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
4-30-05
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
Throughout the period ended April 30, 2005, the Federal Reserve Board's
(the Fed), series of increases in the federal funds rate occupied
investors' attention. However, these increases did not begin to have a
significant impact on stock and bond prices until the early months of
the 2005 calendar year. The Fed's more restrictive monetary policy,
along with high energy prices, has caused concern about the
sustainability of corporate profits and has slowed the stock market's
momentum. Shorter-term bond prices have also been under pressure due to
worries regarding inflation. In addition, credit quality issues have
become a greater concern, particularly in early May, after the end of
the reporting period, when rating agencies downgraded bonds issued by
Ford and General Motors. Given the uncertainties of this environment,
security selection takes on an even greater importance and the in-depth
professional research and active management that mutual funds can
provide makes them an even more intelligent choice for today's
investors.
We want you to know that Putnam Investments' management team, under the
leadership of Chief Executive Officer Ed Haldeman, continues to focus on
investment performance and remains committed to putting the interests of
shareholders first. In keeping with these goals, we are including
additional disclosure about your fund's management team in this report.
Following The Outlook for Your Fund, we provide manager compensation
information that pertains to your fund. Furthermore, in this report we
provide information about the 2004 approval of your fund's management
contract with Putnam by your fund's Trustees. See page 19 for details.
In the following pages, members of your fund's management team discuss
the fund's performance, the strategies used to pursue the fund's
investment objectives during the reporting period, and the team's plan
for responding to recent changes in the market climate.
As always, we thank you for your continuing confidence in Putnam.
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 15, 2005
Report from Fund Management
Fund highlights
* During the semiannual period ended April 30, 2005, Putnam Global
Income Trust had a total return of 4.29% without sales charges.
* The fund's primary benchmark, the Lehman Global Aggregate Bond Index,
returned 3.41%.
* The average return for the fund's Lipper category, Global Income
Funds, was 3.34%.
* The fund increased its dividend payout during the period. See page 5
for details.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
During the first half of your fund's 2005 fiscal year, global bond
markets produced solid returns while the U.S. stock and bond markets
were generally sluggish. Amid uncertainty over economic growth
prospects, long-term bond rates generally declined for much of the
period -- though more so in Europe than in the United States. The
concurrent rise in short-term rates produced a flattening of the yield
curve -- a graphical depiction of the difference between long-term and
short-term rates -- in both regions. In this environment, your fund
benefited from several strategic decisions we made, including our
emphasis on European bonds, the portfolio's reduced sensitivity to
interest-rate changes, and its underweighting, relative to its benchmark
index, of corporate bonds and U.S. Treasuries, which had lackluster
performance. The fund's performance was also bolstered by a successful
currency strategy. As a result, your fund outperformed both its
benchmark index and Lipper peer group average, based on results at net
asset value (NAV).
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TOTAL RETURN FOR
PERIODS ENDED 4/30/05
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Class A
(inception 6/1/87) NAV POP
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6 months 4.29% -0.41%
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1 year 10.49 5.55
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5 years 53.40 46.56
Annual average 8.93 7.94
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10 years 81.73 73.60
Annual average 6.16 5.67
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Annual average
(life of fund) 7.83 7.55
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Data is historical. 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. Performance assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 4.50%. For the most recent month-end
performance, visit www.putnaminvestments.com. For a portion of the
period, this fund limited expenses, without which returns would have
been lower. A short-term trading fee of up to 2% may apply.
FUND PROFILE
Putnam Global Income Trust seeks high current income by investing
principally in debt securities of sovereign and private issuers
worldwide, including supranatural issuers. Preservation of capital and
long-term total return are secondary objectives, but only to the extent
consistent with the objective of seeking high current income. 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.
Market overview
The U.S. and European economies showed considerably different
characteristics during the six-month period. In the United States,
growth remained relatively strong, with signs of moderation toward the
end of the period. European growth, however, was generally slower. Signs
of inflation, which appeared in the United States in early 2005 and were
fueled by increased wage pressures and higher energy prices, prompted
the U.S. Federal Reserve Board (the Fed) to change the tone of its
statements accompanying rate increases in February and March -- the
sixth and seventh, respectively, since June 2004. The shift implied the
Fed was becoming more concerned about the potential for inflation. These
rate increases drove long-term bond prices down (and yields higher)
during these months, detracting from U.S. bond performance for the
six-month period. Short-term rates rose to a much greater extent than
long-term rates, producing a flatter yield curve.
