Putnam
Global
Governmental
Income Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 20, 2000
REPORT FROM FUND MANAGEMENT
D. William Kohli
In the fiscal year that ended October 31, 2000, Putnam Global
Governmental Income Trust's performance was affected by both positive
and negative events. On the positive side, several fund sectors
performed well, benefiting from a slowing U.S. economy, strong
performance among emerging markets, mortgage-backed securities and U.S.
Treasury holdings, and limited exposure to troublesome markets such as
Japan. On the negative side, the fund's currency exposure -- especially
to the euro and the Australian dollar -- hurt its performance relative
to its peers.
Total return for 12 months ended 10/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
-4.24% -8.76% -4.98% -9.50% -5.07% -5.97% -4.49% -7.61%
-----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
* A YEAR OF UNFORESEEN EVENTS
There were several surprises this year on the economic front. First, by
the end of the fund's fiscal year, the U.S. economy had slowed more than
analysts had projected. Second, inflation remained lower than expected,
even with the surge in oil prices. Finally, despite spiking higher in
May, real yields -- the market yields minus the inflation rate -- moved
progressively lower throughout the year.
Around the world, foreign investors were taken aback by the slowing U.S.
economy and the extreme volatility in the U.S. equity markets. In
Europe, investors had hoped that the solid growth in 1999 would be
self-sustaining, but it turned out that this growth was more dependent
on the U.S. than anticipated. In addition, the significant decline in
the euro and the surge in oil prices contributed to Europe's stagnant
economic growth. Both caused higher inflation and somewhat higher
interest rates.
[GRAPHIC OMITTED: horizontal bar chart SAMPLE BOND MARKET RETURNS]
SAMPLE BOND MARKET RETURNS*
(12 months through 10/31/00 in U.S. dollars)
Brazil 19.0%
Japan -2.7%
Mexico 20.8%
Canada 2.9%
United Kingdom -6.1%
United States 8.6%
Sweden -11.2%
Denmark -15.6%
Germany -15.9%
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.
In Japan, bond yields remained extremely low and economic growth was
anemic. We still are concerned about structural problems in Japan's
economy. Consequently, tax revenues are not increasing, and the
government, which is running an enormous deficit, must spend even more
to help stimulate growth of any kind.
On a local currency basis, bond performance in all of the Anglo markets
-- United States, Australia, Canada, and the United Kingdom -- was
strong, benefiting from similar positive fundamentals: slower growth,
low to moderate inflation, and declining yields. European bonds returned
roughly 4% during the period, without factoring in the euro currency
decline.
* CURRENCY PROBLEMS
The euro's decline throughout the year was the strongest negative
influence on your fund's performance, as we had an overweight position
in the currency. This spring, we believed that Europe's economy and the
benefits the euro would bring to European companies would help
strengthen the struggling new currency. However, it continued to decline
through the summer and into the fall for two main reasons. First, there
were several acquisitions of U.S. companies by European companies, which
forced the sale of euros and the purchase of dollars to complete these
transactions. Second, there was a large reallocation of equity assets
from European investors into the U.S. equity markets.
[GRAPHIC OMITTED: horizontal bar chart GEOGRAPHIC DIVERSIFICATION (10/31/00)]
GEOGRAPHIC DIVERSIFICATION (10/31/00)*
United States 43.0%
United Kingdom 12.1%
Germany 11.8%
Greece 5.7%
Denmark 4.5%
Japan 4.0%
Canada 3.8%
Netherlands 3.6%
Italy 3.6%
New Zealand 1.7%
Spain 1.0%
Footnote reads:
*Based on net assets. Country allocations will vary over time.
The declines in the euro, the Australian dollar, and the yen, combined
with a strong dollar, had the effect of boosting performance of the
fund's U.S. holdings while dampening that of its international holdings.
The fund has been overweight the euro and Australian dollar. This
exposure hurt performance on a relative basis and accounted for the
fund's slightly below-average performance within its Lipper peer group.
The euro's decline was more than our currency analysts had anticipated,
and while we regret its effect on the fund's performance, we still
believe the currency will recover. We have, however, reduced our euro
exposure in the past six months.
* GOVERNMENT BONDS PERFORMED WELL WHILE CORPORATES SUFFERED
On a local currency basis, the fund's bond holdings performed well and
validated the effectiveness of our positioning strategy. Our emphasis
was on higher-performing markets such as the United States, Canada,
Australia, and several emerging markets. We underweighted several
markets that did not perform well, such as Japan.
Among the factors influencing this positive performance were the
anticipation of government bond buybacks in several European countries.
A number of countries -- France in particular -- have auctioned licenses
and frequency bandwidth to telecommunications firms. The revenues from
these auctions are expected to help finance the retirement of government
debt.
SORTING OUT THE EURO'S DECLINE
To understand the euro's decline this year, the first place to start may
be the United States. European companies have been pouring money into our
economy at an astounding rate. Unilever Group has purchased Ben & Jerry's
Ice Cream. Lycos is being bought by Terra Networks, the Internet arm of
Spanish phone company Telefonica. Deutsche Telekom has negotiated a proposed
merger with VoiceStream Wireless, and mutual fund company Pioneer Group will
be acquired by Italy's UniCredito Italiano SpA. According to Morgan
Stanley Dean Witter, "the U.S. [has] attracted more than $583 billion in
foreign direct investment (FDI)" in the past two years.* Much of this
has come from Europe. And when the euros used for purchasing these
companies get converted into dollars, the euro sinks and the dollar
rises.
