PUTNAM
INTERMEDIATE
GOVERNMENT
INCOME TRUST
[GRAPHIC OMITTED:
art work]
SEMIANNUAL REPORT
May 31, 1995
[LOGO:
BOSTON - LONDON - TOKYO]
<PAGE>
PERFORMANCE HIGHLIGHTS
o "Interest rates peaked 23 days before the end of the fund's fiscal year.
Since then, rates have fallen almost without interruption to levels below
those of one year ago."
-- Neil Powers, Lead Fund Manager
o "Bond prices have rallied sharply and yields have fallen significantly
since the bleak days of 1994. Many investment experts say your best bet may
be intermediate-term securities...Prices of intermediate-term bonds won't get
hit nearly so hard as those of 30-year bonds should yields head back up
again."
-- The Wall Street Journal, May 9, 1995
o Performance should always be considered in light of a fund's investment
strategy. Putnam Intermediate Government Income Trust is designed for
investors seeking high current income and relative stability of net asset
value through a portfolio of U.S. government and foreign government
securities with limited maturities.
------------------------------------------------------------------
SEMIANNUAL 1995 RESULTS AT A GLANCE
------------------------------------------------------------------
TOTAL RETURN NAV MARKET PRICE
------------------------------------------------------------------
(change in value during period
plus reinvested distributions)
6 months ended 5/31/95 10.98% 11.20%
SHARE VALUE NAV MARKET PRICE
------------------------------------------------------------------
11/30/94 $8.07 $7.25
5/31/95 8.61 7.75
CAPITAL GAINS
LONG- SHORT-
DISTRIBUTIONS NO. INCOME TERM TERM TOTAL
------------------------------------------------------------------
6 $0.3000 -- -- $0.3000
CURRENT RETURN NAV MARKET PRICE
------------------------------------------------------------------
End of period
Current dividend rate(1) 6.97% 7.74%
------------------------------------------------------------------
Performance data represent past results. For performance over longer periods,
see pages 8 and 9. (1)Income portion of most recent distribution, annualized
and divided by NAV or market price at end of period.
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
During the first five months of calendar 1995, the fixed-income markets made
considerable progress in recovering from some of the most challenging conditions
on record. The much improved environment for U.S. and foreign government
securities is clearly reflected in Putnam Intermediate Government Income Trust's
results for the six months ended May 31, 1995.
The consensus seems to be that the world's fixed-income markets will continue to
advance, but at a slower pace. Concern that the Federal Reserve Board would
raise interest rates again appears to have been laid to rest as the Fed lowered
a key rate after the close of the period. Some observers are even predicting
further reductions before year's end.
Whether the Fed eases or not, Putnam Management believes that U.S. interest
rates in general are likely to be lower than current levels by year's end. The
inflation rate could slow further, too, making real rates of return look even
better.
On the pages that follow, your fund's management team reviews the course of the
fixed-income markets in the context of the fund's performance and prospects.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
July 19, 1995
<PAGE>
REPORT FROM THE FUND MANAGERS
NEIL POWERS, LEAD MANAGER
D. WILLIAM KOHLI
Fixed-income investors who stuck it out during the turbulent times of 1994
should be pleased with their decisions, given the bond market performance we
have seen in the past six months. Putnam Intermediate Government Income Trust
was able to take advantage of strong rallies in U.S. bond markets as well as
improving conditions in many fixed-income markets overseas. With investments
in both U.S. and international securities, the fund's dual-sector strategy
again proved effective during a strong semiannual period. The fund's total
return was 10.98% at net asset value for the six months ended May 31, 1995.
o U.S. GOVERNMENT: ECONOMIC SLOWDOWN EXCEEDS EXPECTATIONS
In our November annual report, we discussed how the U.S. bond market had
reacted to Federal Reserve Board efforts to tighten monetary policy
throughout 1994. When the Fed first began raising short-term interest rates
early last year, the market initially reacted by preparing for -- and pricing
in -- even further rate increases.
That response proved right on target when the Fed raised rates for the sixth
time at the end of the fund's 1994 fiscal year. At that point, we believed
that the bond market's peak volatility was behind us, that interest rates
would begin to stabilize, and that a slowdown in economic growth was on the
horizon. All those expectations were realized during the first half of fiscal
1995.
Because we had become less concerned about further interest rate increases,
we maintained a relatively long duration for the fund's portfolio. Duration
is a measure of the portfolio's sensitivity to interest rate changes. A
shorter duration is usually maintained
<PAGE>
during a period of rising interest rates in order to reduce share-price
volatility. As interest rates continued to decline throughout the period, the
longer duration positioned the fund for greater share-price appreciation.
By concentrating on securities in the middle of the intermediate sector -- a
combination of four- and five-year notes and mortgage-backed securities -- we
were able to construct a higher-yielding portfolio. This positioning allowed
us to fully participate in the bond market rally and take advantage of the
higher income opportunities it offered. While we didn't anticipate such a
dramatic fall in interest rates, or the rapid price increases that
accompanied it, our strategy proved effective nonetheless.
