Putnam
Global
Income
Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
We are pleased to report further progress in Putnam's reforms on behalf of
shareholders. The most significant news is the settlement that has been
reached with the Securities and Exchange Commission and with regulatory
authorities in the Commonwealth of Massachusetts regarding market timing in
Putnam funds. Putnam President and Chief Executive Officer Ed Haldeman has
sent a letter to all shareholders describing the terms of the settlement.
Putnam Investment Management, LLC will pay $55 million to the SEC and $55
million to the Commonwealth of Massachusetts. Most of the amount to be paid
is earmarked for restitution to fund shareholders. An independent
consultant will determine the final amount, as well as the method and
timing of distribution, of the restitution payments.
Over the past several months, Putnam has also introduced a number of
voluntary reforms. We would like to call your attention to two of them.
Expense comparisons and risk comparisons can be found following the
Performance Summary of this report. The expense comparison information
enables you to estimate the amount you have actually paid for ongoing
expenses such as management fees and distribution (or 12b-1) fees. Also,
you can compare these expenses with the average expenses of funds in the
same Lipper peer group. The risk comparison shows the fund's risk
relative to similar funds as tracked by Morningstar, an independent
fund-rating company. We believe the expense and risk information will
provide valuable tools for you and your financial advisor.
We are pleased to report that Putnam Global Income Trust generated solid
positive returns at net asset value for the six months ended April 30,
2004, and outperformed at net asset value both its benchmark index and
its Lipper peer group average for the period. The details are shown on
the facing page. Going forward, your fund's management team intends to
take advantage of opportunities to increase the fund's level of income
in an environment of rising interest rates, while maintaining what the
team believes to be a prudent level of risk.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
June 16, 2004
Report from Fund Management
Fund highlights
* Putnam Global Income Trust's class A shares returned 3.81% at net
asset value (NAV) and -1.11% at maximum public offering price (POP) for
the six months ended April 30, 2004.
* Based on results at NAV, the fund outpaced its benchmark, the Lehman
Global Aggregate Bond Index, which returned 2.81% during the same
period. We attribute this to the combined success of the fund's primary
strategies.
* For the same reason, the fund's performance at NAV also exceeded the
2.70% average for its Lipper category, Global Income Funds.
* The fund's monthly dividend for class A shares was reduced to $0.026
in April 2004. See page 5 for more information.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
After a three-year bull run, the momentum of global bond markets slowed
somewhat during the first six months of your fund's 2004 fiscal year.
Investors' concerns about inflation and potential erosion of bond prices
were renewed amid gathering evidence of a sustained rebound in economic
growth, especially in Asia and the United States. Nevertheless, bond
markets provided register positive returns at net asset value for the
period.
FUND PROFILE
Putnam Global Income Trust seeks high current income, consistent with
preservation of capital and long-term total return, by investing
primarily in investment-grade bonds issued by U.S. and foreign
corporations, governments, and government agencies. The fund may invest
up to 20% of its assets in bonds rated below investment grade. The fund
may be suitable for fixed-income investors seeking broad
diversification.
In this environment, Putnam Global Income Trust at net asset value
outpaced both its benchmark and its Lipper peer group as all its primary
strategies made positive contributions to relative performance. Currency
positions and selection among asset-backed securities were especially
key to the period's favorable results. Another plus was the fund's broad
diversification across markets and market sectors, which helped it
weather considerable volatility over the period.
Market overview
Global bond markets delivered moderately positive overall returns for
the six months ended April 30, 2004. In the period's initial months,
yields rose and the gap between shorter-term and longer-term interest
rates narrowed in most major markets on signs of a revival in economic
activity. Faster economic growth in the United Kingdom and Australia led
their central banks to increase interest rates in what appeared to be
the beginnings of a global tightening (that is, rising-rate) cycle. In
the United States and Europe, however, benign inflation readings, excess
capacity, and steadily accommodative central-bank policies tempered
upward pressure on yields.
By early 2004, however, disappointing payroll growth, muted inflation, and
renewed global terrorist activity caused investors to lose confidence in
the U.S. economic recovery. Bond yields declined -- and bond prices
consequently rose -- in most markets with the exception of Japan. In
Europe, concerns over softening growth led to renewed calls for
interest-rate cuts from the European Central Bank (ECB). Toward the end of
the period, strong U.S. and Asian data and nascent signs of inflation
reversed this trend, sparking a steep climb in yields -- and a
corresponding decline in prices -- across many markets.
Central-bank policies during the period varied in response to differing
national and regional economic conditions. For example, U.S. bonds
generally underperformed international bonds, based on expectations that
robust growth and inflationary pressures in the U.S. economy would
eventually cause interest rates to rise and bond prices to fall. In terms
of market segments, the credit sectors -- that is, bonds with higher yields
and lower-quality profiles than government bonds -- surprised many
investors with continued outperformance.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 4/30/04
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Bonds
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Lehman Global Aggregate Bond Index (international bonds) 2.81%
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Lehman Aggregate Bond Index (broad bond market) 1.25%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 0.84%
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Citigroup Non-U.S. World Government Bond Index
(international government bonds) 3.68%
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Equities
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S&P 500 Index (broad stock market) 6.27%
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S&P/Citigroup World Ex-U.S. Primary Markets Growth Index
(international growth stocks) 11.03%
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S&P/Citigroup World Ex-U.S. Primary Markets Value Index
(international value stocks) 12.72%
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These indexes provide an overview of performance in different market
sectors for the six months ended 4/30/04.
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Strategy overview
Our key strategies continued to be successful throughout the semiannual
period. The strongest drivers of performance were security selection,
especially among asset-backed securities, and currency strategies,
notably the fund's overweights to the Australian dollar, British pound,
and Japanese yen. These currencies strengthened versus the U.S. dollar
over the period.
The fund's duration (a measure of sensitivity to interest-rate
movements) also added value by being shorter -- i.e., more defensive --
than the benchmark at times during the period when rates were rising.
Market selection, particularly the fund's underweight to the lagging
Japanese and U.S. markets and above-benchmark weightings to New Zealand,
Australia, Canada, and select European markets, was another strength.
In terms of sector weights, the fund's allocations to mortgage-backed
and asset-backed securities, primarily from U.S. issuers but also U.K.
residential mortgages and select opportunities in Continental Europe,
proved beneficial as returns from these instruments typically exceeded
those from government bonds.
These positives more than offset the negative effects of a short
duration profile in times when rates were falling (which held back the
fund's upside potential under such conditions), and exposure in the
short end of the U.K. market when the Bank of England began to tighten
monetary policy (which resulted in a greater-than-benchmark decline in
the prices of the fund's U.K. holdings).
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY WEIGHTINGS COMPARED]
TOP COUNTRY WEIGHTINGS COMPARED
as of 10/31/03 as of 4/30/04
United States 49.8% 38.2%
Germany 6.5% 12.8%
United Kingdom 10.4% 7.5%
Ireland 6.1% 6.9%
Canada 9.7% 6.3%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
The fund continued its recent pattern of outpacing its benchmark and
Lipper peer group at net asset value due to the success of several
aspects of portfolio management, including its long-term strategy of
broad diversification.
In terms of market allocations, a long-standing underweight to Japan,
the period's worst-performing major market, and an overweight to
Continental Europe, where many of the best-performing markets were
concentrated, were both advantageous. Shifting yield differentials --
for example, German government yields started the period higher than
U.S. Treasuries, but ended at a lower level -- rewarded our above-index
weighting to European securities. An allocation to European high-yield
bonds, which we held through year-end 2003, also added value as this
market segment posted strong results.
Within U.S. holdings, an overweight to mortgage-backed securities (MBSs)
and asset-backed securities (ABSs) helped returns as both sectors
outpaced comparable-duration Treasuries. Highly successful security
selection within the ABS sector further supported returns. The fund's
holdings of home-equity ABSs performed exceptionally well in January and
February. Exposure to investment-grade corporate bonds and a bias in
favor of lower-rated corporate securities within investment-grade
holdings were similarly beneficial, as both the sector and the
lower-quality tiers within it outperformed.
[GRAPHIC OMITTED: horizontal bar chart SECTOR WEIGHTINGS AS OF 4/30/04]
SECTOR WEIGHTINGS AS OF 4/30/04
Government
bonds 39.8%
Mortgage-backed
securities 26.4%
Investment-grade
bonds 18.8%
Asset-backed
securities 8.8%
Cash and
other securities 5.8%
High-yield
bonds 0.4%
Weightings are shown as a percentage of market value. Holdings will vary
over time.
Over the period, the duration of the fund shifted between modestly short
(i.e., defensive) and neutral relative to the benchmark, depending on the
portfolio team's day-by-day sense of the overall direction of interest
rates. (The shorter a portfolio's duration, the less it is affected by
interest-rate movements.) Making duration decisions was especially
challenging during the period as interest-rate trends diverged among major
markets: U.S. and Japanese yields rose, while European rates declined. An
overweight in shorter-term U.K securities at a time when the Bank of
England unexpectedly tightened detracted from returns. Nevertheless, the
fund's duration positioning was a net positive contributor for the period.
Currency strategies were another significant source of outperformance.
Our long-term underweight to the U.S. dollar proved favorable, as this
currency declined over much of the period. Conversely, overweights to
the Australian dollar, the British pound, and the Japanese yen, which
all strengthened versus the U.S. dollar, benefited returns. The positive
effects of these positions were marginally offset by an underweight to
the euro, which rallied against the dollar in the first half of the
period.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
OF SPECIAL INTEREST
Over the past year, yields on fixed-income investments have continued to
decrease and the difference in yields between higher- and lower-quality
bonds has narrowed. The fund's management has used this opportunity to
increase the fund's focus on higher-quality and shorter-term offerings;
however, the fund's earnings have declined as a result. The dividend for
class A shares was reduced from $0.032 to $0.026 per share in April.
Other share classes had similar reductions.