Major European powers did not act together to combat the euro's decline.
Germany, France, Italy, and Spain hold most of the reserves, and their
hesitation has been seen by currency speculators as a vote of no
confidence. European economies also still suffer from inflexible union
demands, government bureaucracy, high tax rates, and costly pensions.
On a positive note, many analysts believe the euro has settled at or
near a bottom. At the same time, the U.S. economy appears to be headed
for slower growth, as equity prices exhibit record-setting volatility
and consumer confidence declines. If the United States loses its appeal
as a place for foreign investment, the Europeans could be beneficiaries
as capital seeks a more favorable environment.
*Business Week, October 2, 2000
It was the buyback in the U.S., however, that had the most dramatic
effect on fund performance. The federal government has been using its
budget surplus to retire significant amounts of long-term debt, which
has boosted the prices of long-term Treasury bonds immensely. Meanwhile,
rising short-term interest rates and lower profits hurt the performance
of investment-grade and high-yield corporate bonds during the period.
The spread, or yield difference, between the two sectors has widened to
near-record levels. We believe these widening spreads represent a buying
opportunity, as corporate bonds -- especially high-yield -- are
currently trading at extremely attractive valuations.
* MORTGAGE-BACKED AND EMERGING MARKETS PERFORMED WELL
The fund had over 17% of its investments in mortgage-backed securities
(MBSs), which outperformed corporate bonds during the period. MBSs have
attractive yields and lower credit risk than corporate bonds. As a
result, they provide an alternative to corporate bonds in a slowing
economy. In addition, the risk of prepayment -- the primary risk for MBS
investors -- typically diminishes in a rising interest-rate
environment.
With the exception of Argentina, the fund's emerging markets holdings
performed well. Argentina's government bonds underperformed because of
credit problems resulting from high government debt levels, but the fund
had only a small position in the country for most of the year. Russian
government bonds were the strongest performers, gaining roughly 150%
during the period. Market sentiment for Russian bonds was so negative
after the ruble devaluation in 1998 that even a slightly more positive
outlook produced a dramatic recovery. One of the primary reasons for the
improved sentiment has been the surge in oil prices, which also has
benefited fund holdings in other oil-exporting nations such as Mexico
and Bulgaria. Because of the strong performance in emerging markets this
year, we have reduced our positions somewhat as a defensive move,
locking in the gains.
* OUTLOOK DEPENDENT ON U.S. ECONOMY
The outlook for the global bond market may depend heavily on what
happens in the United States. While some bond sectors -- high-yield, in
particular -- have priced in a recession, we believe that slower, but
still positive, growth is more likely. With a potential Fed interest
rate decrease early next year, the economy may sustain moderate growth
in 2001. While we have reduced our currency exposure in Europe, we
continue to see signs that the euro is near a bottom and is poised for
recovery. We may add to the fund's high-yield corporate bond holdings --
currently only about 2% of total assets -- in anticipation of a recovery
in this sector sometime next year.
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 10/31/00, 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 payments 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.
TOTAL RETURN FOR PERIODS ENDED 10/31/00
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
------------------------------------------------------------------------------
1 year -4.24% -8.76% -4.98% -9.50% -5.07% -5.97% -4.49% -7.61%
------------------------------------------------------------------------------
5 years 9.15 3.95 5.08 3.50 5.12 5.12 7.86 4.33
Annual average 1.77 0.78 1.00 0.69 1.00 1.00 1.52 0.85
------------------------------------------------------------------------------
10 years 54.72 47.34 43.59 43.59 43.44 43.44 50.75 45.88
Annual average 4.46 3.95 3.68 3.68 3.67 3.67 4.19 3.85
------------------------------------------------------------------------------
Annual average
(life of fund) 7.08 6.69 6.22 6.22 6.27 6.27 6.75 6.49
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/00
Salomon Bros.
World Govt. Consumer
Bond Index price index
------------------------------------------------------------------------------
1 year -5.08% 3.45%
------------------------------------------------------------------------------
5 years 12.67 13.14
Annual average 2.41 2.50
------------------------------------------------------------------------------
10 years 90.90 30.26
Annual average 6.68 2.68
------------------------------------------------------------------------------
Annual average
(life of fund) 7.08 3.26
------------------------------------------------------------------------------
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,
if 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 10/31/90
Salomon Bros.
