,489,937
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 339,970
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 15,503,909
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 42,742
- -----------------------------------------------------------------------------------------------
Total assets 393,773,980
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 8,114
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 10,798,927
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 845,463
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 660,019
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 72,987
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 36,229
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 620
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 140,808
- -----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 15,366,651
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 1,428,575
- -----------------------------------------------------------------------------------------------
Other accrued expenses 27,346
- -----------------------------------------------------------------------------------------------
Total liabilities 29,385,739
- -----------------------------------------------------------------------------------------------
Net assets $364,388,241
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $428,450,979
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 10,799
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (54,808,915)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (9,264,622)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $364,388,241
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($132,599,808 divided by 11,130,768 shares) $11.91
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $11.91)* $12.50
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($30,309,667 divided by 2,551,175 shares)** $11.88
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($49,582 divided by 4,164 shares)** $11.91
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($201,429,184 divided by 16,981,973 shares) $11.86
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $11.86)* $12.26
- -----------------------------------------------------------------------------------------------
* 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, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest (net of foreign tax of $182,492) $28,948,975
- -----------------------------------------------------------------------------------------------
Dividends 4,867
- -----------------------------------------------------------------------------------------------
Total investment income 28,953,842
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,593,565
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 724,349
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 20,224
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,928
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 533,156
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 338,930
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 83
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,094,886
- -----------------------------------------------------------------------------------------------
Reports to shareholders 30,205
- -----------------------------------------------------------------------------------------------
Auditing 57,823
- -----------------------------------------------------------------------------------------------
Legal 5,895
- -----------------------------------------------------------------------------------------------
Other 28,377
- -----------------------------------------------------------------------------------------------
Total expenses 6,436,421
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (36,696)
- -----------------------------------------------------------------------------------------------
Net expenses 6,399,725
- -----------------------------------------------------------------------------------------------
Net investment income 22,554,117
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (27,644,472)
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (668,456)
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions 26,477,760
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (16,025,040)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
futures contracts during the year (10,380,128)
- -----------------------------------------------------------------------------------------------
Net loss on investments (28,240,336)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(5,686,219)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 22,554,117 $ 30,708,121
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments and
foreign currency transactions (1,835,168) (50,800,739)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (26,405,168) 13,268,044
- ---------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (5,686,219) (6,824,574)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (10,609,623) (9,890,406)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,489,382) (1,207,442)
- ---------------------------------------------------------------------------------------------------------------
Class C (419) --
- ---------------------------------------------------------------------------------------------------------------
Class M (10,454,693) (8,427,540)
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A (1,754,541) --
- ---------------------------------------------------------------------------------------------------------------
Class B (246,303) --
- ---------------------------------------------------------------------------------------------------------------
Class C (69) --
- ---------------------------------------------------------------------------------------------------------------
Class M (1,728,919) --
- ---------------------------------------------------------------------------------------------------------------
From return of capital
Class A (1,602,595) (9,983,386)
- ---------------------------------------------------------------------------------------------------------------
Class B (224,973) (1,218,794)
- ---------------------------------------------------------------------------------------------------------------
Class C (63) --
- ---------------------------------------------------------------------------------------------------------------
Class M (1,579,192) (8,506,768)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (103,730,719) 188,890,353
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (139,107,710) 142,831,443
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 503,495,951 360,664,508
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
and distributions in excess of net income of $10,799 and
$15,550,349, respectively) $364,388,241 $503,495,951
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.82 $13.94 $14.49 $13.62 $13.33
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .62(c) .77(c) .71(c) .83(c) 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.72) (.95) (.24) .82 .19
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.10) (.18) .47 1.65 1.19
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.62) (.47) (.59) (.78) (.62)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.10) -- (.43) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital (.09) (.47) -- -- (.28)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.81) (.94) (1.02) (.78) (.90)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.91 $12.82 $13.94 $14.49 $13.62
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (0.85) (1.14) 3.38 12.46 9.38
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $132,600 $253,611 $316,837 $343,125 $366,476
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.21 1.26 1.29 1.32 1.34
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.02 5.90 4.90 5.93 7.19
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 290.27 561.48 638.66 429.38 300.66
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (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
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.79 $13.90 $14.45 $13.60 $13.31
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .55(c) .67(c) .59(c) .72(c) .77
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.74) (.94) (.23) .81 .33
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.19) (.27) .36 1.53 1.10
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.55) (.42) (.52) (.68) (.55)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.09) -- (.39) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital (.08) (.42) -- -- (.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.72) (.84) (.91) (.68) (.81)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.88 $12.79 $13.90 $14.45 $13.60
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.58) (1.87) 2.62 11.57 8.63
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $30,310 $36,017 $41,322 $41,106 $30,910
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.96 2.01 2.04 2.07 2.09
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.26 5.17 4.22 5.13 6.59
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 290.27 561.48 638.66 429.38 300.66
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (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 C
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to October 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $12.05
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .14(c)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .04
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.91
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) .37*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $50
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .53*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.29*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 290.27
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (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
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.77 $13.89 $14.44 $13.59 $12.81
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .59(c) .76(c) .66(c) .77(c) .49
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.72) (.95) (.23) .83 .88
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.13) (.19) .43 1.60 1.37
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.59) (.46) (.56) (.75) (.40)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.10) -- (.42) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital (.09) (.47) -- -- (.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.78) (.93) (.98) (.75) (.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.86 $12.77 $13.89 $14.44 $13.59
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.10) (1.28) 3.15 12.14 10.87*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $201,429 $213,868 $2,506 $1,892 $509
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.46 1.51 1.54 1.58 .96*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.76 5.55 4.74 5.52 4.78*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 290.27 561.48 638.66 429.38 300.66
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (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, 1999
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, class C and class M shares. The fund
began offering Class C shares on July 26, 1999. 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 C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum
front-end sales charge of 3.25% and pay an ongoing distribution fee that
is higher than class A but lower than class B and class C 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 that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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 sales price on its principal exchange, or if no sales are
reported -- as in the case of some securities traded over-the-counter --
the last reported bid price.