During most of the period, we maintained a relatively high weighting in
mortgage-backed securities. At the same time, we realized that the declining
interest-rate environment may raise prepayment risk. Historically, declines
in interest rates have increased prepayment activity as the lower rates
prompt homeowners to refinance their mortgages. Therefore, our strategy
involved concentrating on discount-coupon mortgages, i.e., those with coupons
lower than the current market rate, which tend to be less sensitive to
prepayment risk. Toward the end of the period, we began to significantly
reduce our exposure to mortgage-backed securities in favor of 10-year
Treasury notes.
[GRAPHIC OMITTED: pie chart
INTERNATIONAL SECTOR HOLDINGS: DIVERSIFICATION BY COUNTRY* showing
Germany 6.8%; United Kingdom 6.0%; Italy 4.6%;
France 3.9%; Denmark 3.4%; Sweden 1.5%; and Canada 1.4%.
Footnote reads:
*As of May 31, international sector holdings constituted 27.6% of the
portfolio, based on net assets. Sector weightings will vary over time.]
<PAGE>
o INTERNATIONAL ECONOMIES LESS ROBUST THAN EXPECTED
The fund's allocation of approximately 30% in international fixed-income
securities remained unchanged. Early in the fiscal year, we had anticipated
strong growth for many overseas economies, including the United Kingdom,
Canada, and Australia. However, the growth in many international economies
was actually much slower than expected.
Although we were looking toward stronger economic growth -- which can dampen
fixed-income performance -- we were aggressively positioned in international
bond markets with the expectation that investors would begin returning to
fixed-income securities. We focused on core European markets such as Germany,
France, and Denmark, which resulted in generally positive performance.
To protect the fund from adverse foreign-currency movements, a portion of
foreign currency holdings were hedged back into U.S. dollars. In February,
however, we began to adjust the fund's currency exposure as the U.S. dollar
weakened significantly against other currencies, particularly the German
deutschemark and the Japanese yen.
Despite a new investment policy that allows for expanding, to a limited
extent, the level and type of international government securities available
for investment, the fund has yet to invest in emerging markets. While many of
these areas showed signs of rebounding strength by the end of the period, we
still felt the volatility presented more risk than appropriate for the fund's
strategy.
o OUTLOOK: ECONOMIC SLOWDOWN EXPECTED TO CONTINUE
For the remainder of fiscal 1995, we believe that the U.S. fixed-income
securities -- particularly U.S. Treasuries -- will continue to benefit from a
slowing economy. We also expect to maintain a relatively long duration to
take advantage of further interest rate declines.
<PAGE>
[GRAPHIC OMITTED: line chart U.S. TREASURY VERSUS MORTGAGE SECURITIES
Y-axis reads (top to bottom) 20% to -5 in 5% decrements
X-axis reads (left to right) 6/94 through 5/95 in monthly increments
A white line represents Lehman Long-Term Treasury Index
(see plot points below: "LL-TTI")
A grey line represents Lehman Adjustable Rate Mortgage-Backed Index
(see plot points below: "LARM-BI")
A black line represents Lehman Mortgage-Backed Securities Index
(see plot points below: "LM-BSI")
Date "LL-TTI" "LARM-BI" "LM-BSI"
6/94 -0.95 0.22 -0.22
7/94 2.41 0.83 1.78
8/94 1.66 1.33 2.10
9/94 -1.54 0.91 0.65
10/94 -1.89 0.83 0.59
11/94 -1.31 0.55 0.28
12/94 0.21 1.07 1.08
1/95 2.79 2.75 3.24
2/95 5.70 4.81 5.88
3/95 6.61 5.32 6.37
4/95 8.50 6.43 7.89
5/95 16.83 8.16 11.28
Caption reads:
This chart, which reflects cumulative monthly returns, illustrates the lower
relative volatility offered by mortgage-backed securities versus long-term
Treasury bonds for the year ended 5/31/95. While the U.S. government backing
of individual securities does not insure your principal, which will fluctuate,
it does guarantee that the fund's government-backed holdings will make timely
payments of interest and principal. Mortgage-backed securities are subject to
prepayment risk, which is the risk that the investor's principal will be
returned in full at some point earlier than the security's stated maturity
date. Such prepayment may cause an investor's actual rate of return to differ
from the expected rate of return.]
Within the international sleeve, we expect to take advantage of the global
economic slowdown, which should bode well for fixed-income markets overseas.
We also anticipate that the U.S. dollar, after a period of significant
weakness, should stabilize as the year progresses.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. Although the described
holdings were viewed favorably as of 5/31/95, there is no guarantee the fund
will continue to hold these securities in the future. Investments in non-U.S.
securities may be subject to certain risks such as currency fluctuations and
political developments. Although the U.S. government guarantees the timely
payment of principal and interest on the U.S. government and agency
obligations, the value of the fund shares is not guaranteed and will
fluctuate.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: on a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods.