Fund's class A World Govt. Consumer price
Date shares at POP Bond Index index
10/31/90 9,525 10,000 10,000
10/31/91 10,702 11,130 10,292
10/31/92 11,872 12,676 10,622
10/31/93 13,120 14,194 10,914
10/31/94 12,342 14,708 11,199
10/31/95 13,499 16,944 11,513
10/31/96 15,181 17,853 11,858
10/31/97 15,695 18,319 12,105
10/31/98 15,516 20,618 12,277
10/31/99 15,385 20,111 12,592
10/31/00 $14,734 $19,090 $13,026
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 $14,359 and $14,344, 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 $15,075 ($14,588
at public offering price). See first page of performance section for
performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/00
Class A Class B Class C Class M
------------------------------------------------------------------------------
Distributions
(number) 12 12 12 12
------------------------------------------------------------------------------
Income $ -- $ -- $ -- $ --
------------------------------------------------------------------------------
Capital gains -- -- -- --
------------------------------------------------------------------------------
Return of
capital1 0.648 0.561 0.570 0.620
------------------------------------------------------------------------------
Total $0.648 $0.561 $0.570 $0.620
------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
------------------------------------------------------------------------------
10/31/99 $11.91 $12.50 $11.88 $11.91 $11.86 $12.26
------------------------------------------------------------------------------
10/31/00 10.77 11.31 10.74 10.75 10.72 11.08
------------------------------------------------------------------------------
Current return (end of period)
------------------------------------------------------------------------------
Current
dividend
rate2 6.02% 5.73% 5.25% 5.25% 5.82% 5.63%
------------------------------------------------------------------------------
Current
30-day SEC
yield3 5.71 5.44 4.97 4.96 5.47 5.29
------------------------------------------------------------------------------
1 See page 32.
2 Most recent distribution, excluding capital gains, annualized and
divided by NAV or POP at end of period.
3 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 9/30/00 (most recent calendar quarter)
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
------------------------------------------------------------------------------
1 year -3.16% -7.78% -3.91% -8.48% -3.90% -4.81% -3.42% -6.55%
------------------------------------------------------------------------------
5 years 12.26 6.92 8.13 6.52 8.12 8.12 10.85 7.22
Annual average 2.34 1.35 1.57 1.27 1.57 1.57 2.08 1.40
------------------------------------------------------------------------------
10 years 62.48 54.78 50.77 50.77 50.56 50.56 58.30 53.12
Annual average 4.97 4.47 4.19 4.19 4.18 4.18 4.70 4.35
------------------------------------------------------------------------------
Annual average
(life of fund) 7.22 6.83 6.36 6.36 6.41 6.41 6.89 6.62
------------------------------------------------------------------------------
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.
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
The 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.
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
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, 2000, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United
States of America, 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, 2000 by correspondence
with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 5, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000
FOREIGN GOVERNMENT BONDS AND NOTES (40.0%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
USD 355,000 Argentina (Republic of) bonds 11 3/4s, 2015 $ 300,863
USD 465,000 Argentina (Republic of) notes Ser. XW, 11s, 2005 411,525
USD 347,000 Brazil (Federal Republic of) notes 14 1/2s, 2009 370,006
USD 660,000 Brazil (Federal Republic of) bonds 12 1/4s, 2030 574,200
EUR 9,400,000 Buoni Poliennali Del Tes (Italy Treasury Bonds)
5 1/2s, 2010 7,950,567
CAD 11,750,000 Canada (Government of) bonds Ser. WB60,
7 1/4s, 2007 8,249,165
USD 280,000 Colombia (Republic of) bonds 11 3/4s, 2020 222,600
DKK 66,005,000 Denmark (Kingdom of) bonds 6s, 2009 7,761,005
DKK 17,005,000 Denmark (Kingdom of) bonds 4s, 2001 1,927,623
EUR 16,810,000 Deutschland (Federal Republic of) bonds Ser. 95,
6 1/2s, 2005 15,079,894
GRD 4,890,700,000 Hellenic Greece (Republic of) bonds 6 1/2s, 2014 12,519,752
USD 382,500 Morocco (Kingdom of) floating rate govt. guaranty
Ser A, 7 3/4s, 2009 332,775
NZD 9,300,000 New Zealand (Government of) bonds Ser. 709,
7s, 2009 3,761,199
USD 335,000 Philippines (Republic of) notes 10 5/8s, 2025 255,437
USD 435,000 Philippines (Republic of) bonds 9 7/8s, 2019 321,900
USD 610,000 Russia (Federation of) 144A bonds 12 3/4s, 2028 506,300
USD 545,000 Russia (Federation of) 144A unsub. 2 1/2s, 2030 201,650
EUR 2,602,382 Spain (Government of) bonds 6s, 2029 2,249,629
GBP 8,430,000 United Kingdom Treasury bonds 9s, 2012 16,320,272
GBP 3,815,000 United Kingdom Treasury bonds 8 1/2s, 2005 6,250,329
GBP 1,050,000 United Kingdom Treasury bonds 6 1/4s, 2010 1,652,439
USD 595,000 United Mexican States bonds 11 3/8s, 2016 673,838
USD 265,000 Venezuela (Republic of) bonds 9 1/4s, 2027 174,900
-------------
Total Foreign Government Bonds and Notes
(cost $95,588,681) $ 88,067,868
<CAPTION>
CORPORATE BONDS AND NOTES (28.1%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Automotive (0.1%)
-------------------------------------------------------------------------------------------------------------------
EUR 150,000 Dura Operating Corp. sr. sub notes Ser. B, 9s, 2009 $ 109,328
EUR 150,000 RJ Tower Corp. 144A company guaranty 9 1/4s, 2010 108,183
-------------
217,511
Banking (6.2%)
-------------------------------------------------------------------------------------------------------------------
EUR 2,295,000 Bayerishche Handelsbank Ser. 1190, FRN, 4.85s,
2001 (Germany) 1,944,001
EUR 3,355,000 Deutsche Bahn Finance B.V. bonds 4 7/8s,
2009 (Netherlands) 2,631,532
USD 170,000 Hanvit Bank 144A sub. notes 11 3/4s, 2010 (Korea) 161,500
EUR 2,185,000 Hypothekenbank in Essen AG Ser. 538, FRN, 4.987s,
2009 (Germany) 1,850,621
EUR 8,310,000 Hypothekenbank in Essen AG 144A notes Ser. 552,
4 1/4s, 2002 (Germany) 6,940,605
-------------
13,528,259
Building Materials (0.4%)
-------------------------------------------------------------------------------------------------------------------