The fund's management team
The fund is managed by the Putnam Core Fixed-Income Team. The members of
the team are Kevin Cronin (Portfolio Leader), D. William Kohli (Portfolio
Member), Carl Bell, Rob Bloemker, Andrea Burke, Steve Horner, Michael Salm,
John Van Tassel, and David Waldman.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
As the world economy begins to transition from an environment of generally
stable and low interest rates to one in which global interest-rate
movements may become both more frequent and more divergent across
countries, broad diversification in terms of both markets and market
sectors becomes more important than ever. We intend to maintain the fund's
diverse mix of securities in order to best position it amid a changing
financial backdrop.
Among markets, currently the fund is underweighting the United States, is
neutrally weighted in the United Kingdom, and has overweighted Continental
Europe, Australia, New Zealand, and Canada, all relative to the benchmark
index. However, we have been reducing the underweight to the U.S. as rates
in that market have moved higher and the U.S. yield differential versus
other markets has narrowed. We retain a substantial overweight to European
governments based on our belief that low consumption and dormant inflation
in the region will keep near-term rates relatively stable. We are steering
clear of Japanese bonds, which continue to carry unattractive valuations
and yields.
Among sectors, we are systematically reducing overweights to U.S. and
European corporates given prevailing valuations. We maintain a small
exposure to corporate high-yield issues, as we see few likely negative
catalysts for that market in the near future. We believe the fundamentals
for high-yield bonds remain positive, while valuation and technical factors
are neutral.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. International
investing involves certain risks, such as currency fluctuations,
economic instability, and political developments. Additional risks may
be associated with emerging-markets securities, including illiquidity
and volatility. Mutual funds that invest in government securities are
not guaranteed. Mortgage-backed securities are subject to prepayment
risk. Lower-rated bonds may offer higher yields in return for more risk.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended April 30, 2004. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a
fund's investment strategy. Data represents past performance. Past
performance does not guarantee future results. More recent returns may
be less or more than those shown. Investment return and principal value
will fluctuate and you may have a gain or a loss when you sell your
shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 4/30/04
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Class A Class B Class C Class M Class R
(inception dates) (6/1/87) (2/1/94) (7/26/99) (3/17/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 3.81% -1.11% 3.42% -1.39% 3.40% 2.44% 3.69% 0.34% 3.64%
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1 year 8.66 3.52 7.75 2.81 7.75 6.76 8.40 4.89 8.29
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5 years 29.25 23.15 24.57 22.65 24.49 24.49 27.71 23.62 27.54
Annual average 5.27 4.25 4.49 4.17 4.48 4.48 5.01 4.33 4.99
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10 years 62.95 55.23 51.30 51.30 51.17 51.17 58.81 53.70 58.76
Annual average 5.00 4.50 4.23 4.23 4.22 4.22 4.73 4.39 4.73
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Annual average
(life of fund) 7.67 7.37 6.83 6.83 6.86 6.86 7.36 7.15 7.40
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Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A and M shares
reflect a sales charge of 4.75% and 3.25%, respectively (which for class A
shares does not reflect a reduction in sales charges that went into effect
on January 28, 2004; if this reduction had been in place for all periods
indicated, returns would have been higher). Class B share returns reflect
the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declining to 1% in the sixth year, and is eliminated
thereafter. Class C shares reflect a 1% CDSC the first year that is
eliminated thereafter. Class R share returns have no initial sales charge
or CDSC. Performance for class B, C, M, and R shares before their inception
is derived from the historical performance of class A shares, adjusted for
the applicable sales charge (or CDSC) and higher operating expenses for
such shares. For a portion of the period, this fund limited expenses,
without which returns would have been lower.
A 2% short-term trading fee will be imposed on shares exchanged or sold
within 5 days of purchase. In addition, there is a 1% short-term trading
fee for this fund on shares sold or exchanged between 6 and 90 days.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/04
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Lehman Global Lipper Global
Aggregate Income Funds
Bond Index* category average+
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6 months 2.81% 2.70%
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1 year 6.32 6.20
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5 years 32.45 30.94
Annual average 5.78 5.49
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10 years 93.10 89.96
Annual average 6.80 6.54
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Annual average
(life of fund) -- 7.44
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Index and Lipper results should be compared to fund performance at net
asset value.
* The benchmark was not in existence at the time of the fund's
inception. The Lehman Global Aggregate Bond Index commenced 12/31/89.
+ Over the 6-month and 1-, 5-, and 10-year periods ended 4/30/04, there
were 93, 92, 62, and 32 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/04
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Class A Class B Class C Class M Class R
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Distributions (number) 6 6 6 6 5
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Income $0.968 $0.919 $0.917 $0.951 $0.925
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Capital gains -- -- -- -- --
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Total $0.968 $0.919 $0.917 $0.951 $0.925
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Share value: NAV POP NAV NAV NAV POP NAV
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10/31/03 $12.65 $13.28 $12.61 $12.62 $12.58 $13.00 --
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12/1/03* -- -- -- -- -- -- $12.81
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4/30/04 12.17 12.74+ 12.13 12.14 12.10 12.51 12.16
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Current return
(end of period)
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Current dividend rate 1 2.56% 2.45% 1.78% 1.58% 2.28% 2.21% 2.27%
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Current 30-day
SEC yield 2 2.53 2.42 1.78 1.77 2.28 2.21 2.24
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* Inception date of class R shares.
+ Reflects a reduction in sales charges that took effect on January 28, 2004.
1 Most recent distribution, excluding capital gains, annualized and
divided by NAV or POP at end of period.
2 For a portion of the period, this fund limited expenses, without which
returns would have been lower. Based only on investment income, calculated
using SEC guidelines.
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TOTAL RETURN FOR PERIODS ENDED 3/31/04 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (6/1/87) (2/1/94) (7/26/99) (3/17/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 7.61% 2.52% 7.22% 2.23% 7.13% 6.13% 7.51% 4.05% 7.54%
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1 year 14.65 9.25 13.82 8.82 13.82 12.82 14.43 10.67 14.38
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5 years 34.96 28.58 30.08 28.09 30.01 30.01 33.39 29.09 33.31
Annual average 6.18 5.16 5.40 5.08 5.39 5.39 5.93 5.24 5.92
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10 years 67.54 59.61 55.47 55.47 55.43 55.43 63.25 57.96 63.45
Annual average 5.30 4.79 4.51 4.51 4.51 4.51 5.02 4.68 5.04
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Annual average
(life of fund) 7.95 7.64 7.10 7.10 7.14 7.14 7.63 7.42 7.67
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Understanding your fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. Using the
information below, you can estimate how these expenses affect your
investment and compare them with the expenses of other funds. You may also
pay one-time transaction expenses, including sales charges (loads) and
redemption fees, which are not shown in this section and would have
resulted in higher total expenses. For more information, see your fund's
prospectus or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam Global Income Trust from October 31, 2003, to April
30, 2004. It also shows how much a $1,000 investment would be worth at
the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 4/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $7 $10 $10 $8 $8
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Ending value (after
expenses) $1,038 $1,034 $1,034 $1,037 $1,036
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* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended 4/30/04.
The expense ratio may differ for each share class (see the table at the
bottom of the next page). Expenses are calculated by multiplying the
expense ratio by the average account value for the period; then
multiplying the result by the number of days in the period; and then
dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended April
30, 2004, use the calculation method below. To find the value of your
investment on October 31, 2003, go to www.putnaminvestments.com and log on
to your account. Click on the "Transaction History" tab in your Daily
Statement and enter 10/31/2003 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 10/31/03 [DIV] $1,000 x per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $7 (see table above) = $70
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to
help investors assess fund expenses. Per these guidelines, the table below
shows your fund's expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return. You can use this information to compare
the ongoing expenses (but not transaction expenses or total costs) of
investing in the fund with those of other funds. All mutual fund
shareholder reports will provide this information to help you make this
comparison. Please note that you cannot use this information to estimate
your actual ending account balance and expenses paid during the period.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 4/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $7 $10 $10 $8 $8
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Ending value (after
expenses) $1,018 $1,015 $1,015 $1,017 $1,017
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* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended 4/30/04.
The expense ratio may differ for each share class (see the table at the
bottom of this page). Expenses are calculated by multiplying the expense
ratio by the average account value for the period; then multiplying the
result by the number of days in the period; and then dividing that
result by the number of days in the year.
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined by Lipper, an independent fund-rating agency that ranks funds
relative to others that Lipper considers to have similar investment styles
or objectives. The expense ratio for each share class shown below indicates
how much of your fund's net assets have been used to pay ongoing expenses
during the period.
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EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class C Class M Class R
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Your fund's annualized
expense ratio 1.32% 2.07% 2.07% 1.57% 1.57%
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Average annualized expense
ratio for Lipper peer group + 1.27% 2.02% 2.02% 1.52% 1.52%
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+ For class A shares, expenses shown represent the average of the expenses
of front-end load funds viewed by Lipper as having the same investment
classification or objective as the fund, calculated in accordance with
Lipper's standard reporting methodology for comparing expenses within a
given universe. All Lipper data is for the most recent fiscal periods
available as of 3/31/04. For class B, C, M, and R shares, Putnam has
adjusted the Lipper total expense average to reflect higher 12b-1 fees
incurred by these classes of shares. The peer group may include funds that
are significantly larger or smaller than the fund, which may limit the
comparability of the fund's expenses to the Lipper average.
Risk comparison
As part of new initiatives to enhance disclosure, we are including a risk
comparison to help you understand how your fund compares with other funds.
The comparison utilizes a risk measure developed by Morningstar, an
independent fund-rating agency. This risk measure is referred to as the
fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 0.35
Taxable bond
fund average 0.32
0% Increasing Risk 100%
Your fund's Overall Morningstar Risk is shown alongside that of the average
fund in its broad asset class, as determined by Morningstar. The risk bar
broadens the comparison by translating the fund's Overall Morningstar Risk
into a percentile, which is based on the fund's ranking among all funds
rated by Morningstar as of 3/31/04. A higher Overall Morningstar Risk
generally indicates that a fund's monthly returns have varied more widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class A
shares only; information for other classes may vary. Overall Morningstar
Risk is based on historical data and does not indicate future results.
Morningstar does not purport to measure the risk associated with a current
investment in a fund, either on an absolute basis or on a relative basis.