Short-term investments having remaining maturities of 60 days or less are
stated at amortized cost, which approximates market value, and other
investments, including restricted securities, are stated at fair value
following procedures approved by the Trustees.
Market quotations are not considered to be readily available for certain
debt obligations; such investments are stated at fair value on the basis
of valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders.
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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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). Gains or losses on securities sold are determined on
the identified cost basis. Interest income is recorded on the accrual
basis. 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. Any premium resulting from the purchase of
zero coupon bonds, original issue discount bonds, stepped-coupon bonds and
payment in kind bonds are amortized on a 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, and 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 realized 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. Investments in foreign securities involve
certain risks, including those related to economic stability, unfavorable
political developments, and currency fluctuations, not present with
domestic investments.
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, 1999, 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, as amended. 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, 1999, the fund had a capital loss carryover of
approximately $51,889,000 available to offset future capital gains, if
any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- ----------------
$ 5,449,000 October 31, 2003
24,813,000 October 31, 2006
21,627,000 October 31, 2007
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 losses on wash
sale transactions, foreign currency gains and losses, dividends payable,
unrealized gains and losses on certain futures contracts, market discount,
and foreign market discount. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended October 31, 1999, the fund reclassified $19,290,980 to
decrease distributions in excess of net investment income and an increase
to accumulated net realized losses of $19,290,980. 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: 0.70% of the first $500
million of average net assets, 0.60% of the next $500 million, 0.55% of
the next $500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion, and
0.43% thereafter. Prior to July 1, 1999, the management fees were as
follows, 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.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a 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, 1999, fund expenses were reduced by $36,696
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 fund receives an annual Trustee fee, of which $777 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. 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
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 a 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, class C 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund to an annual rate of 0.25%, 1.00%, 1.00% and 0.50% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended October 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $11,112 and $192,771 from the sale
of class A and class M shares, respectively and $68,231 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, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received $2,090 and no monies on class A and class C
redemptions, respectively.
Note 3
Purchases and sales of securities
During the year ended October 31, 1999, cost of purchases and proceeds
from sales of investment securities other than U.S. government obligations
and short-term investments aggregated $542,058,806 and $584,500,725,
respectively. Purchases and sales of U.S. government obligations
aggregated $691,887,317 and $744,179,540, respectively.
Note 4
Capital shares
At October 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,598,128 $ 46,357,753
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 912,781 10,387,268
- -----------------------------------------------------------------------------
4,510,909 56,745,021
Shares
repurchased (13,162,037) (161,767,035)
- -----------------------------------------------------------------------------
Net decrease (8,651,128) $(105,022,014)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,478,314 $ 45,389,551
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,232,502 16,052,340
- -----------------------------------------------------------------------------
4,710,816 61,441,891
Shares
repurchased (7,653,407) (100,251,624)
- -----------------------------------------------------------------------------
Net decrease (2,942,591) $(38,809,733)
- -----------------------------------------------------------------------------
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,129,520 $14,123,183
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 133,852 1,657,295
- -----------------------------------------------------------------------------
1,263,372 15,780,478
Shares
repurchased (1,529,059) (18,951,466)
- -----------------------------------------------------------------------------
Net decrease (265,687) $(3,170,988)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,505,220 $19,607,542
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 153,614 1,994,786
- -----------------------------------------------------------------------------
1,658,834 21,602,328
Shares
repurchased (1,814,622) (23,589,537)
- -----------------------------------------------------------------------------
Net decrease (155,788) $(1,987,209)
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to October 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,149 $49,506
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 27 317
- -----------------------------------------------------------------------------
4,176 49,823
Shares
repurchased (12) (146)
- -----------------------------------------------------------------------------
Net increase 4,164 $49,677
- -----------------------------------------------------------------------------
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,132,742 $77,444,771
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,333 103,041
- -----------------------------------------------------------------------------
6,141,075 77,547,812
Shares
repurchased (5,912,852) (73,135,206)
- -----------------------------------------------------------------------------
Net increase 228,223 $ 4,412,606
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 25,255,616 $338,237,961
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,841 140,813
- -----------------------------------------------------------------------------
25,266,457 338,378,774
Shares
repurchased (8,693,157) (108,691,479)
- -----------------------------------------------------------------------------
Net increase 16,573,300 $229,687,295
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
For the year ended 1999, a portion of the Fund's distribution represents a
return of capital and is therefore not taxable to shareholders.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
*DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. 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.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity 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 [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
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
ASSET ALLOCATION 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 Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share,
it is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Edward H. D'Alelio
Vice President
D. William Kohli
Vice President and Fund manager
Jeffrey A. Kaufman
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
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' Web site: 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
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN031-56798 041/220/906 12/99