TOTAL RETURN FOR PERIODS ENDED 5/31/95
NAV MARKET PRICE
- ---------------------------------------------------
6 months 10.98% 11.20%
- ---------------------------------------------------
1 year 11.14 13.81
- ---------------------------------------------------
5 years 58.36 52.22
Annual average 9.63 8.77
- ---------------------------------------------------
Life of fund
(since 6/27/88) 83.48 53.58
Annual average 9.15 6.39
- ---------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/95
(most recent calendar quarter)
NAV MARKET PRICE
- ---------------------------------------------------
6 months 10.39% 12.38%
- ---------------------------------------------------
1 year 11.35 11.18
- ---------------------------------------------------
5 years 54.58 48.55
Annual average 9.10 8.24
- ---------------------------------------------------
Life of fund
(since 6/27/88) 82.84 53.58
Annual average 8.99 6.31
- ---------------------------------------------------
Performance data represent past results. Investment returns, market price and
net asset value will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost. Fund performance data do not take into
account any adjustment for taxes payable on reinvested distributions.
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets less liabilities
divided by the number of outstanding shares.
MARKET PRICE is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York Stock
Exchange.
COMPARATIVE INDEXES AND BENCHMARKS
LEHMAN BROS. SALOMON BROS.
GOVT. NON-U.S. LEHMAN BROS. CONSUMER
INTERMEDIATE WORLD GOVT. MORTGAGE-BACKED PRICE
BOND INDEX BOND INDEX SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------
6 months 8.69% 19.50% 10.98% 1.67%
- -----------------------------------------------------------------------------
1 year 9.08 25.06 11.29 3.19
- -----------------------------------------------------------------------------
5 years 51.40 109.35 55.04 17.80
Annual average 8.65 15.93 9.17 3.33
- -----------------------------------------------------------------------------
Life of fund
(since 6/27/88) 77.21 115.04 87.64 28.98
Annual average 8.63 11.71 9.53 3.74
- -----------------------------------------------------------------------------
COMPARATIVE BENCHMARKS
LEHMAN BROTHERS ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES INDEX* reflects
performance of adjustable-rate securities backed by the Government National
Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal
National Mortgage Association.
LEHMAN BROTHERS GOVERNMENT INTERMEDIATE BOND INDEX* is composed of all bonds
covered by the Lehman Brothers Government Bond Index+ with maturities between 1
and 9.99 years.
LEHMAN BROTHERS LONG-TERM TREASURY INDEX* is composed of all bonds covered by
the Lehman Brothers Treasury Bond Index++ with maturities of 10 years or
greater.
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX* reflects performance of 15-
and 30-year fixed-rate securities backed by mortgage pools of the GNMA, FHLMC,
and FNMA.
SALOMON BROTHERS NON-U.S. WORLD GOVERNMENT BOND INDEX* is an unmanaged list of
bonds issued by 10 countries.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund will
differ. + The Lehman Brothers Government Bond Index is an unmanaged list of
U.S. government and mortgage-backed securities. ++ The Lehman Brothers
Treasury Bond index is an unmanaged list of publicly issued U.S. Treasury
obligations.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS OWNED
May 31, 1995 (Unaudited)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (79.6%)*
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
Federal Home Loan Mortgage Corp.
$ 1,388,975 10 1/2s, May 1, 2020 $ 1,488,801
4,862,687 Certif. of Participation (COP), 8 1/2s, September 1, 2008 5,039,592
3,520,771 7 1/2s, January 1, 2020 3,542,776
1,455,795 COP, 7s, with various due dates to July 1, 2008 1,454,479
645,212 COP, 6 1/2s, September 1, 2002 637,953
Federal National Mortgage Association
1,112,087 11 1/2s, August 1, 2022 1,215,645
2,434,787 10 1/2s, with various due dates to December 1, 2028 2,637,167