Low Overall Morningstar Risk does not mean that you cannot lose money on an
investment in a fund. Copyright 2004 Morningstar, Inc. All Rights Reserved.
The information contained herein (1) is proprietary to Morningstar and/or
its content providers; (2) may not be copied or distributed; and (3) is not
warranted to be accurate, complete, or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from
any use of this information.
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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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 (since reduced to 4.50%) 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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Comparative indexes
Citigroup Non-U.S. World Government Bond Index is an unmanaged index of
government bonds from 10 countries.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Global Aggregate Bond Index is an unmanaged index used as a broad
measure of international investment-grade bonds.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
S&P/Citigroup World Ex-U.S. Primary Markets Growth Index is an unmanaged
index of mostly large- and some small-capitalization stocks from
developed countries excluding the United States chosen for their growth
orientation.
S&P/Citigroup World Ex-U.S. Primary Markets Value Index is an unmanaged
index of mostly large- and some small-capitalization stocks from
developed countries excluding the United States chosen for their value
orientation.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these materials
to customers who share the same address. This change will automatically
apply to all shareholders except those who notify us. If you would prefer
to receive your own copy, please call Putnam at 1-800-225-1581.
Putnam is committed to managing our mutual funds in the best interests of
our shareholders. Our proxy voting guidelines and policies are available on
the Putnam Individual Investor Web site, www.putnaminvestments.com, by
calling Putnam's Shareholder Services at 1-800-225-1581, or on the SEC's
Web site, www.sec.gov.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal 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.
The fund's portfolio
April 30, 2004 (Unaudited)
Foreign government bonds and notes (39.3%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
AUD 7,263,000 Australia (Government of) bonds
5 3/4s, 2011 $5,201,935
EUR 3,000,000 Austria (Republic of) notes
Ser. EMTN, 3.8s, 2013 3,484,585
CHF 2,900,000 Austria (Republic of) notes
Ser. EMTN, 3 3/8s, 2012 2,378,828
CAD 6,557,000 Canada Housing Trust govt. guaranty
5.1s, 2007 (Canada) 5,021,438
DKK 9,640,000 Denmark (Kingdom of) bonds 6s, 2009 1,727,047
USD 1,000,000 Export Development Canada government
bonds 4s, 2007 (Canada) 1,022,500
EUR 4,036,000 France (Government of) bonds 5 3/4s,
2032 5,457,211
EUR 7,110,000 Germany (Federal Republic of) bonds
Ser. 97, 6s, 2007 9,225,884
EUR 6,930,000 Germany (Federal Republic of) bonds
4 3/4s, 2008 8,797,103
CHF 1,900,000 Italy (Republic of) unsub. notes
Ser. 11, Tranche 1, 3 1/8s, 2010 1,528,500
NZD 3,444,000 New Zealand (Government of) bonds
6s, 2011 2,131,998
NZD 2,130,000 New Zealand (Government of) bonds
8s, 2006 1,400,481
NZD 6,085,000 Ontario (Province of) unsub. 5 3/4s,
2008 (Canada) 3,732,656
EUR 2,693,000 Portugal Obrigacoes do Tesouro OT
notes 4 3/8s, 2014 3,244,885
USD 500,000 Quebec (Province of) notes 5s, 2009
(Canada) 519,570
SEK 3,585,000 Sweden (Government of) bonds 6 3/4s,
2014 547,459
SEK 7,760,000 Sweden (Government of) bonds Ser.
3101, 4s, 2008 1,255,980
GBP 4,638,000 United Kingdom treasury bonds
7 1/2s, 2006 8,779,228
GBP 425,000 United Kingdom treasury bonds
2 1/2s, 2009 1,785,679
--------------
Total Foreign government bonds and
notes (cost $63,300,383) $67,242,967
Corporate bonds and notes (21.4%) (a)
Principal amount Value
Basic Materials (0.2%)
- -------------------------------------------------------------------------------
USD 185,000 Abitibi-Consolidated, Inc. company
guaranty 6.95s, 2006 (Canada) $191,864
USD 95,000 Avery Dennison Corp. notes 4 7/8s,
2013 94,032
--------------
285,896
Capital Goods (0.1%)
- -------------------------------------------------------------------------------
USD 185,000 Waste Management, Inc. company
guaranty 6 3/8s, 2012 198,642
Communication Services (0.9%)
- -------------------------------------------------------------------------------
USD 100,000 Ameritech Capital Funding company
guaranty 6 1/4s, 2009 107,711
USD 125,000 AT&T Corp. sr. notes 8.05s, 2011 137,158
USD 60,000 AT&T Wireless Services, Inc. sr.
notes 8 3/4s, 2031 73,196
USD 115,000 AT&T Wireless Services, Inc. sr.
notes 7 7/8s, 2011 132,459
USD 145,000 British Telecommunications PLC bonds
8 7/8s, 2030 (United Kingdom) 183,429
USD 135,000 British Telecommunications PLC notes
8 3/8s, 2010 (United Kingdom) 159,199
USD 180,000 Cingular Wireless, LLC sr. notes
5 5/8s, 2006 190,576
USD 100,000 France Telecom notes 9 1/2s, 2031
(France) 128,245
USD 40,000 Koninklijke (Royal) KPN NV sr.
unsub. notes 8s, 2010 (Netherlands) 46,787
USD 130,000 Sprint Capital Corp. company
guaranty 8 3/4s, 2032 155,287
USD 150,000 Telefonica Europe BV company
guaranty 7 3/4s, 2010 (Netherlands) 173,980
USD 80,000 Vodafone Group PLC notes 7 7/8s,
2030 (United Kingdom) 95,574
--------------
1,583,601
Conglomerates (0.1%)
- -------------------------------------------------------------------------------
USD 90,000 Tyco International Group SA company
guaranty 6 3/4s, 2011 (Luxembourg) 97,059
Consumer Cyclicals (0.7%)
- -------------------------------------------------------------------------------
USD 170,000 DaimlerChrysler NA Holding Corp.
company guaranty 7.2s, 2009 186,956
USD 105,000 DaimlerChrysler NA Holding Corp.
company guaranty Ser. D, 3.4s, 2004 106,027
EUR 6,050 Derby Cycle Corp. (The) sr. notes
9 3/8s, 2008 1
USD 165,000 Federated Department Stores, Inc.
sr. notes 8 1/2s, 2010 198,168
USD 165,000 Ford Motor Co. debs. 9.98s, 2047 199,625
USD 360,000 Ford Motor Credit Corp. notes
7 7/8s, 2010 395,502
USD 160,000 International Game Technology sr.
notes 8 3/8s, 2009 187,351
--------------
1,273,630
Consumer Staples (1.5%)
- -------------------------------------------------------------------------------
USD 340,000 AT&T Broadband Corp. company
guaranty 8 3/8s, 2013 405,664
USD 340,000 Comcast Corp. company guaranty
5.85s, 2010 357,068
USD 280,000 Cox Enterprises, Inc. 144A notes 8s,
2007 313,481
USD 76,315 CVS Corp. 144A pass-through
certificates 6.117s, 2013 79,528
USD 230,000 Echostar DBS Corp. 144A sr. notes
5 3/4s, 2008 230,575
USD 105,000 Johnson (SC) & Son, Inc. 144A bonds
5 3/4s, 2033 98,683
USD 185,000 Liberty Media Corp. debs. 8 1/2s,
2029 217,557
USD 120,000 Miller Brewing Co. 144A notes
5 1/2s, 2013 121,562
USD 250,000 News America Holdings, Inc. company
guaranty 9 1/4s, 2013 317,352
USD 40,000 News America, Inc. company guaranty
4 3/4s, 2010 40,121
USD 190,000 Rogers Cable, Inc. sec. notes
6 1/4s, 2013 (Canada) 182,959
USD 145,000 Time Warner, Inc. notes 8.18s, 2007 164,181
USD 55,000 Tyson Foods, Inc. notes 7 1/4s, 2006 59,519
USD 45,000 Yum! Brands, Inc. sr. notes 8 7/8s,
2011 54,857
--------------
2,643,107
Financial (12.6%)
- -------------------------------------------------------------------------------
USD 170,000 American General Corp. notes 7 1/2s,
2010 197,195
USD 120,000 AXA Financial, Inc. sr. notes
7 3/4s, 2010 138,980
EUR 4,500,000 Bank Nederlandse Gemeenten notes
4 5/8s, 2012 (Netherlands) 5,566,763
USD 35,000 Bank of New York Co., Inc. (The) sr.
sub. notes FRN 3.4s, 2013 33,908
EUR 1,500,000 Bayerische Landesbank bonds Ser. 5,
5 1/4s, 2009 (Germany) 1,938,298
USD 95,000 CIT Group, Inc. sr. notes 7 3/4s,
2012 109,876
USD 270,000 CIT Group, Inc. sr. notes Ser. MTN,
6 7/8s, 2009 298,927
EUR 9,300,000 Depfa ACS Bank sr. sec. public loan
notes 3 1/4s, 2008 (Ireland) 11,125,610
USD 325,000 First Chicago NBD Corp. sub. notes
6 3/8s, 2009 360,719
USD 185,000 General Electric Capital Corp.
company guaranty 7 7/8s, 2006 207,741
USD 50,000 General Electric Capital Corp. notes
Ser. A, 6 3/4s, 2032 53,830
USD 95,000 Goldman Sachs Group, Inc. (The)
notes 4 3/4s, 2013 90,503
USD 125,000 Household Finance Corp. notes
6 3/8s, 2012 134,778
USD 175,000 John Hancock Financial Services,
Inc. sr. notes 5 5/8s, 2008 186,079
USD 255,000 JPMorgan Chase & Co. sub. notes
5 3/4s, 2013 264,040
USD 475,000 Lehman Brothers Holdings, Inc. notes
4s, 2008 479,493
USD 90,000 National Westminster Bank sub. notes
7 3/8s, 2009 (United Kingdom) 103,852
USD 35,000 Nationwide Financial Services, Inc.