EUR 500,000 American Standard, Inc. company guaranty
7 1/8s, 2006 413,156
EUR 1,000,000 Geberit International, Inc. company guaranty
10 1/8s, 2007 (Luxembourg) 457,153
-------------
870,309
Cable Television (1.0%)
-------------------------------------------------------------------------------------------------------------------
EUR 250,000 Callahan Nordrhein Westfalen 144A sr. notes 14s,
2010 (Germany) 207,108
USD 250,000 Charter Communications Holdings LLC sr. notes
8 5/8s, 2009 223,125
EUR 1,080,000 NTL Communications Corp. sr. notes Ser. B,
9 7/8s, 2009 764,276
GBP 250,000 NTL, Inc. sr. unsub. Ser. B, 9 1/2s, 2008 297,619
USD 500,000 TeleWest Communications PLC deb. 9 5/8s, 2006
(United Kingdom) 415,000
USD 130,000 TeleWest Communications PLC sr. disc. notes
stepped-coupon zero % (9 1/4s, 4/15/04) 2009
(United Kingdom) (STP) 58,500
EUR 400,000 United Pan-Europe NV 144A sr. notes 10 7/8s,
2009 (Netherlands) 257,640
-------------
2,223,268
Chemicals (0.2%)
-------------------------------------------------------------------------------------------------------------------
EUR 200,000 CP Kelco APS/Capital Corp. sr. sub notes 11 7/8s,
2010 (Denmark) 168,653
EUR 300,000 Huntsman ICI Chemicals, Inc. sr. sub. notes
10 1/8s, 2009 242,809
EUR 100,000 Ineos Acrylics Finance bonds 10 1/4s, 2010
(United Kingdom) 79,665
-------------
491,127
Consumer Finance (--%)
-------------------------------------------------------------------------------------------------------------------
USD 220,000 Contifinancial Corp. sr. notes 7 1/2s, 2002
(In default) (NON) 30,800
Financial (17.2%)
-------------------------------------------------------------------------------------------------------------------
EUR 9,025,000 DSL Finance NV bonds 5 3/4s, 2009 (Netherlands) 3,867,697
USD 6,220,000 Fannie Mae notes 6 1/2s, 2004 6,216,081
USD 19,675,000 Fannie Mae notes 5 1/8s, 2004 18,881,901
USD 4,060,000 Federal Home Loan Bank unsub. Ser. 60, 6 7/8s, 2002 5,953,841
USD 2,830,000 Freddie Mac notes 6 7/8s, 2005 2,866,252
-------------
37,785,772
Health Care (0.3%)
-------------------------------------------------------------------------------------------------------------------
GBP 450,000 HCA - The Healthcare Co. sr. notes 8 3/4s, 2010 656,577
Industrial (--%)
-------------------------------------------------------------------------------------------------------------------
EUR 100,000 Vantico Group SA bonds 12s, 2010 (Luxembourg) 71,868
Lodging/Tourism (0.3%)
-------------------------------------------------------------------------------------------------------------------
GBP 488,979 Blackstone Hotel Acquisition Co. jr. mtge loan FRN
10 1/4s, 2003 (United Kingdom) 674,405
Manufacturing (0.1%)
-------------------------------------------------------------------------------------------------------------------
EUR 100,000 Flextronics International, Ltd. 144A sr. sub. notes
9 3/4s, 2010 (Singapore) 85,640
EUR 150,000 Flowserve Finance B.V. 144A company guaranty
12 1/4s, 2010 (Netherlands) 127,125
-------------
212,765
Metals (0.1%)
-------------------------------------------------------------------------------------------------------------------
USD 270,000 AK Steel Corp. company guaranty 7 7/8s, 2009 243,000
Paper & Forest Products (0.3%)
-------------------------------------------------------------------------------------------------------------------
EUR 250,000 BSN Financing Co. 144A company guaranty 10 1/4s,
2009 (Luxembourg) 193,866
EUR 100,000 Clondalkin, Ind. sr. notes 10 5/8s, 2010
(United Kingdom) 82,631
EUR 400,000 Kappa Beheer B.V. company guaranty 10 5/8s,
2009 (Netherlands) 343,238
-------------
619,735
Pharmaceuticals (0.1%)
-------------------------------------------------------------------------------------------------------------------
USD 170,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 167,875
Power Producers (0.1%)
-------------------------------------------------------------------------------------------------------------------
USD 177,000 York Power Funding 144A notes 12s, 2007
(Cayman Islands) 177,000
Publishing (0.3%)
-------------------------------------------------------------------------------------------------------------------
GBP 350,000 TDL Infomedia Group, Ltd. sr. sub. notes 12 1/8s, 2009
(United Kingdom) 586,890
Retail (0.2%)
-------------------------------------------------------------------------------------------------------------------
USD 500,000 Southland Corp. sr. sub. deb. 5s, 2003 441,770
Shipping (0.1%)
-------------------------------------------------------------------------------------------------------------------
EUR 250,000 Cammell Laird Holdings 144A sr. notes 12s, 2010
(United Kingdom) 210,816
Technology Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
EUR 250,000 Exodus Communications, Inc. 144A sr. notes
11 3/8s, 2008 194,183
EUR 200,000 PSINet, Inc. sr. notes 11s, 2009 88,140
-------------
282,323
Telecommunications (0.5%)
-------------------------------------------------------------------------------------------------------------------
USD 20,000 Carrier1 International SA sr. notes Ser. B, 13 1/4s,
2009 (Luxembourg) 15,400
USD 180,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 151,200
EUR 300,000 Global Telesystems 144A bonds 10 1/2s, 2006 122,040
EUR 250,000 Hermes Europe Railtel B.V. 144A sr. notes 10 3/8s,
2006 (Netherlands) 97,463
USD 330,000 Nextel Communications, Inc. sr. notes 9 3/8s, 2009 320,100
EUR 500,000 RSL Communications PLC company guaranty,
stepped-coupon zero % (10 1/8s, 3/1/03), 2008
(United Kingdom) (STP) 52,500
EUR 375,000 RSL Communications PLC bonds stepped-coupon
zero % (10s, 3/15/03), 2008 (United Kingdom) (STP) 14,625
USD 200,000 Tele1 Europe B.V. sr. notes 13s, 2009 (Netherlands) 172,000
EUR 1,000,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12.4s, 4/15/03), 2008 (STP) 125,663
-------------
1,070,991
Telephone (0.4%)
-------------------------------------------------------------------------------------------------------------------
EUR 200,000 Colt Telecommunications Group PLC notes
7 5/8s, 2009 151,700
EUR 100,000 Jazztel PLC sr. notes 144A 13 1/4s, 2009
(United Kingdom) 61,020
USD 120,000 Microcell Telecommunications sr. disc. notes
stepped-coupon Ser. B, zero % (14s, 12/1/01),
2006 (Canada) (STP) 115,200
USD 700,000 Versatel Telecom B.V. sr. notes 13 1/4s,
2008 (Netherlands) 532,000
EUR 250,000 WinStar Communications, Inc. sr. notes 12 3/4s, 2010 156,888
-------------