1,083,081 10s, September 1, 2020 1,171,081
57,222,573 8s, with various due dates to May 1, 2025 58,420,238
Government National Mortgage Association
132,393 9 1/2s, with various due dates to August 15, 2020 140,432
482,087 8 1/2s, September 15, 2024 500,464
12,372,000 8s, TBA, June 14, 2025+++ 12,677,341
62,143,572 8s, with various due dates to March 15, 2025 63,725,360
54,787,576 7 1/2s, with various due dates to September 15, 2024 55,195,507
35,319,400 7s, with various due dates to June 15, 2024 34,756,407
15,000,000 U.S. Treasury Bonds 12 3/8s, May 15, 2004 21,114,900
52,200,000 U.S. Treasury Notes 9 1/4s, August 15, 1998 57,093,750
10,000,000 U.S. Treasury Notes 7 7/8s, November 15, 2004 11,081,200
105,230,000 U.S. Treasury Notes 7 1/2s, February 15, 2005 114,075,634
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $441,240,628) $445,968,727
<CAPTION>
FOREIGN BONDS AND NOTES (27.6%)*
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------
<C> <C> <S> <C>
CAD 10,700,000 Canada (Government of) notes 7 3/4s, 1999 $ 7,886,019
DKK 104,120,000 Denmark (Government of) bonds 8s, 2003 18,800,624
FRF 79,700,000 France (Government of) OAT deb. 8 1/2s, 2002 17,138,231
FRF 23,830,000 France (Government of) OAT deb. 7s, 1999 4,809,703
DEM 5,470,000 Germany (Republic of) Unity Fund bonds 8s, 2002 4,187,152
DEM 34,500,000 Germany (Republic of) bonds 7 3/8s, 2005 25,518,040
DEM 11,890,000 Germany (Republic of) bonds 7 1/8s, 2003 8,672,508
ITL 18,335,000,000 Italy (Government of) bonds 12s, 2003 11,181,140
ITL 19,885,000,000 Italy (Government of) bonds 8 1/2s, 2004 9,875,802
ITL 8,105,000,000 Italy (Government of) notes 8 1/2s, 1999 4,460,483
SEK 61,600,000 Sweden (Kingdom of) bonds 10 1/4s, 2000 8,410,688
GBP 6,205,000 United Kingdom Treasury bonds 10s, 2001 10,835,839
GBP 7,785,000 United Kingdom Treasury bonds 9 3/4s, 2002 13,598,838
GBP 5,300,000 United Kingdom Treasury bonds 9 1/2s, 2004 9,247,520
------------
TOTAL FOREIGN BONDS AND NOTES
(cost $142,902,628) $154,622,587
<PAGE>
<CAPTION>
CALL OPTIONS ON FOREIGN CURRENCIES (0.1%)* (cost $822,174)
EXPIRATION DATE/
CURRENCY STRIKE PRICE VALUE
----------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
JPY 1,004,000,000 Japanese Yen in Exchange
for U.S. Dollars Aug 95/JPY 113 $ 822,174
<CAPTION>
SHORT-TERM INVESTMENTS (4.2%)*
PRINCIPAL AMOUNT VALUE
----------------------------------------------------------------------------------------
<C> <S> <C>
$ 5,000,000 Federal National Mortgage Association,
10.6s, November 10, 1995 $ 5,098,450
18,407,000 Interest in $523,899,000 repurchase agreement dated
May 31, 1995 with Goldman, Sachs & Co. due
June 1, 1995 with respect to various U.S. Treasury
obligations-maturity value of $18,410,104 for an
effective yield of 6.07% 18,410,104
------------
TOTAL SHORT-TERM INVESTMENTS (cost $23,508,554) $ 23,508,554
------------
TOTAL INVESTMENTS (cost $608,473,984)*** $624,922,042
* Percentages indicated are based on net assets of $560,416,938, which correspond to a net
asset value per share of $8.61.
+++ TBA's are mortgage-backed securities traded under delayed delivery commitments, settling
after May 31, 1995. Although the unit price for the trades has been established, the
principal value has not been finalized. However, the principal amount will not fluctuate
more than 2.0% from the commitment. Income on the securities will not be earned on such
securities until settlement date. The cost of TBA purchases held at May 31, 1995 was
$12,557,580 or 2.2% of net assets.
<CAPTION>
TBA SALE COMMITMENTS OUTSTANDING at May 31, 1995
(proceeds receivable $59,263,291)
PRINCIPAL DELIVERY COUPON MARKET
AGENCY AMOUNT MONTH RATE VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GNMA $13,060,000 June 95 8s $13,333,346
GNMA 37,860,000 June 95 8s 38,794,385
GNMA 7,680,000 June 95 7 1/2s 7,728,000
-------------
$59,855,731
*** The aggregate identified cost on a tax basis is $610,551,179, resulting in gross
unrealized appreciation and depreciation of $15,255,291 and $884,428, respectively, or
net unrealized appreciation of $14,370,863.