notes 5 5/8s, 2015 35,698
USD 115,000 Principal Life Global Funding I 144A
sec. notes 5 1/4s, 2013 115,539
USD 40,000 Travelers Property Casualty Corp.
sr. notes 3 3/4s, 2008 39,915
--------------
21,481,744
Government (3.7%)
- -------------------------------------------------------------------------------
CHF 700,000 European Investment Bank
supranational bank bonds 3 1/2s,
2014 (Supra-Nation) 575,280
NZD 2,870,000 International Finance Corp. notes
Ser. EMTN, 6 3/4s,
2009 (Supra-Nation) 1,828,709
EUR 1,500,000 Norddeutsche Landesbank Girozentrale
bonds Ser. 7, 5 3/4s, 2010
(Germany) 1,994,936
CHF 2,375,000 Oester Postspark Bawag foreign
government guaranty Ser. EMTN,
3 1/4s, 2011 (Austria) 1,926,196
--------------
6,325,121
Health Care (0.1%)
- -------------------------------------------------------------------------------
USD 15,000 American Home Products Corp. notes
6.95s, 2011 16,579
USD 75,000 Bayer Corp. 144A FRB 6.2s, 2008 80,645
--------------
97,224
Technology (0.2%)
- -------------------------------------------------------------------------------
USD 50,000 Fiserv, Inc. notes 4s, 2008 49,676
USD 170,000 IBM Canada Credit 144A company
guaranty 3 3/4s, 2007 (Canada) 169,160
USD 75,000 Motorola, Inc. notes 7 5/8s, 2010 84,815
--------------
303,651
Transportation (0.2%)
- -------------------------------------------------------------------------------
USD 100,000 Delta Air Lines, Inc. pass-through
certificates Ser. 02-1, 6.417s,
2012 103,250
USD 295,000 Union Pacific Corp. notes 6 5/8s,
2008 323,257
--------------
426,507
Utilities & Power (1.1%)
- -------------------------------------------------------------------------------
USD 40,000 AEP Texas Central Co. sr. notes
Ser. D, 5 1/2s, 2013 40,465
USD 50,000 CenterPoint Energy Resources Corp.
debs. 8.9s, 2006 55,824
USD 310,000 Consumers Energy Co. 1st mtge.
Ser. B, 5 3/8s, 2013 305,112
USD 90,000 Duke Capital Corp. sr. notes Ser. A,
6 1/4s, 2005 93,832
USD 120,000 Duke Energy Field Services, LLC
notes 7 7/8s, 2010 138,722
USD 70,000 Exelon Generation Co., LLC sr. notes
6.95s, 2011 77,987
USD 80,000 KeySpan Corp. notes 7 5/8s, 2010 93,159
USD 40,000 National Fuel Gas Co. notes 5 1/4s,
2013 40,287
USD 50,000 National Rural Utilities Cooperative
Finance Corp. coll. trust 3 7/8s,
2008 50,279
USD 85,000 Northern States Power Co. mtge.
Ser. B, 8s, 2012 102,219
USD 40,000 Panhandle Eastern Pipe Line sr.
notes 4.8s, 2008 40,625
USD 50,000 PP&L Capital Funding, Inc. company
guaranty Ser. D, 8 3/8s, 2007 56,446
USD 50,000 Progress Energy, Inc. sr. notes
6 3/4s, 2006 53,418
USD 150,000 Public Services Co. of Colorado sr.
notes Ser. A, 6 7/8s, 2009 166,850
EUR 505,000 Veolia Environnement sr. unsub.
Ser. EMTN, 5 3/8s, 2018 (France) 607,926
USD 34,492 York Power Funding 144A notes 12s,
2007 (Cayman Islands) 3
--------------
1,923,154
--------------
Total Corporate bonds and notes
(cost $33,548,937) $36,639,336
U.S. government agency mortgage obligations (18.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
Federal National Mortgage
Association Pass-Through
Certificates
$101,947 7s, November 1, 2033 $107,777
711,362 6 1/2s, with due dates from
September 1, 2032 to October 1, 2033 740,542
1,100,000 6s, TBA, May 1, 2034 1,125,093
14,095,000 5 1/2s, TBA, May 1, 2034 14,059,763
4,365,000 5s, TBA, May 1, 2034 4,228,594
3,834,000 5s, TBA, May 1, 2019 3,855,566
4,165,000 4 1/2s, TBA, June 1, 2034 3,892,976
1,100,000 4 1/2s, TBA, May 1, 2034 1,032,282
2,500,000 4 1/2s, TBA, May 1, 2019 2,460,155
--------------
Total U.S. government agency mortgage
obligations (cost $31,876,969) $31,502,748
U.S. treasury obligations (2.0%) (a) (cost $3,516,509)
Principal amount Value
- -------------------------------------------------------------------------------
$2,996,000 U.S. Treasury Bonds 6 1/4s, May 15,
2030 $3,366,872
Asset-backed securities (6.9%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
ABSC NIMS Trust 144A
$109,400 Ser. 03-HE5, Class A, 7s, 2033 $109,947
67,690 Ser. 03-HE7, Class A, 7s, 2033 68,029
Aegis Asset Backed Securities Trust
144A
128,251 Ser. 04-1N, Class Note, 5s, 2034 128,251
86,420 Ser. 04-2N, Class N1, 4 1/2s, 2034 86,420
Amortizing Residential Collateral
Trust
689,273 Ser. 02-BC1, Class A, Interest Only
(IO), 6s, 2005 23,284
1,478,182 Ser. 02-BC3, Class A, IO, 6s, 2005 27,972
1,036,364 Ser. 02-BC4, Class A, IO, 6s, 2004 9,466
925,455 Ser. 02-BC6, Class A, IO, 6s, 2004 17,631
30,771 AQ Finance NIM Trust Ser. 03-N1,
Class Note, 9.37s, 2033 30,703
AQ Finance NIM Trust 144A
100,642 Ser. 03-N2, Class Note, 9.3s, 2033 101,396
58,241 Ser. 03-N9A, Class Note, 7.385s,
2033 58,605
161,174 Argent NIM Trust Ser. 03-N8, Class
A, 5.56s, 2034 161,174
Argent NIM Trust 144A
73,004 Ser. 03-N7, Class 2A1, 5.68s, 2034 72,996
173,000 Ser. 04-WN4, Class A, 4.459s, 2034 172,527
100,791 Asset Backed Funding Corp. NIM Trust
144A Ser. 03-WF1, Class N1, 8.35s,
2032 100,791
Bayview Financial Acquisition Trust
102,498 Ser. 02-CA, Class A, IO, 5.1s, 2004 2,434
7,846,184 Ser. 03-X, Class A, IO, 1.36s, 2006 112,789
250,000 Capital One Multi-Asset Execution
Trust FRB Ser. 02-C1, Class
C1, 3.85s, 2010 262,734
CARSSX Finance, Ltd. 144A FRN Ser.
04-A
300,000 Class B3, 4.7s, 2011 300,000
660,000 Class B4, 6.7s, 2011 660,000
676,546 CDC Mortgage Capital Trust Ser.
02-HE2, Class A, IO, 5 1/4s, 2005 34,092
Chase Funding Net Interest Margin
144A
9,276 Ser. 03-1A, Class Note, 8 3/4s, 2004 9,276
60,257 Ser. 03-2A, Class Note, 8 3/4s, 2035 60,559
Conseco Finance
619,667 Ser. 02-C, Class AFIO, IO, 7 1/2s,
2032 44,206
368,839 Ser. 02-C, Class AVIO, IO, 7 1/2s,
2032 25,801
Conseco Finance Securitizations Corp.
423,000 Ser. 00-2, Class A4, 8.48s, 2021 437,101
449,000 Ser. 01-1, Class A5, 6.99s, 2032 407,554
502,201 Ser. 02-2, Class A, IO, 8 1/2s, 2010 148,707
Countrywide Asset Backed
Certificates 144A
134,271 Ser. 03-5NF, Class NF, 6 3/4s, 2034 135,425
121,000 Ser. 04-BC1N, Class Note, 5 1/2s,
2035 120,584
43,792 Fremont NIM Trust 144A Ser. 04-A,
Class Note, 4 3/4s, 2034 43,748
Granite Mortgages PLC FRB
GBP 340,000 Ser. 03-2, Class 3C, 5.578s, 2043
(United Kingdom) 619,648
$100,000 Ser. 02-1, Class 1C, 2.45s, 2042
(United Kingdom) 101,703
70,000 Ser. 02-2, Class 1C, 2.4s, 2043
(United Kingdom) 71,282
EUR 455,000 Ser. 03-2, Class 2C1, 4 5/8s, 2043
(United Kingdom) 557,680
$1,275,000 Green Tree Financial Corp. Ser.
99-5, Class A5, 7.86s, 2030 1,114,389
408,956 Greenpoint Manufactured Housing Ser.
00-3, Class IA, 8.45s, 2031 350,459
149,000 GS Auto Loan Trust 144A Ser. 04-1,
Class D, 5s, 2011 146,742
GSAMP Trust 144A
49,517 Ser. 03-HE1N, Class Note, 7 1/4s,
2033 49,467
87,368 Ser. 04-FM1N, Class Note, 5 1/4s,
2033 87,368
Holmes Financing PLC FRB
80,000 Ser. 5, Class 2C, 2.59s, 2005
(United Kingdom) 80,575
50,000 Ser. 4, Class 3C, 2.44s, 2040
(United Kingdom) 50,716
57,000 Ser. 8, Class 2C, 1.834s, 2040
(United Kingdom) 57,000
1,704 Home Equity Asset Trust Ser. 02-1N,
Class A, 8s, 2032 1,704
Home Equity Asset Trust 144A
121,439 Ser. 02-5N, Class A, 8s, 2033 121,439
48,172 Ser. 03-3N, Class A, 8s, 2033 48,413
71,324 Ser. 03-4N, Class A, 8s, 2033 71,681
173,000 Ser. 03-7N, Class A, 5 1/4s, 2034 172,568
300,000 LNR CDO, Ltd. FRB Ser. 02-1A, Class
FFL, 3.85s, 2037 (Cayman Islands) 292,440
Long Beach Asset Holdings Corp. NIM
Trust 144A
88,245 Ser. 03-2, Class N1, 7.627s, 2033 88,369
45,645 Ser. 03-4, Class N1, 6.535s, 2033 45,645
2,227,500 Long Beach Mortgage Loan Trust Ser.