1,016,808
Water Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
GBP 160,000 Azurix Corp. sr. notes 10 3/8s, 2007 211,382
-------------
Total Corporate Bonds and Notes (cost $70,008,009) $ 61,791,251
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (13.1%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
U.S. Government Agency Mortgage Obligations (10.3%)
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association
Pass-Through Certificates
$ 11,739,675 8s, with due dates from December 1, 2029 to August 1, 2030 $ 11,888,182
8,380,944 7 1/2s, with due dates from January 1, 2030 to May 1, 2030 8,370,718
2,539,543 Government National Mortgage Association Pass-Through
Certificates 6s, with due dates from March 15, 2029 to
June 15, 2029 2,392,706
-------------
22,651,606
U.S. Treasury Obligations (2.8%)
-------------------------------------------------------------------------------------------------------------------
6,235,240 U.S. Treasury Inflation Index Notes 3 7/8s, January 15, 2009 6,235,240
-------------
Total U.S. Government and Agency Obligations
(cost $28,594,573) $ 28,886,846
<CAPTION>
COLLATERALIZED MORTGAGE OBLIGATIONS (7.4%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 18,913,833 Fannie Mae Ser. 203, Class 2, Interest Only, 8s, 2023 $ 5,236,768
5,220,000 GS Mortgage Securities Corp. II Ser. 98-C1, Class A2,
6.62s, 2030 5,056,059
4,200,000 Residential Mortgage Securities FRB, Ser. 8, Class M,
7.311s, 2038 6,018,901
-------------
Total Collateralized Mortgage Obligations
(cost $17,405,575) $ 16,311,728
<CAPTION>
PURCHASED OPTIONS OUTSTANDING (4.0%) (a)
EXPIRATION DATE/
CONTRACT AMOUNT STRIKE PRICE VALUE
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
JPY 3,400,000,000 Japanese Government Bonds
10-year Future Contract (call) Dec 00/133.26 JPY 8,825,426
USD 14,400,000 U.S. Treasury Notes 5-year
Future Contract (call) Nov 00/101.50 USD 13,500
-------------
Total Purchased Options Outstanding (cost $8,571,968) $ 8,838,926
BRADY BONDS (0.4%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 180,000 Argentina (Republic of) deb. FRB 7.625s, 2005 $ 157,500
315,000 Bulgaria (Government of) FRB Ser. A, 7 3/4s, 2024 234,675
145,000 Bulgaria (Government of) deb. Ser. PDI, FRB, 7 3/4s, 2011 108,025
575,000 Bulgaria (Government of) Ser. A, FLIRB, 3s, 2012 405,375
-------------
Total Brady Bonds (cost $921,810) $ 905,575
<CAPTION>
COMMON STOCKS (0.1%) (a) (cost 402,422)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
113 PSF Holdings LLC, Class A (NON) $ 146,900
<CAPTION>
PREFERRED STOCKS (0.1%) (a) (cost $98,192)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
107 R&B Falcon Corp.13.875% cum. pfd. (PIK) 135,839
<CAPTION>
WARRANTS (--%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
50 Telehub Communications Corp. 7/31/05 $ 25
225 Versatel Telecom NV (Netherlands) 5/15/08 49,500
-------------
Total Warrants (cost $7,000) $ 49,525
<CAPTION>
SHORT-TERM INVESTMENTS (4.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 376,000 U.S. Treasury Bills zero %, December 21, 2000 (SEG) $ 372,879
9,917,000 Interest in 500,000,000 joint repurchase agreement dated
October 31, 2000 with Morgan Stanley Dean Witter
& Co., Inc. due November 1, 2000 with respect to various
U.S. Government obligations -- maturity value of $9,918,815
for an effective yield of 6.59% 9,917,000
-------------
Total Short-Term Investments (cost $10,289,879) $ 10,289,879
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $231,888,109) (b) $ 215,424,337
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $220,093,473.
(b) The aggregate identified cost on a tax basis is $232,386,026,
resulting in gross unrealized appreciation and depreciation of
$2,643,057 and $19,604,746, respectively, or net unrealized depreciation
of $16,961,689.
(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.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures and written call options contracts
at October 31, 2000.
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.
FLIRB represents Front Loaded Interest Reduction Bond.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at October 31, 2000,
which are subject to change based on the terms of the security.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at October 31, 2000:
(as percentage of Market Value)
United States 44.0%
United Kingdom 12.4
Germany 12.1
Greece 5.8
Denmark 4.6
Japan 4.1
Canada 3.9
Italy 3.7
Netherlands 3.7
New Zealand 1.7
Spain 1.0
Other 3.0
------
Total 100.0%
======
------------------------------------------------------------------------------
Forward Currency Contracts to Buy at October 31, 2000
(aggregate face value $533,235,211)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
------------------------------------------------------------------------------
Australian Dollar $ 10,033,577 $ 11,078,395 12/20/00 $ (1,044,818)
British Pound 26,451,438 26,385,503 12/20/00 65,935
Canadian Dollar 7,978,358 8,250,127 12/20/00 (271,769)
Euro 151,501,474 158,895,299 12/20/00 (7,393,825)
Greek Drachma 934,719 995,329 12/20/00 (60,610)
Japanese Yen 310,741,894 325,921,895 12/20/00 (15,180,001)
Swedish Krona 1,156,405 1,208,787 12/20/00 (52,382)
Swiss Franc 480,573 499,876 12/20/00 (19,303)
------------------------------------------------------------------------------
$ (23,956,773)
------------------------------------------------------------------------------
Forward Currency Contracts to Sell at October 31, 2000
(aggregate face value $587,049,594)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
------------------------------------------------------------------------------
Australian Dollar $ 3,847,345 $ 3,929,883 12/20/00 $ 82,538
British Pound 54,704,346 54,409,578 12/20/00 (294,768)
Canadian Dollar 18,070,352 18,644,992 12/20/00 574,640
Danish Krone 8,745,703 9,211,707 12/20/00 466,004
Euro 169,121,891 176,864,479 12/20/00 7,742,588
Japanese Yen 305,484,652 319,902,240 12/20/00 14,417,588
New Zealand Dollar 3,786,876 4,086,715 12/20/00 299,839
------------------------------------------------------------------------------
$23,288,429
------------------------------------------------------------------------------
Futures Contracts Outstanding at October 31, 2000
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
------------------------------------------------------------------------------
EuroYen 3 month
(Short) $32,550,902 $32,519,770 Sep-01 $ (31,132)
Euro 3 month
(Long) 4,674,250 4,676,585 Mar-01 (2,335)