<CAPTION>
FORWARD CROSS CURRENCY CONTRACTS TO SELL at May 31, 1995
(aggregate face value $21,376,120)
IN UNREALIZED
MARKET EXCHANGE MARKET DELIVERY APPRECIATION/
VALUE FOR VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
British Pounds $13,490,423 Deutschemarks $13,142,197 6/14/95 $(348,226)
Deutschemarks 8,148,980 French Francs 8,243,289 6/21/95 94,309
-------------
$(253,917)
<CAPTION>
FORWARD CROSS CURRENCY CONTRACTS TO BUY at May 31, 1995
(aggregate face value $30,352,829)
IN UNREALIZED
MARKET EXCHANGE MARKET DELIVERY APPRECIATION/
VALUE FOR VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
British Pounds $ 9,206,131 Deutschemarks $ 9,176,597 6/12/95 $ 29,534
British Pounds 8,094,542 Deutschemarks 8,083,148 6/14/95 11,394
Deutschemarks 8,085,097 Spanish Pesetas 8,380,629 6/21/95 (295,532)
Deutschemarks 4,754,903 Italian Lira 4,693,761 6/21/95 61,142
-------------
$(193,462)
<PAGE>
<CAPTION>
FORWARD CURRENCY CONTRACTS TO SELL at May 31, 1995
UNREALIZED
MARKET AGGREGATE DELIVERY APPRECIATION/
VALUE FACE VALUE DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 2,294,850 $ 2,310,560 6/14/95 $ 15,710
British Pounds 10,162,272 10,030,720 6/16/95 (131,552)
British Pounds 14,449,672 14,509,395 6/14/95 59,723
Danish Krona 13,795,832 13,441,388 9/13/95 (354,444)
Deutschemarks 8,777,195 8,822,671 6/14/95 45,476
Deutschemarks 7,120,853 7,157,341 6/14/95 36,488
Deutschemarks 1,274,502 1,297,484 6/21/95 22,982
Deutschemarks 1,876,351 1,835,180 6/21/95 (41,171)
Deutschemarks 4,247,968 4,171,374 6/21/95 (76,594)
Deutschemarks 4,035,570 3,948,872 6/19/95 (86,698)
French Francs 3,646,723 3,645,776 6/8/95 (947)
French Francs 8,054,274 8,237,063 6/21/95 182,789
French Francs 4,872,836 4,928,190 6/21/95 55,354
French Francs 845,699 859,423 6/21/95 13,724
French Francs 4,429,851 4,525,934 6/21/95 96,083
French Francs 5,058,890 4,891,181 9/13/95 (167,709)
Italian Lira 2,787,492 2,690,030 9/13/95 (97,462)
Japanese Yen 2,370,800 2,339,729 6/14/95 (31,071)
Swedish Krona 4,760,975 4,731,358 9/13/95 (29,617)
-------------
$(488,936)
FORWARD CURRENCY CONTRACTS TO BUY at May 31, 1995
UNREALIZED
MARKET AGGREGATE DELIVERY APPRECIATION/
VALUE FACE VALUE DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------
Australian Dollars $1,649,077 $ 1,703,196 6/19/95 $(54,119)
Australian Dollars 4,843,117 4,838,208 9/13/95 4,909
Canadian Dollars 1,163,063 1,167,372 9/13/95 (4,309)
Deutschemarks 9,172,681 9,172,681 9/13/95 --
Deutschemarks 7,515,994 7,396,940 7/24/95 119,054
Deutschemarks 5,046,119 4,933,296 9/13/95 112,823
French Francs 4,087,544 4,156,259 6/21/95 (68,715)
French Francs 13,430,503 13,620,862 6/21/95 (190,359)
French Francs 5,036 4,879 6/21/95 157
Japanese Yen 1,185,396 1,169,632 6/14/95 15,764
Japanese Yen 10,085,633 10,043,720 6/21/95 41,913
Japanese Yen 1,754,386 1,861,284 6/14/95 (106,898)
Japanese Yen 7,349,455 7,239,608 6/14/95 109,847
Japanese Yen 154,653 151,189 7/10/95 3,464
Japanese Yen 4,136,670 4,078,854 9/13/95 57,816
Japanese Yen 4,136,670 4,072,585 9/13/95 64,085
Japanese Yen 5,590,808 5,525,426 9/13/95 65,382
Netherlands Guilder 5,760,282 5,928,339 6/14/95 (168,057)
Spanish Pesetas 7,904,472 7,604,265 6/21/95 300,207
Spanish Pesetas 407,700 392,989 6/14/95 14,711
-------------
$317,675
<CAPTION>
DIVERSIFICATION OF FOREIGN HOLDINGS at May 31, 1995
(as a percentage of net assets):
<S> <C> <C> <C>
Germany 6.8% Denmark 3.4%
United Kingdom 6.0 Sweden 1.5
Italy 4.6 Canada 1.4
France 3.9
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995 (Unaudited)
<TABLE>
ASSETS
- -------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (identified cost
$608,473,984) (Note 1) $624,922,042
- -------------------------------------------------------------------------------------
Cash 5,381
- -------------------------------------------------------------------------------------
Interest and other receivables 9,099,253
- -------------------------------------------------------------------------------------
Receivable for securities sold 61,734,261
- -------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,634,840
- -------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 3,491,850
- -------------------------------------------------------------------------------------
TOTAL ASSETS 700,887,627
LIABILITIES
- -------------------------------------------------------------------------------------
Payable for securities purchased 70,947,477
- -------------------------------------------------------------------------------------
Distributions payable to shareholders 3,272,721
- -------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,021,752
- -------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,559
- -------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 386
- -------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 122,807
- -------------------------------------------------------------------------------------
Payable for open forward currency contracts 2,253,480
- -------------------------------------------------------------------------------------
Payable for closed forward currency contracts 2,876,857
- -------------------------------------------------------------------------------------
Other accrued expenses 116,919
- -------------------------------------------------------------------------------------
TBA sale commitment, at value (proceeds receivable $59,263,291) 59,855,731
- -------------------------------------------------------------------------------------
TOTAL LIABILITIES 140,470,689
- -------------------------------------------------------------------------------------
NET ASSETS $560,416,938
REPRESENTED BY
- -------------------------------------------------------------------------------------
Paid-in capital (Note 1) $572,673,955
- -------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (5,975,426)
- -------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (Note 1) (21,538,521)
- -------------------------------------------------------------------------------------
Net unrealized appreciation of investments, options, foreign
currency, TBA sales commitments and forward currency contracts 15,256,930
- -------------------------------------------------------------------------------------
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES
OUTSTANDING $560,416,938
- -------------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE
- -------------------------------------------------------------------------------------
Net asset value per share ($560,416,938 divided by 65,098,252 shares) $8.61
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six months ended May 31, 1995 (Unaudited)