03-1, Class S2, IO, 3 3/4s, 2004 36,261
33,039 Merrill Lynch Mortgage Investors,
Inc. Ser. 03-WM3N, Class N1, 8s,
2005 33,414
Merrill Lynch Mortgage Investors,
Inc. 144A
111,753 Ser. 03-OP1N, Class N1, 7 1/4s, 2034 111,822
86,370 Ser. 04-WMC2, Class N1, 4 1/2s, 2034 86,136
89,165 Morgan Stanley ABS Capital I 144A
Ser. 04-NC2N, Class Note, 6 1/4s,
2033 89,611
Morgan Stanley Dean Witter Capital I
FRN
111,000 Ser. 01-NC3, Class B1, 3.55s, 2031 110,631
109,000 Ser. 01-NC4, Class B1, 3.6s, 2032 108,648
286,896 Neon Capital, Ltd. 144A limited
recourse secured notes Ser.
96, 1.458s, 2013 (e) 267,034
130,810 New Century Mortgage Corp. NIM Trust
144A Ser. 03-B, Class Note, 6 1/2s,
2033 131,464
Oakwood Mortgage Investors, Inc.
101,989 Ser. 01-C, Class A2, 5.92s, 2017 69,521
185,483 Ser. 02-A, Class A2, 5.01s, 2020 161,186
521,084 Ser. 02-C, Class A1, 5.41s, 2032 464,172
Option One Mortgage Securities Corp.
NIM Trust 144A
33,608 Ser. 03-5, Class Note, 6.9s, 2033 33,776
30,732 Ser. 03-2B, Class N1, 7.63s, 2033
(Cayman Islands) 30,704
105,482 Pass-Through Amortizing Credit Card
Trust Ser. 02-1A, Class A3FL, 4.1s,
2012 105,837
Permanent Financing PLC FRB
70,000 Ser. 3, Class 3C, 2.26s, 2042
(United Kingdom) 71,203
177,000 Ser. 4, Class 3C, 1.909s, 2042
(United Kingdom) 177,354
2,014,815 Residential Asset Mortgage Products,
Inc. Ser. 02-RZ3, Class A,
IO, 5 3/4s, 2005 66,426
388,387 Residential Asset Securities Corp.
Ser. 02-KS6, Class A, IO, 4 1/2s,
2005 10,609
SAIL Net Interest Margin Notes 144A
73,759 Ser. 03-12A, Class A, 7.35s, 2033 73,737
148,378 Ser. 03-13A, Class A, 6 3/4s, 2033 148,188
49,171 Ser. 03-8A, Class A, 7s, 2033 48,924
116,889 Ser. 03-BC2A, Class A, 7 3/4s, 2033 116,549
Sasco Arc Net Interest Margin Notes
144A
79,315 Ser. 03-3, Class A, 7 3/4s, 2033 78,917
114,681 Ser. 03-5, Class A, 7.35s, 2033
(Cayman Islands) 114,648
139,729 Ser. 03-AM1, Class A, 7 3/4s, 2033 139,048
113,040 SHARPS SP I, LLC Net Interest Margin
Trust Ser. 03-NC1N, Class N, 7 1/4s,
2033 113,675
SHARPS SP I, LLC Net Interest Margin
Trust 144A
123,238 Ser. 03-0P1N, Class NA, 4.45s, 2033 123,226
84,531 Ser. 03-HS1N, Class N, 7.48s, 2033 84,742
Structured Asset Investment Loan
Trust
3,183,097 Ser. 03-BC2, Class A, IO, 6s, 2005 129,819
700,001 Ser. 03-BC8, Class A, IO, 6s, 2005 37,960
3,136,000 Ser. 04-1, Class A, IO, 6s, 2005 170,702
1,183,636 Structured Asset Securities Corp.
Ser. 02-HF1, Class A, IO, 6s, 2005 31,137
188,000 TIAA Commercial Real Estate
Securitization FRN, Ser. 02-1A,
Class III, 7.6s, 2037 (Cayman
Islands) 198,920
--------------
Total Asset-backed securities
(cost $12,244,707) $11,879,491
Collateralized mortgage obligations (6.7%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$340,000 Commercial Mortgage Acceptance Corp.
Ser. 97-ML1, Class A3, 6.57s, 2007 $366,563
87,000 CS First Boston Mortgage Securities
Corp. 144A FRB Ser. 03-TF2A, Class L,
5.1s, 2014 86,316
160,000 DLJ Mortgage Acceptance Corp. 144A
Ser. 97-CF1, Class A3, 7.76s, 2030 175,874
Fannie Mae
451,027 Ser. 04-4, Class QM, 12s, 2033 444,738
390,289 Ser. 01-T10, Class A2, 7 1/2s, 2041 420,424
372,319 Ser. 02-T4, Class A3, 7 1/2s, 2041 401,067
150,690 Ser. 02-T6, Class A2, 7 1/2s, 2041 162,326
276,928 Ser. 01-T12, Class A2, 7 1/2s, 2041 298,310
449,093 Ser. 01-T7, Class A1, 7 1/2s, 2041 483,769
49,259 Ser. 99-T2, Class A1, 7 1/2s, 2039 53,062
335,466 Ser. 00-T6, Class A1, 7 1/2s, 2030 361,368
1,353,831 Ser. 03-118, Class SF, IO, 7s, 2033 200,113
2,403,490 Ser. 03-22, IO, 6s, 2033 598,995
476,946 Ser. 346, Class 2, IO, 5 1/2s, 2033 129,670
1,298,213 Ser. 339, Class 10, IO, 5 1/2s, 2033 317,454
39,776 Ser. 329, Class 2, IO, 5 1/2s, 2033 10,416
3,012,809 Ser. 343, Class 6, IO, 5s, 2033 756,027
2,974,550 Ser. 03-W10, Class 1, IO, 2.046s,
2043 169,642
3,804,406 Ser. 03-W6, Class 11, IO, 2.02s,
2042 68,883
6,633,548 Ser. 03-W8, Class 12, IO, 1.646s,
2042 326,994
3,547,234 Ser. 03-W6, Class 21, IO, 1.63s,
2042 38,301
2,892,524 Ser. 03-W17, Class 12, IO, 1.164s,
2033 97,068
17,780,582 Ser. 02-T18, IO, 0.52s, 2042 260,211
1,095,153 Ser. 02-T4, IO, 0.449s, 2041 12,232
47,460,121 Ser. 02-26, IO, 0.237s, 2048 289,210
225,000 FFCA Secured Lending Corp. Ser.
99-1A, Class C1, 7.59s, 2025 164,250
100,000 First Chicago Lennar Trust 144A Ser.
97-CHL1, Class E, 7.929s, 2039 91,750
Freddie Mac
472,402 Ser. 2763, Class SC, 24.2s, 2032 577,566
1,603,807 Ser. 2575, Class SG, IO, 6 1/2s,
2032 138,328
749,871 Ser. 2702, Class DI, IO, 5 1/2s,
2024 87,463
580,152 Ser. 2553, Class IJ, IO, 5 1/2s,
2020 36,169
279,042 Ser. 2696, Principal Only (PO), zero%,
2033 170,689
490,000 GMAC Commercial Mortgage Securities,
Inc. Ser. 97-C2, Class A2, 6.55s,
2029 493,324
471,313 Government National Mortgage
Association Ser. 03-114, Class
SP, 16.667s, 2027 521,390
95,000 GS Mortgage Securities Corp. II 144A
FRB Ser. 03-FL6A, Class L, 4.35s,
2015 95,119
GBP 423,085 Hermione (European Loan Conduit No.
14) 144A FRB Class A, 4.489s, 2011
(Ireland) 754,040
$331,000 IStar Asset Receivables Trust Ser.
02-1A, Class E, 2.335s, 2020 331,530
155,348 Lehman Brothers Floating Rate
Commercial Mortgage Trust 144A
FRB Ser. 03-C4, Class A, 1.7s, 2015 155,542
194,549 Merrill Lynch Mortgage Investors,
Inc. Ser. 99-C1, Class A1, 7.37s,
2031 205,735
78,000 Mortgage Capital Funding, Inc. FRB
Ser. 98-MC2, Class E, 7.289s, 2030 84,553
1,000,000 Strategic Hotel Capital, Inc. 144A
Ser. 03-1, Class H, 3.2s, 2013 1,001,094
56,000 Trizechahn Office Properties Trust
144A Ser. 01-TZHA, Class D3, 6.943s,
2013 59,352
--------------
Total Collateralized mortgage
obligations (cost $11,626,792) $11,496,927
Short-term investments (22.3%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$37,368,000 Short-term investments held in
Putnam commingled cash account with
yields ranging from 1.03% to 1.05%
and due dates ranging from May 3,
2004 to May 21, 2004 (d) $37,368,000
775,000 U.S. Treasury Bills zero %, May 6,
2004 (SEG) 774,902
--------------
Total Short-term investments
(cost $38,142,902) $38,142,902
- -------------------------------------------------------------------------------
Total Investments
(cost $194,257,199) $200,271,243
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $171,117,824.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at
April 30, 2004.
(d) See Note 1 to the financial statements.
(e) The notes are secured by debt and equity securities and equity
participation agreements held by Neon Capital, Ltd.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
TBA after the name of a security represents to be announced securities
(Note 1).