Euro 3 month
(Short) 4,678,250 4,680,290 Mar-02 2,040
Gilt (Short) 9,732,259 9,628,386 Dec-00 (103,873)
U.S. Agency 10 yr
(Long) 7,230,688 7,169,409 Dec-00 61,279
U.S. Treasury Bond
(Long) 8,886,094 8,837,105 Dec-00 48,989
U.S. Treasury
(Short) 7,653,438 7,651,779 Dec-00 (1,659)
U.S. Treasury Note
5 yr (Short) 1,409,625 1,398,792 Dec-00 (10,833)
------------------------------------------------------------------------------
$ (37,524)
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $231,888,109) (Note 1) $215,424,337
-------------------------------------------------------------------------------------------
Foreign currency (cost $1,253,947) 1,220,469
-------------------------------------------------------------------------------------------
Interest, dividends and other receivables 3,998,621
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 23,963
-------------------------------------------------------------------------------------------
Receivable for securities sold 3,531,059
-------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 23,649,132
-------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 664,752
-------------------------------------------------------------------------------------------
Total assets 248,512,333
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 376,255
-------------------------------------------------------------------------------------------
Payable for variation margin 47,717
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 8,539
-------------------------------------------------------------------------------------------
Payable for securities purchased 1,248,301
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 418,553
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 424,736
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 80,831
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 45,720
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,185
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 86,823
-------------------------------------------------------------------------------------------
Payable for written options outstanding (premiums received $16,645) (Note 3) 18,563
-------------------------------------------------------------------------------------------
Payable for open forward currency contracts 24,317,476
-------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 1,266,370
-------------------------------------------------------------------------------------------
Other accrued expenses 76,791
-------------------------------------------------------------------------------------------
Total liabilities 28,418,860
-------------------------------------------------------------------------------------------
Net assets $220,093,473
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $296,414,235
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,521,882
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (60,338,397)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (17,504,247)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $220,093,473
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($91,172,569 divided by 8,467,001 shares) $10.77
-------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $10.77)* $11.31
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($21,293,355 divided by 1,982,856 shares)** $10.74
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($298,334 divided by 27,743 shares)** $10.75
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($107,329,215 divided by 10,013,983 shares) $10.72
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $10.72)* $11.08
-------------------------------------------------------------------------------------------
* 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, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest (net of foreign tax of $10,334) $ 19,643,655
-------------------------------------------------------------------------------------------
Dividends 15,640
-------------------------------------------------------------------------------------------
Total investment income 19,659,295
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,042,974
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 423,879
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 18,320
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 6,586
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 268,994
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 252,949
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 1,796
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 792,217
-------------------------------------------------------------------------------------------
Other 259,712
-------------------------------------------------------------------------------------------
Total expenses 4,067,427
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (49,113)
-------------------------------------------------------------------------------------------
Net expenses 4,018,314
-------------------------------------------------------------------------------------------
Net investment income 15,640,981
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (16,816,998)
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (861,460)
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (3,305,972)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (1,077,581)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures contracts
and written options during the year (7,162,044)
-------------------------------------------------------------------------------------------
Net loss on investments (29,224,055)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(13,583,074)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended October 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 15,640,981 $ 22,554,117
--------------------------------------------------------------------------------------------------
Net realized loss on investments and
foreign currency transactions (20,984,430) (1,835,168)
--------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (8,239,625) (26,405,168)
--------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (13,583,074) (5,686,219)
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A -- (10,609,623)
--------------------------------------------------------------------------------------------------
Class B -- (1,489,382)
--------------------------------------------------------------------------------------------------