INTEREST INCOME (net of foreign tax of $256,021) $22,128,684
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,964,134
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 254,319
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 10,832
- -------------------------------------------------------------------------------
Reports to shareholders 104,209
- -------------------------------------------------------------------------------
Auditing 50,855
- -------------------------------------------------------------------------------
Legal 4,251
- -------------------------------------------------------------------------------
Postage 88,855
- -------------------------------------------------------------------------------
Administrative services (Note 2) 7,374
- -------------------------------------------------------------------------------
Exchange listing fees 32,808
- -------------------------------------------------------------------------------
Other 6,469
- -------------------------------------------------------------------------------
TOTAL EXPENSES 2,524,106
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 19,604,578
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 6,209,109
- -------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 14,899
- -------------------------------------------------------------------------------
Net realized loss on forward currency contracts and foreign
currency translation (Note 1) (103,348)
- -------------------------------------------------------------------------------
Net unrealized depreciation on forward currency contracts
and foreign currency translation during the period (3,430,572)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, options and
TBA sale commitments during the period 32,076,357
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 34,766,445
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $54,371,023
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31 NOVEMBER 30
1995* 1994
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- -------------------------------------------------------------------------------
OPERATIONS:
- -------------------------------------------------------------------------------
Net investment income $19,604,578 $36,746,590
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments,
options, forward currency contracts and foreign
currency translation 6,120,660 (39,650,968)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments, options, foreign currency, TBA sale
commitments and forward currency contracts 28,645,785 (14,966,979)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 54,371,023 (17,871,357)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
- -------------------------------------------------------------------------------
From net investment income (19,545,945) (25,519,203)
- -------------------------------------------------------------------------------
From net realized gain on investments -- (4,319,003)
- -------------------------------------------------------------------------------
Return of capital -- (15,925,598)
- -------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 34,825,078 (63,635,161)
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of period 525,591,860 589,227,021
- -------------------------------------------------------------------------------
END OF PERIOD (including distributions in excess
of net investment income of $5,975,426 and
$6,034,059, respectively) $560,416,938 $525,591,860
- -------------------------------------------------------------------------------
NUMBER OF FUND SHARES
- -------------------------------------------------------------------------------
SHARES OUTSTANDING AT BEGINNING AND END OF PERIOD 65,098,252 65,098,252
- -------------------------------------------------------------------------------
*Unaudited.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31 YEAR ENDED NOVEMBER 30
- -----------------------------------------------------------------------------------------------------------------------------
1995<F1> 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.07 $9.05 $9.32 $9.21 $9.08 $9.11
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income .30 .56 .55 .60 .68 .73
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .54 (.84) .21 .28 .34 .22
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .84 (.28) .76 .88 1.02 .95
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income (.30) (.39) (.55) (.60) (.68) (.73)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.04) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.07) (.44) (.17) (.05) (.08)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- -- -- -- (.09)
- -----------------------------------------------------------------------------------------------------------------------------
Return of capital -- (.24) -- -- (.16) (.08)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.30) (.70) (1.03) (.77) (.89) (.98)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.61 $8.07 $9.05 $9.32 $9.21 $9.08
- -----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $7.750 $7.250 $8.125 $9.125 $9.125 $9.000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT MARKET VALUE (%) <F2> 11.20<F3> (2.38) (.01) 8.69 11.80 11.90
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $560,417 $525,592 $589,227 $601,573 $585,649 $567,117
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) .47<F3> .87 .89 .92 1.01 1.02
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.66<F3> 6.64 5.98 6.51 7.51 8.19
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 148.72<F3> 242.42 303.68 216.24 255.49 268.42
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Unaudited.
<F2> Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
<F3> Not annualized.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1995 (Unaudited)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, closed-end management investment company. The fund's investment
objective is to seek, with equal emphasis, high current income and relative
stability of net asset value by investing in a portfolio of U.S. government and
agency obligations and foreign governmental obligations with limited maturities.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A SECURITY VALUATION Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price, except that
certain U.S. government obligations are stated at the mean between the bid and
asked prices. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by the
Trustees.
B SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Interest income is recorded on the accrual basis. Discount on zero coupon bonds
is accreted according to the effective yield method.