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates shown at April 30, 2004.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at April 30, 2004: (as a
percentage of Market Value)
Australia 2.6%
Austria 3.9
Canada 5.4
Denmark 0.9
France 3.1
Germany 11.0
Ireland 5.9
Italy 0.8
Netherlands 2.9
New Zealand 1.8
Portugal 1.6
Supra-Nation 1.2
Sweden 0.9
United Kingdom 6.4
United States 32.6
Other 19.0
------
Total 100.0%
Forward currency contracts to buy at April 30, 2004 (Unaudited)
(aggregate face value $55,094,834)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Australian Dollar $2,635,212 $2,722,334 6/16/04 $(87,122)
British Pound 5,989,027 6,201,505 6/16/04 (212,478)
Canadian Dollar 117,377 123,064 6/16/04 (5,687)
Euro 5,676,915 5,849,026 6/16/04 (172,111)
Japanese Yen 35,963,437 36,525,609 6/16/04 (562,172)
Korean Won 1,620,081 1,600,135 6/16/04 19,946
Norwegian Krone 571,048 562,990 6/16/04 8,058
Swedish Krona 605,762 605,648 6/16/04 114
Taiwan Dollar 903,841 904,523 6/16/04 (682)
- ------------------------------------------------------------------------------------------------------
$(1,012,134)
- ------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at April 30, 2004 (Unaudited)
(aggregate face value $46,465,545)
Aggregate Delivery Unrealized
Value face value date appreciation
- ------------------------------------------------------------------------------------------------------
Australian Dollar $2,708,081 $2,846,532 6/16/04 $138,451
British Pound 6,741,052 6,959,862 6/16/04 218,810
Canadian Dollar 3,470,596 3,553,669 6/16/04 83,073
Danish Krone 964,898 998,818 6/16/04 33,920
Euro 13,883,456 14,210,306 6/16/04 326,850
New Zealand Dollar 9,274,276 10,104,139 6/16/04 829,863
Swedish Krona 1,219,616 1,245,991 6/16/04 26,375
Swiss Franc 6,456,284 6,546,228 6/16/04 89,944
- ------------------------------------------------------------------------------------------------------
$1,747,286
- ------------------------------------------------------------------------------------------------------
Futures contracts outstanding at April 30, 2004 (Unaudited)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Euro 90 day (Long) $3,587,063 $3,593,690 Jun-06 $(6,627)
Euro 90 day (Long) 3,579,188 3,584,502 Sep-06 (5,314)
Euro 90 day (Short) 5,180,175 5,175,077 Jun-04 (5,098)
Euro 90 day (Short) 4,421,925 4,418,861 Sep-04 (3,064)
Euro 90 day (Short) 733,500 735,737 Dec-04 2,237
Euro 90 day (Short) 729,938 732,801 Mar-05 2,863
Euro 90 day (Short) 726,525 729,800 Jun-05 3,275
Euro 90 day (Short) 723,638 727,138 Sep-05 3,500
Euro 90 day (Short) 721,163 724,876 Dec-05 3,713
Euro Fund 10 yr (Short) 6,017,426 6,037,235 Jun-04 19,809
Euro-Bobl 5 yr (Long) 6,146,479 6,138,974 Jun-04 7,505
Interest Rate Swap
10 yr (Short) 3,329,594 3,541,618 Jun-04 212,024
Japanese Government Bond
10 yr-SIMEX (Long) 12,691,074 12,768,771 Jun-04 (77,697)
Long Gilt 10 yr (Short) 4,171,383 4,224,930 Jun-04 (53,547)
U.S. Treasury Bond
20 yr (Short) 11,459,031 12,002,466 Jun-04 (543,435)
U.S. Treasury Note
10 yr (Long) 6,519,500 6,755,768 Jun-04 (236,268)
U.S. Treasury Note
5 yr (Short) 20,778,188 21,159,768 Jun-04 381,580
- ------------------------------------------------------------------------------------------------------
$(294,544)
- ------------------------------------------------------------------------------------------------------
TBA sale commitments outstanding at April 30, 2004 (Unaudited)
(proceeds receivable $9,349,795)
Principal Settlement
Agency amount date Value
- ------------------------------------------------------------------------------------------------------
FNMA 5s, May 1, 2034 $4,365,000 5/13/04 $4,228,593
FNMA 5s, May 1, 2019 1,000,000 5/18/04 1,005,625
FNMA 4 1/2s, June 1, 2034 4,165,000 6/14/04 3,892,976
- ------------------------------------------------------------------------------------------------------
$9,127,194
- ------------------------------------------------------------------------------------------------------
Interest rate swap contracts outstanding at April 30, 2004 (Unaudited)
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- ------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. dated
March 25, 2004 to pay semiannually the notional
amount multiplied by 3.075% and receive
quarterly the notional amount multiplied by the
three month USD-LIBOR. $4,100,000 3/30/09 $169,224
Agreement with Merrill Lynch Capital Services,
Inc. dated September 27, 2002 to receive
semi-annually the notional amount multiplied by
the six month JPY-LIBOR-BBA and pay
semiannually the notional amount multiplied
by 0.399%. JPY 1,135,000,000 10/1/07 5,575
Agreement with UBS, AG dated April 23, 2004
to receive annually the notional amount
multiplied by 3.49% and pay quarterly the
notional amount multiplied by the three month
SEK-STIBOR-SIDE. SEK 96,000,000 4/27/06 26,567
Agreement with UBS, AG dated February 12,
2004 to pay semiannually the notional amount
multiplied by 2.56% and receive quarterly the
notional amount multiplied by the three month
CAD-BA-CDOR. CAD 11,900,000 2/16/06 50,021
Agreement with UBS, AG dated March 8, 2004
to pay semiannually the notional amount
multiplied by 2.47% and receive quarterly the
notional amount multiplied by the three month
CAD-BA-CDOR. CAD 5,000,000 3/8/06 (38,599)
- ------------------------------------------------------------------------------------------------------
$212,788
- ------------------------------------------------------------------------------------------------------
Credit default contracts outstanding at April 30, 2004 (Unaudited)
(premiums received $543,117)
Notional
amount Value
- ------------------------------------------------------------------------------------------------------
Agreements with JPMorgan Chase Bank with effective dates
ranging from July 3, 2002 to September 27, 2002, maturing on
March 28, 2007, to receive premiums ranging from 4.004% to
5.350% times the notional amount. For each credit default event
related to one of the 100 issues within the JECI 100 Float, 3/28/07
Bond Index, the fund makes a payment of the proportional notional
amount times the difference between the par value and the
then-market value of the defaulted issue. EUR 8,900,000 $237,906
Agreement with JPMorgan Chase Bank effective October 8, 2002,
maturing on October 2, 2007, to receive a premium equal to
4.795% times the notional amount. For each credit default event
related to one of the 100 issues within the JECI 100 Float, 10/02/07
Bond Index, the fund makes a payment of the proportional
notional amount times the difference between the par value and
the then-market value of the defaulted issue. EUR 2,850,000 38,604
- ------------------------------------------------------------------------------------------------------
$276,510
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
April 30, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$194,257,199) (Note 1) $200,271,243
- -------------------------------------------------------------------------------
Cash 156,443
- -------------------------------------------------------------------------------
Foreign currency (cost $137,850) (Note 1) 138,527
- -------------------------------------------------------------------------------
Interest and other receivables 2,294,550
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 78,547
- -------------------------------------------------------------------------------
Receivable for securities sold 12,460,537
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 1,794,336
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 421,168
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 251,387
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 29,866
- -------------------------------------------------------------------------------
Total assets 217,896,604
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 35,005,237
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 550,985
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 244,741
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 56,219
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 60,548
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 822
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 62,725
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 1,059,184
- -------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 238,964
- -------------------------------------------------------------------------------
Payable for open swap contracts (Note 1) 38,599
- -------------------------------------------------------------------------------
TBA sale commitments, at value (proceeds receivable
$9,349,795) (Note 1) 9,127,194
- -------------------------------------------------------------------------------
Credit default contracts outstanding, at value (premiums
received $543,117) (Note 1) 276,510
- -------------------------------------------------------------------------------
Other accrued expenses 57,052
- -------------------------------------------------------------------------------
Total liabilities 46,778,780
- -------------------------------------------------------------------------------
Net assets $171,117,824
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $217,942,478
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (905,124)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (52,939,158)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 7,019,628
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $171,117,824
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($106,369,241 divided by 8,741,835 shares) $12.17
- -------------------------------------------------------------------------------
Offering price per class A share (100/95.50 of $12.17)* $12.74
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($31,946,838 divided by 2,633,736 shares)** $12.13
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($1,715,248 divided by 141,274 shares)** $12.14
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($31,085,476 divided by 2,569,510 shares) $12.10
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $12.10)* $12.51
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($1,021 divided by 84 shares) $12.16
- -------------------------------------------------------------------------------
* 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.
Statement of operations
Six months ended April 30, 2004 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Interest (net of foreign tax of $230) $3,589,764
- -------------------------------------------------------------------------------
Securities lending 3,211
- -------------------------------------------------------------------------------
Total investment income 3,592,975
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 633,166
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 271,016
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 7,165
- -------------------------------------------------------------------------------
Administrative services (Note 2) 4,462
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 137,852
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 177,412
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 10,358
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 83,350
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 2
- -------------------------------------------------------------------------------
Other 108,519
- -------------------------------------------------------------------------------
Non-recurring costs (Note 5) 5,122
- -------------------------------------------------------------------------------
Costs assumed by Manager (Note 5) (5,122)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (57,838)
- -------------------------------------------------------------------------------
Total expenses 1,375,464
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (1,057)
- -------------------------------------------------------------------------------
Net expenses 1,374,407
- -------------------------------------------------------------------------------
Net investment income 2,218,568
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,167,046
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 163,429
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 681,773
- -------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (24,414)
- -------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (391,497)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
contracts, swap contracts, credit default contracts and TBA
sale commitments during the period (604,325)
- -------------------------------------------------------------------------------
Net gain on investments 4,992,012
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $7,210,580
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
Increase (decrease) in net assets 2004* 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $2,218,568 $6,068,910
- -------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 5,987,834 14,100,898
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currencies (995,822) 6,393,465
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 7,210,580 26,563,273
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (8,432,962) (4,340,584)
- -------------------------------------------------------------------------------
Class B (2,728,974) (1,135,513)
- -------------------------------------------------------------------------------
Class C (142,334) (54,946)
- -------------------------------------------------------------------------------
Class M (2,559,086) (1,367,110)
- -------------------------------------------------------------------------------
Class R (73) --
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (24,579,487) 9,312,547
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets (31,232,336) 28,977,667
Net assets
- -------------------------------------------------------------------------------
Beginning of period 202,350,160 173,372,493
- -------------------------------------------------------------------------------
End of period (including distributions in
excess of net investment income of $905,124
and undistributed net investment income of
$10,739,737, respectively) $171,117,824 $202,350,160
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.65 $11.39 $10.97 $10.77 $11.91 $12.82
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .16 (d) .40 .46 .58 .63 .62
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .33 1.31 .43 .23 (1.12) (.72)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .49 1.71 .89 .81 (.49) (.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.97) (.45) (.47) (.16) -- (.72)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.45) (.65) (.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.97) (.45) (.47) (.61) (.65) (.81)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.17 $12.65 $11.39 $10.97 $10.77 $11.91
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.81* 15.18 8.35 7.63 (4.24) (.85)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $106,369 $120,099 $99,140 $82,093 $91,173 $132,600
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .66 (d)* 1.31 1.29 1.24 1.19 1.21
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.31 (d)* 3.23 4.21 5.32 5.57 5.02
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 71.80* 197.79 331.06 (e) 292.73 (e) 301.44 290.27
- ---------------------------------------------------------------------------------------------------------------------------------
* 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).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ending
April 30, 2004 reflect a reduction of 0.03% based on the average net
assets for class A shares (Note 2).