Class C -- (419)
--------------------------------------------------------------------------------------------------
Class M -- (10,454,693)
--------------------------------------------------------------------------------------------------
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 (6,113,986) (1,602,595)
--------------------------------------------------------------------------------------------------
Class B (1,246,207) (224,973)
--------------------------------------------------------------------------------------------------
Class C (9,462) (63)
--------------------------------------------------------------------------------------------------
Class M (8,639,053) (1,579,192)
--------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (114,702,986) (103,730,719)
--------------------------------------------------------------------------------------------------
Total decrease in net assets (144,294,768) (139,107,710)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 364,388,241 503,495,951
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,521,882 and $10,799, respectively) $220,093,473 $364,388,241
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.91 $12.82 $13.94 $14.49 $13.62
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (a) .63 .62 .77 .71 .83
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.12) (.72) (.95) (.24) .82
-----------------------------------------------------------------------------------------------------
Total from
investment operations (.49) (.10) (.18) .47 1.65
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- (.62) (.47) (.59) (.78)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.10) -- (.43) --
-----------------------------------------------------------------------------------------------------
From return of capital (.65) (.09) (.47) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (.65) (.81) (.94) (1.02) (.78)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.77 $11.91 $12.82 $13.94 $14.49
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (4.24) (0.85) (1.14) 3.38 12.46
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $91,173 $132,600 $253,611 $316,837 $343,125
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.19 1.21 1.26 1.29 1.32
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.57 5.02 5.90 4.90 5.93
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 301.44 290.27 561.48 638.66 429.38
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.88 $12.79 $13.90 $14.45 $13.60
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (a) .54 .55 .67 .59 .72
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.12) (.74) (.94) (.23) .81
-----------------------------------------------------------------------------------------------------
Total from
investment operations (.58) (.19) (.27) .36 1.53
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- (.55) (.42) (.52) (.68)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.09) -- (.39) --
-----------------------------------------------------------------------------------------------------
From return of capital (.56) (.08) (.42) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (.56) (.72) (.84) (.91) (.68)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.74 $11.88 $12.79 $13.90 $14.45
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (4.98) (1.58) (1.87) 2.62 11.57
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $21,293 $30,310 $36,017 $41,322 $41,106
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.94 1.96 2.01 2.04 2.07
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.83 4.26 5.17 4.22 5.13
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 301.44 290.27 561.48 638.66 429.38
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
For the period
Per-share Year ended July 26, 1999+
operating performance Oct. 31 to Oct. 31
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.91 $12.05
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (a) .55 .14
--------------------------------------------------------------
Net realized and unrealized
loss on investments (1.14) (.10)
--------------------------------------------------------------
Total from
investment operations (.59) .04
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income -- (.14)
--------------------------------------------------------------
In excess of net
investment income -- (.02)
--------------------------------------------------------------
From return of capital (.57) (.02)
--------------------------------------------------------------
Total distributions (.57) (.18)
--------------------------------------------------------------
Net asset value,
end of period $10.75 $11.91
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) (5.07) .37*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $298 $50
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.94 .53*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.93 1.29*
--------------------------------------------------------------
Portfolio turnover (%) 301.44 290.27
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.86 $12.77 $13.89 $14.44 $13.59
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (a) .60 .59 .76 .66 .77
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.12) (.72) (.95) (.23) .83
-----------------------------------------------------------------------------------------------------
Total from
investment operations (.52) (.13) (.19) .43 1.60
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- (.59) (.46) (.56) (.75)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.10) -- (.42) --
-----------------------------------------------------------------------------------------------------
From return of capital (.62) (.09) (.47) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (.62) (.78) (.93) (.98) (.75)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.72 $11.86 $12.77 $13.89 $14.44
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (4.49) (1.10) (1.28) 3.15 12.14
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $107,329 $201,429 $213,868 $2,506 $1,892
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.44 1.46 1.51 1.54 1.58
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.31 4.76 5.55 4.74 5.52
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 301.44 290.27 561.48 638.66 429.38