C FOREIGN CURRENCY TRANSLATION The accounting records of the fund are maintained
in U.S. dollars. The market values of foreign securities, currency holdings,
other assets and liabilities are recorded in the books and records of the fund
after translation to U.S. dollars based on the exchange rate 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 securities. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency transactions
represent net exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and
<PAGE>
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.
D 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 managed by Putnam Investment Management, Inc. ("Putnam Management"),
the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and
certain other accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
E 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. The fund's Manager 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.
F TBA PURCHASE COMMITMENTS The fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed price at a future date
beyond customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitment will not fluctuate more than 2.0% from the principal amount. The fund
holds, and maintains until the settlement date, cash or high-grade debt
obligations in an amount sufficient to meet the purchase price, or the fund
enters into offsetting contracts for the forward sale of other securities it
owns. TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in the value of the fund's other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities, generally
according to the procedures described under "Security valuation" above.
Although the fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the fund may dispose of a commitment
prior to settlement if the fund Manager deems it appropriate to do so.
TBA SALE COMMITMENTS The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During
<PAGE>
the time a TBA sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment deliverable on or before
the sale commitment date, are held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss. If
the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss on the commitment without
regard to any unrealized gain or loss on the underlying security. If the fund
delivers securities under the commitment, the fund realizes a gain or loss from
the sale of the securities based upon the unit price established at the date the
commitment was entered into.
G OPTION ACCOUNTING PRINCIPLES The fund may, to the extent consistent with its
investment objectives and policies, seek to increase its current returns by
writing covered call and put options on securities it owns or in which it may
invest. When the fund writes a call option or put option, an amount equal to the
premium received by the fund is included in the fund's "Statement of assets and
liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market value
of the option written. The current market value of an option is the last sale
price or, in the absence of a sale, the last offering price, except that certain
options on U.S. government obligations are stated at fair value on the basis of
valuations furnished by a pricing service approved by the Trustees. If an option
expires on its stipulated expiration date, or if the fund enters into a closing
purchase transaction, the fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a written call option
is exercised, the fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost the security that the fund purchases upon
exercise of the option. Accordingly, the risk in writing a call option is that
the fund relinquishes the opportunity to profit if the market price of the
underlying security increases and the option is exercised. In writing a put
option, the fund assumes the risk of incurring a loss if the market price of the
underlying security decreases and the option is exercised. In addition there is
the risk the fund may not be able to enter into a closing transaction because of
an illiquid secondary market.
<PAGE>
The fund may also, to the extent consistent with its investment objectives and
policies, buy put options to protect its portfolio holdings in an underlying
security against a decline in market value. The fund may buy call options to
hedge against an increase in the price of the securities that the fund
ultimately wants to buy. The fund may also buy and sell combinations of put and
call options on the same underlying security to earn additional income.
The premium paid by the fund for the purchase of a call option or put option is
included in the fund's "Statement of assets and liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option the fund has purchased expires on the stipulated expiration
date the fund realizes a loss in the amount of the cost of the option. If the
fund enters into a closing sale transaction, it realizes a gain or loss,
depending on whether the proceeds from the closing sale are greater or less than
the cost of the option. If the fund exercises a put option, it realizes a gain
or loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If the fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium originally paid. The risk associated with purchasing options is
limited to the premium originally paid.
OPTIONS ON FOREIGN CURRENCIES The fund, to the extent consistent with its
investment objectives and policies, may write and purchase put and call options
on foreign currencies. The accounting principles and risks involved are similar
to those described above relating to options on securities. The amount of
potential loss to the fund of a written call or put option is the value (in U.S.
dollars) of the currency sold or received, converted at the spot price, less the
value of U.S. dollars received or paid in exchange.
FORWARD CURRENCY CONTRACTS The fund may engage in forward currency contracts, an
agreement between two parties to buy and sell a currency 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 the fund intends
to buy are denominated when the fund holds cash reserves and short-term
investments). The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily and the change
in market value is recorded by the fund 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
<PAGE>
changes unfavorably. In addition, the fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts
or if the fund is unable to enter a closing position. The maximum potential loss
from forward currency contracts is the aggregate face value in U.S. dollars at
the time the contract was opened; however, management of the fund believes the
likelihood of such loss to be remote.
H FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on income, capital
gains or unrealized appreciation of securities held and excise tax on income and
capital gains.
At November 30, 1994 the fund had a capital loss carryover of approximately
$25,428,000, which will expire on November 30, 2002.
I DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date. At certain times, the fund may pay
distributions at a level rate even though, as a result of market conditions or
investment decisions, the fund may not achieve projected investment results for
a given period.