(e) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.61 $11.36 $10.94 $10.74 $11.88 $12.79
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .12 (d) .30 .38 .50 .54 .55
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .32 1.30 .43 .22 (1.12) (.74)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .44 1.60 .81 .72 (.58) (.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.92) (.35) (.39) (.13) -- (.64)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.39) (.56) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.92) (.35) (.39) (.52) (.56) (.72)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.13 $12.61 $11.36 $10.94 $10.74 $11.88
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.42* 14.27 7.60 6.85 (4.98) (1.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $31,947 $41,469 $29,498 $18,123 $21,293 $30,310
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.03 (d)* 2.06 2.04 1.99 1.94 1.96
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .96 (d)* 2.44 3.33 4.58 4.83 4.26
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 71.80* 197.79 331.06 (e) 292.73 (e) 301.44 290.27
- ---------------------------------------------------------------------------------------------------------------------------------
* 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).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ending
April 30, 2004 reflect a reduction of 0.03% based on the average net
assets for class B shares (Note 2).
(e) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
For the
Six months period
ended July 26,
April 30 1999+ to
Per-share (Unaudited) Year ended October 31 October 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.62 $11.37 $10.96 $10.75 $11.91 $12.05
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .12 (d) .29 .37 .49 .55 .14
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .32 1.32 .43 .24 (1.14) (.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .44 1.61 .80 .73 (.59) .04
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.92) (.36) (.39) (.13) -- (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.39) (.57) (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.92) (.36) (.39) (.52) (.57) (.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.14 $12.62 $11.37 $10.96 $10.75 $11.91
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.40* 14.30 7.48 6.94 (5.07) .37*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,715 $2,337 $1,048 $415 $298 $50
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.03 (d)* 2.06 2.04 1.99 1.94 .53*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .94 (d)* 2.35 3.22 4.52 4.93 1.29*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 71.80* 197.79 331.06 (e) 292.73 (e) 301.44 290.27
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
+ Commencement of operations.
(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).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ending
April 30, 2004 reflect a reduction of 0.03% based on the average net
assets for class C shares (Note 2).
(e) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.58 $11.33 $10.91 $10.72 $11.86 $12.77
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .15 (d) .37 .44 .57 .60 .59
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .32 1.29 .42 .20 (1.12) (.72)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .47 1.66 .86 .77 (.52) (.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.95) (.41) (.44) (.15) -- (.69)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.43) (.62) (.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.95) (.41) (.44) (.58) (.62) (.78)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.10 $12.58 $11.33 $10.91 $10.72 $11.86
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.69* 14.86 8.16 7.31 (4.49) (1.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $31,085 $38,446 $43,686 $52,481 $107,329 $201,429
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .78 (d)* 1.56 1.54 1.49 1.44 1.46
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.20 (d)* 3.02 4.02 5.18 5.31 4.76
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 71.80* 197.79 331.06 (e) 292.73 (e) 301.44 290.27
- ---------------------------------------------------------------------------------------------------------------------------------
* 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).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ending
April 30, 2004 reflect a reduction of 0.03% based on the average net
assets for class M shares (Note 2).
(e) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- ------------------------------------------------------------------------
For the
period
Dec. 1,
2003+ to
April 30,
Per-share 2004
operating performance (Unaudited)
- ------------------------------------------------------------------------
Net asset value,
beginning of period $12.81
- ------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------
Net investment income (a) (b) .13
- ------------------------------------------------------------------------
Net realized and unrealized
gain on investments .15
- ------------------------------------------------------------------------
Total from
investment operations .28
- ------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------
From net
investment income (.93)
- ------------------------------------------------------------------------
Total distributions (.93)
- ------------------------------------------------------------------------
Net asset value,
end of period $12.16
- ------------------------------------------------------------------------
Total return at
net asset value (%)(c) 2.09*
- ------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1
- ------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) (d) .65*
- ------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 1.00*
- ------------------------------------------------------------------------
Portfolio turnover (%) 71.80*
- ------------------------------------------------------------------------
+ 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) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ending
April 30, 2004 reflect a reduction of less than 0.01% based on the
average net assets for class R shares (Note 2).
(c) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Includes amounts paid through expense offset arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
April 30, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam Global 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 sovereign and
private issuers worldwide, including supranational issuers. The fund's
secondary objectives are preservation of capital and long-term total
return but only to the extent that these are consistent with high
current income. The fund invests in higher yielding, lower rated bonds
that have a higher rate of default due to the nature of the investments.
The fund offers class A, class B, class C, class M and class R shares.
The fund began offering class R shares on December 1, 2003. Class A
shares are sold with a maximum front-end sales charge of 4.50%. Prior to
January 28, 2004, the maximum front-end sales charge for class A shares
was 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, class M and class R
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 shares but lower than class B and class
C shares. Class R shares are sold without a front-end sales charge and
pay an ongoing distribution fee that is higher than class A shares, but
lower than class B and class C shares. Class R shares are offered to
qualified employee-benefit plans.
A redemption fee of 1.00%, which is retained by the fund, may apply to
shares of any class redeemed (either by selling or by exchanging to
another fund) within 90 days of purchase. Effective April 19, 2004 (May
3, 2004 for defined contribution plans administered by Putnam), a 2.00%
redemption fee may apply to any shares that are redeemed (either by
selling or exchanging into another fund) within 5 days of purchase. A
1.00% redemption fee would apply to any shares that are redeemed (either
by selling or exchanging into another fund) within 6-90 days of
purchase.
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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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 valued at the last reported sales price on their principal
exchange, or official closing price for certain markets. If no sales are
reported -- as in the case of some securities traded over-the-counter -- a
security is valued at its last reported bid price. Market quotations are
not considered to be readily available for certain debt obligations; such
investments are valued at fair value on the basis of valuations furnished
by an independent pricing service or dealers, approved by the Trustees.
Such services or dealers determine valuations for normal institutional-size
trading units of such securities using methods based on market transactions
for comparable securities and various relationships, generally recognized
by institutional traders, between securities. Many securities markets and
exchanges outside the U.S. close prior to the close of the New York Stock
Exchange and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close
but before the close of the New York Stock Exchange. Accordingly, on
certain days, the fund will fair value foreign securities taking into
account multiple factors, including movements in the U.S. securities
markets. The number of days on which fair value prices will be used will
depend on market activity and it is possible that fair value prices will be
used by the fund to a significant extent. 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
valued at amortized cost, which approximates fair value. Other investments,
including restricted securities, are valued at fair value following
procedures approved by the Trustees. Such valuations and procedures are
reviewed periodically by the Trustees.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having
maturities of up to 397 days for collateral received under security
lending arrangements and up to 90 days for other cash investments.
C) Security transactions and related investment income Security
transactions are recorded 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. Non-cash dividends, if
any, are recorded at the fair market value of the securities received.
All premiums/discounts are amortized/accreted on a yield-to-maturity
basis.
D) 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 earned 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, currency gains and losses realized
between the trade and settlement dates on securities transactions 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.
E) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used 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. Forward currency contracts outstanding at
period end, if any, are listed after the fund's portfolio.
F) 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. Risks may exceed amounts recognized on the statement
of assets and liabilities. 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. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." 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.
Futures and written option contracts outstanding at period end, if any,
are listed after the fund's portfolio.
G) Interest rate swap contracts The fund may enter into interest rate
swap contracts, which are arrangements between two parties to exchange
cash flows based on a notional principal amount, to manage the fund's
exposure to interest rates. Interest rate swap contracts are marked to
market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss. Payments received or made
are recorded as realized gains or loss. The fund could be exposed to
credit or market risk due to unfavorable changes in the fluctuation of
interest rates or if the counterparty defaults on its obligation to
perform. Risks may exceed amounts recognized on the statement of assets
and liabilities. Interest rate swap contracts outstanding at period end,
if any, are listed after the fund's portfolio.
H) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront payment
to a counter party, the protection seller, in exchange for the right to
receive a contingent payment. The maximum amount of the payment may equal
the notional amount, at par, of the underlying index or security as a
result of a related credit event. An upfront payment received by the fund,
as the protection seller, is recorded as a liability on the fund's books.
An upfront payment made by the fund, as the protection buyer, is recorded
as an asset on the fund's books. The credit default contracts are marked to
market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss. Payments received or made as a
result of a credit event or termination of the contract are recognized, net
of a proportional amount of the upfront payment, as realized gains or
losses. In addition to bearing the risk that the credit event will occur,
the fund could be exposed to market risk due to unfavorable changes in
interest rates or in the price of the underlying security or index, the
possibility that the fund may be unable to close out its position at the
same time or at the same price as if it had purchased comparable publicly
traded securities or that the counterparty may default on its obligation to
perform. The risk of loss may exceed the fair value of these contracts
recognized on the statement of assets and liabilities. Credit default
contracts outstanding at period end, if any, are listed after the fund's
portfolio.