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 primarily 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. 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 the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities 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. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate.
Short-term investments having remaining maturities of 60 days or less
are stated at amortized cost, which approximates market value. 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. Dividend income is
recorded on the ex-dividend date, except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at fair
market value of the securities received. Discounts on zero coupon 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, 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 instability, 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, 2000, 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, 2000, the fund had a capital loss carryover of
approximately $59,792,000 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
7,903,000 October 31, 2008
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, paydown gains and losses on mortgage-backed
securities, market discount, book accretion/amortization adjustment, 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, 2000, the fund reclassified $14,129,898 to
decrease undistributed net investment income and $1,325,050 to decrease
paid-in-capital, with a decrease to accumulated net realized loss of
$15,454,948. 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.
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.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At October 31, 2000, the payable to the
subcustodian bank represents the amount due for cash advanced for
the settlement of a security purchased.
For the year ended October 31, 2000, fund expenses were reduced by
$49,113 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $725
has been allocated to the fund, and an additional fee for each Trustees
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 Retail Management, Inc., 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 Retail Management, Inc. 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 at 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, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $10,141 and $5,285
from the sale of class A and class M shares, respectively, and received
$51,124 and $248 in contingent deferred sales charges from redemptions
of class B and class C shares, respectively. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the
year ended October 31, 2000, Putnam Retail Management, Inc., acting as
underwriter received $263 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 2000, cost of purchases and proceeds
from sales of investment securities other than U.S. government
obligations and short-term investments aggregated $540,018,637 and
$616,671,139, respectively. Purchases and sales of U.S. government
obligations aggregated $297,951,095 and $351,729,751, respectively.
Written option transactions during the year are summarized as follows:
Contract Premiums
Amounts Received
---------------------------------------------------------------------------
Written options
outstanding at the
beginning of year $ -- $ --
---------------------------------------------------------------------------
Options written 5,400,000 16,645
---------------------------------------------------------------------------
Options expired -- --
---------------------------------------------------------------------------
Options closed -- --
---------------------------------------------------------------------------
Written options
outstanding at the
end of year $5,400,000 $16,645
---------------------------------------------------------------------------
Note 4
Capital shares
At October 31, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended October 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 843,538 $ 9,571,178
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 406,243 4,588,353
---------------------------------------------------------------------------
1,249,781 14,159,531
Shares
repurchased (3,913,548) (44,637,743)
---------------------------------------------------------------------------
Net decrease (2,663,767) $(30,478,212)
---------------------------------------------------------------------------
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, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 386,144 $ 4,378,934
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 94,681 1,066,627
---------------------------------------------------------------------------
480,825 5,445,561
Shares
repurchased (1,049,144) (11,918,486)
---------------------------------------------------------------------------
Net decrease (568,319) $ (6,472,925)
---------------------------------------------------------------------------
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, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 37,392 $419,527
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 751 8,337
---------------------------------------------------------------------------
38,143 427,864
Shares
repurchased (14,564) (163,721)
---------------------------------------------------------------------------
Net increase 23,579 $264,143
---------------------------------------------------------------------------
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, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 216,388 $ 2,458,808
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,383 60,537
---------------------------------------------------------------------------
221,771 2,519,345
Shares
repurchased (7,189,761) (80,535,337)
---------------------------------------------------------------------------
Net decrease (6,967,990) $(78,015,992)
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
For the fiscal year ended October 31, 2000, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains, resulting in a
return of capital. This occurred after certain distributions had been made
because foreign currency losses decreased the amount of taxable income
available for distribution.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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, III
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
D. William Kohli
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Global
Government Income Trust. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance Summary
and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN031-66575 041/220/906 12/00