The character of income and gains are determined in accordance with income tax
regulations may differ from generally accepted accounting principles. These
differences include treatment of post-October losses, realized and unrealized
gains and losses on foreign currencies, and GNMA pay-downs. Reclassifications
are made to the fund's capital accounts to reflect income and gains available
for distribution (or available capital loss carryovers) under income tax
regulations.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory
services is paid quarterly at the annual rate of: 0.75% of the first $500
million of average weekly net assets, 0.65% of the next $500 million, 0.60% of
the next $500 million, 0.55% of any amount over $1.5 billion.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative
services to the fund. The aggregate amount of all such reimbursements is
determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $1,300 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested persons
of the Manager and who
<PAGE>
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
Custodial functions for the fund 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. Investor
servicing and custodian fees reported in the Statement of operations for the
six months ended May 31, 1995 have been reduced by credits allowed by PFTC.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended May 31, 1995, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $221,270,460 and $231,753,423, respectively. Purchases and sales of
U.S. government obligations aggregated $522,296,555 and $520,080,261
respectively. In determining the net gain or loss on securities sold, the cost
of securities has been determined on the identified cost basis.
Written option transactions on investments during the period are summarized as
follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ----------------------------------------------------
Options
written 67,666,000 $896,928
Options
exercised (43,482,000) (327,160)
Options
expired (24,184,000) (569,768)
- ----------------------------------------------------
WRITTEN OPTIONS
OUTSTANDING AT
END OF PERIOD -- $ --
- ----------------------------------------------------
<PAGE>
SELECTED QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE (DECREASE)
TOTAL NET UNREALIZED GAIN IN NET ASSETS RESULTING NET ASSETS
INVESTMENT INCOME INVESTMENT INCOME (LOSS) ON INVESTMENTS FROM OPERATIONS AT END OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
QUARTER PER PER PER PER PER
ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/93 $10,522,893 $.16 $ 9,210,818 $.14 $ 15,181,471 $.24 $ 24,392,289 $.38 $593,400,171 $9.12
5/31/93 10,923,417 .17 9,474,981 .15 3,870,296 .05 13,345,277 .20 596,948,092 9.17
8/31/93 10,122,570 .15 8,808,242 .13 7,879,731 .13 16,687,973 .26 603,871,402 9.28
11/30/93 9,416,897 .15 8,175,281 .13 (13,054,383) (.21) (4,879,102) (.08) 589,227,021 9.05
2/28/94 9,658,271 .15 8,376,468 .13 (7,496,765) (.11) 879,703 .02 574,368,277 8.82
5/31/94 10,370,334 .16 9,094,386 .14 (27,030,125) (.42) (17,935,739) (.28) 545,936,464 8.39
8/31/94 10,443,409 .16 9,255,437 .14 (4,746,051) (.07) 4,509,386 .07 540,681,196 8.31
11/30/94 11,066,280 .17 10,020,299 .15 (15,345,006) (.24) (5,324,707) (.09) 525,591,860 8.07
2/28/95 11,199,913 .17 10,026,658 .15 8,837,178 .14 18,863,836 .29 534,674,367 8.21
5/31/95 10,928,771 .17 9,577,920 .15 25,929,267 .40 35,507,187 .55 560,416,938 8.61
</TABLE>
DIVIDEND POLICY
It is the fund's dividend policy to pay monthly distributions from net
investment income and any net realized short-term gains (including gains from
options and futures transactions). Long-term capital gains, if any, are
distributed at least annually. In an effort to maintain a more stable level of
distributions, the fund's monthly distribution rate will be based on Putnam
Management's projections of the net investment income and net realized
short-term capital gains that the fund is likely to earn over the long term.
Such distributions at times may exceed the current earnings of the fund,
resulting in a return of capital to shareholders.
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER OFFICERS
Putnam Investment George Putnam
Management, Inc. President
One Post Office Square
Boston, MA 02109 Charles E. Porter
Executive Vice President
MARKETING SERVICES
Putnam Mutual Funds Corp. Patricia C. Flaherty
One Post Office Square Senior Vice President
Boston, MA 02109
Lawrence J. Lasser
CUSTODIAN Vice President
Putnam Fiduciary Trust Company
Gordon H. Silver
LEGAL COUNSEL Vice President
Ropes & Gray
Gary N. Coburn
TRUSTEES Vice President
George Putnam, Chairman
Neil Powers
William F. Pounds, Vice Chairman Vice President and Fund Manager
Jameson Adkins Baxter D. William Kohli
Vice President and Fund Manager
Hans H. Estin
William N. Shiebler
John A. Hill Vice President
Elizabeth T. Kennan John R. Verani
Vice President
Lawrence J. Lasser
Paul M. O'Neil
Robert E. Patterson Vice President
Donald S. Perkins John D. Hughes
Vice President and Treasurer
George Putnam, III
Beverly Marcus
Eli Shapiro Clerk and Assistant Treasurer
A.J.C. Smith
W. Nicholas Thorndike
<PAGE>
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-to-date
information about the fund's NAV or to request Putnam's quarterly Closed-End
Fund Commentary.
<PAGE>
[LOGO: PUTNAM INVESTMENTS] ------------
Bulk Rate
THE PUTNAM FUNDS U.S. Postage
One Post Office Square PAID
Boston, Massachusetts 02109 Putnam
Investments
------------
19008-076