I) TBA purchase commitments The fund may enter into "TBA" (to be
announced) commitments to purchase securities for a fixed unit 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 commitments will not significantly differ
from the principal amount. The fund holds, and maintains until
settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities 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 fair value of the underlying
securities, 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.
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 Putnam Management deems
it appropriate to do so.
J) 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 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 fair 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. If the fund delivers securities under the commitment,
the fund realizes a gain or a loss from the sale of the securities based
upon the unit price established at the date the commitment was entered
into. TBA sale commitments outstanding at period end, if any, are listed
after the fund's portfolio.
K) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the statement of operations.
At April 30, 2004, the fund had no securities out on loan.
L) 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 (the "Code"), 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, 2003, the fund had a capital loss carryover of
$58,694,811 available to the extent allowed by the Code to offset future
net capital gain, if any. The amount of the carryover and the expiration
dates are:
Loss Carryover Expiration
- ------------------------------------
$24,812,950 October 31, 2006
21,627,332 October 31, 2007
7,903,488 October 31, 2008
1,114,179 October 31, 2009
3,236,862 October 31, 2010
The aggregate identified cost on a tax basis is $194,272,381, resulting
in gross unrealized appreciation and depreciation of $8,274,389 and
$2,275,527, respectively, or net unrealized appreciation of $5,998,862.
M) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, if any, are recorded on the
ex-dividend date and paid at least annually. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services 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.
Effective January 28, 2004, Putnam Management has agreed to limit its
compensation (and, to the extent necessary, bear other expenses) through
December 31, 2004, to the extent that the fund's net expenses as a
percentage of average net assets exceed the average expense ratio for
the fund's Lipper peer group of front-end load funds.
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, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months April 30, 2004, the fund
paid PFTC $222,731 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended April 30, 2004,
the fund's expenses were reduced by $1,057 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $847, as a quarterly retainer, 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 Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses 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, class M and class R shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plans is
to compensate Putnam Retail Management, a wholly-owned subsidiary of
Putnam, LLC and Putnam Retail Management GP, Inc., for services provided
and expenses incurred in distributing shares of the fund. The Plans provide
for payments by the fund to Putnam Retail Management at an annual rate of
up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets
attributable to class A, class B, class C, class M and class R shares,
respectively. The Trustees have approved payment by the fund at an annual
rate of 0.25%, 1.00%, 1.00%, 0.50% and 0.50% of the average net assets
attributable to class A, class B, class C, class M and class R shares,
respectively.
For the six months ended April 30, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $3,184 and $1,110
from the sale of class A and class M shares, respectively, and received
$230,728 and $1,882 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.40% is assessed on certain
redemptions of class A and class M shares, respectively. For the six
months ended April 30, 2004, Putnam Retail Management, acting as
underwriter, received $88 and no monies on class A and class M
redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2004, cost of purchases and
proceeds from sales of investment securities other than U.S. government
securities and short-term investments aggregated $104,988,035 and
$143,120,582 respectively. Purchases and sales of U.S. government
securities aggregated $3,518,609 and no monies, respectively.
Note 4
Capital shares
At April 30, 2004, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 1,487,293 $18,745,596
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 576,965 7,142,836
- ----------------------------------------------------------------
2,064,258 25,888,432
Shares repurchased (2,817,634) (35,474,397)
- ----------------------------------------------------------------
Net decrease (753,376) $(9,585,965)
- ----------------------------------------------------------------
Year ended October 31, 2003
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 5,460,793 $66,608,645
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 303,244 3,704,503
- ----------------------------------------------------------------
5,764,037 70,313,148
Shares repurchased (4,971,807) (61,209,294)
- ----------------------------------------------------------------
Net increase 792,230 $9,103,854
- ----------------------------------------------------------------
Six months ended April 30, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 654,771 $8,181,063
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 197,140 2,430,823
- ----------------------------------------------------------------
851,911 10,611,886
Shares repurchased (1,506,819) (18,920,250)
- ----------------------------------------------------------------
Net decrease (654,908) $(8,308,364)
- ----------------------------------------------------------------
Year ended October 31, 2003
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 2,532,645 $31,114,144
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 76,814 933,882
- ----------------------------------------------------------------
2,609,459 32,048,026
Shares repurchased (1,918,450) (23,471,446)
- ----------------------------------------------------------------
Net increase 691,009 $8,576,580
- ----------------------------------------------------------------
Six months ended April 30, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 40,740 $511,805
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 10,478 129,356
- ----------------------------------------------------------------
51,218 641,161
Shares repurchased (95,106) (1,186,285)
- ----------------------------------------------------------------
Net decrease (43,888) $(545,124)
- ----------------------------------------------------------------
Year ended October 31, 2003
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 244,637 $3,009,300
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 4,002 48,976
- ----------------------------------------------------------------
248,639 3,058,276
Shares repurchased (155,598) (1,877,649)
- ----------------------------------------------------------------
Net increase 93,041 $1,180,627
- ----------------------------------------------------------------
Six months ended April 30, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 57,748 $731,531
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 9,552 117,545
- ----------------------------------------------------------------
67,300 849,076
Shares repurchased (554,329) (6,990,183)
- ----------------------------------------------------------------
Net decrease (487,029) $(6,141,107)
- ----------------------------------------------------------------
Year ended October 31, 2003
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 447,914 $5,472,524
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 4,404 53,497
- ----------------------------------------------------------------
452,318 5,526,021
Shares repurchased (1,252,242) (15,074,535)
- ----------------------------------------------------------------
Net decrease (799,924) $(9,548,514)
- ----------------------------------------------------------------
For the period December 1, 2003
(commencement of operations)
to April 30, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 78 $1,000
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 6 73
- ----------------------------------------------------------------
84 1,073
Shares repurchased -- --
- ----------------------------------------------------------------
Net increase 84 $1,073
- ----------------------------------------------------------------
At April 30, 2004, Putnam, LLC owned 84 class R shares of the
fund (100% of class R shares outstanding), valued at $1,021.
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought against
Putnam Management by those agencies on October 28, 2003 in connection with
excessive short-term trading by Putnam employees and, in the case of the
charges brought by the Massachusetts Securities Division, by participants
in some Putnam-administered 401(k) plans. The settlement with the SEC
requires Putnam Management to pay $5 million in disgorgement plus a civil
monetary penalty of $50 million, and the settlement with the Massachusetts
Securities Division requires Putnam Management to pay $5 million in
restitution and an administrative fine of $50 million. The settlements also
leave intact the process established under an earlier partial settlement
with the SEC under which Putnam Management agreed to pay the amount of
restitution determined by an independent consultant, which may exceed the
disgorgement and restitution amounts specified above, pursuant to a plan to
be developed by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear
all costs, including restitution, civil penalties and associated legal
fees stemming from both of these proceedings. The SEC's and
Massachusetts Securities Division's allegations and related matters also
serve as the general basis for numerous lawsuits, including purported
class action lawsuits filed against Putnam Management and certain
related parties, including certain Putnam funds. Putnam Management has
agreed to bear any costs incurred by Putnam funds in connection with
these lawsuits. Based on currently available information, Putnam
Management believes that the likelihood that the pending private
lawsuits and purported class action lawsuits will have a material
adverse financial impact on the fund is remote, and the pending actions
are not likely to materially affect its ability to provide investment
management services to its clients, including the Putnam funds.
For the period ended April 30, 2004, Putnam Management has assumed
$5,122 of legal, shareholder servicing and communication, audit, and
Trustee fees incurred by the Fund in connection with these matters.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. The fund may experience increased redemptions as a result
of these matters, which could result in increased transaction costs and
operating expenses.
Putnam puts your interests first
In January, Putnam announced a number of voluntary initiatives designed
to reduce fund expenses, provide investors with more useful information,
and help safeguard the interests of all Putnam investors. For details,
visit www.putnaminvestments.com.
Cost-cutting initiatives
Reduced sales charges
Effective immediately, the maximum sales charge for class A shares has been
reduced to 5.25% for equity funds (formerly 5.75%) and 4.50% for most
income funds (formerly 4.75%).*
Lower class B purchase limit
To help ensure that investors are in the most cost-effective share class,
the maximum amount that can be invested in class B shares has been reduced
to $100,000. (Larger trades or accumulated amounts will be directed to
class A shares.)
Ongoing expenses will be limited
During calendar 2004, total ongoing expenses, including management fees for
all funds, will be maintained at or below the average of each fund's
industry peers in its Lipper load-fund universe. For more information,
please see the Statement of Additional information.
Additional measures are being taken to reduce expenses for shareholders
in the six global and international funds that had short-term trading
issues.
Improved disclosure
Putnam fund prospectuses and shareholder reports are being revised to
disclose additional information that will help shareholders compare
funds and weigh their costs and risks along with their potential
benefits. Shareholders will find easy-to-understand information about
fund expense ratios, portfolio manager compensation, risk comparisons,
brokerage commissions, and employee and trustee ownership of Putnam
funds. Disclosure of breakpoint discounts is also being enhanced to
alert investors to potential cost savings.
Protecting investors' interests
New short-term trading fee introduced To discourage short-term trading,
which can interfere with a fund's long-term strategy, a 2% short-term
trading fee will be imposed on any Putnam fund shares redeemed or
exchanged within five calendar days of purchase.
* The maximum sales charge for class A shares of Putnam U.S.
Intermediate Government Income Fund remains 3.25%.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
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, Associate
Treasurer and Principal Executive
Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Patricia C. Flaherty
Senior Vice President
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Global
Income Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary.
For more recent performance, please visit www.putnaminvestments.com.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund, which are described in its prospectus.
For this and other information or to request a prospectus, call
1-800-225-1581 toll free. Please read the prospectus carefully before
investing. The fund's Statement of Additional Information contains
additional information about the fund's Trustees and is available
without charge upon request by calling 1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
SA031-214202 041/220/2MW/906 6/04
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal financial
officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: June 28, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: June 28, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 28, 2004