In Europe, economic growth was generally slow in the major developed
economies, including Germany, France, and Italy, resulting in a general
decline in long-term bond yields that bolstered the performance of
European government bonds. Short-term rates rose here too, resulting in
a significant flattening of the European yield curve.
Emerging-market bond performance was strong during November and December
2004, but fell off sharply in 2005 when investors became concerned about
higher U.S. interest rates, the potential for inflation, and valuations
that were beginning to appear excessive. Corporate high-yield bond
performance also declined in 2005 for similar reasons. Your fund did not
have significant exposure to these areas of the bond market and was not
greatly affected by their sluggish performance.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 4/30/05
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Bonds
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Lehman Global Aggregate Bond Index (international bonds) 3.41%
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Lehman Aggregate Bond Index (broad bond market) 0.98%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 0.87%
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Citigroup Non-U.S. World Government Bond Index
(international government bonds) 5.03%
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Equities
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S&P 500 Index (broad stock market) 3.28%
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S&P/Citigroup World Ex-U.S. Growth Primary Market Index
(international growth stocks of large companies) 8.57%
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S&P/Citigroup World Ex-U.S. Value Primary Market Index
(international value stocks of large companies) 8.83%
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These indexes provide an overview of performance in different market
sectors for the six months ended 4/30/05.
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Strategy overview
Our strategy of maintaining an overweighted position in European
government bonds -- relative to the fund's benchmark index -- helped
produce solid absolute and relative returns for the fund. In Europe, the
fund's main focus was in Germany and France, where the economies have
been hindered by rising unemployment, lower capital spending, and
reduced government outlays. Economic growth for euro-zone countries
(those belonging to the European Union and using the euro as their
currency) was a lackluster 0.2% in the fourth calendar quarter of 2004,
following a 0.3% increase in the third quarter. As a result, the fund's
European bond holdings performed well, as yields declined (and prices
rose) due to the sluggish economic environment. Meanwhile, in the United
States, Treasury yields declined until February and March, when the Fed
hinted that it was concerned about lower productivity and the potential
for inflation. Yields rose sharply in response, hurting Treasury
returns. Although the fund's Treasury holdings detracted from its
results during these months, our decision to maintain an underweighted
position in this sector helped the fund's relative performance.
Throughout the period, we sought to take advantage of the flattening
yield curve, which occurred because short- and intermediate-maturity
bond yields rose and long-term bond yields fell (or, in the United
States, rose only slightly). We overweighted longer-term bonds and
underweighted those with short and intermediate maturities. Both
strategies proved beneficial. At the same time, we reduced the
portfolio's overall duration -- a measure of a bond's price sensitivity
to interest-rate fluctuations -- in an effort to lower its sensitivity
to interest-rate changes. This strategy also contributed positively to
the fund's performance, especially when U.S. rates spiked toward the end
of the period and bond prices declined.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY WEIGHTINGS COMPARED]
TOP COUNTRY WEIGHTINGS COMPARED
10/31/04 4/30/05
United States 49.4% 61.4%
Germany 15.1% 12.9%
United Kingdom 7.1% 8.1%
Ireland 7.6% 7.3%
France 4.2% 5.8%
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 and allocations affected performance
One of the key drivers of the fund's performance during the period was
our decision to overweight European government bonds, particularly those
from Germany and France. However, the fund's underweight to U.S.
Treasuries, which underperformed most fixed-income sectors during the
period, also benefited relative performance.
The semiannual period was marked by interest-rate fluctuation within a
relatively moderate range. In such an environment, securitized bonds, or
structured securities, tend to perform well because they typically offer
higher income than corporate bonds of comparable credit quality. They
also offer short maturities, so as interest rates rise, we can reinvest
the proceeds in higher-yielding securities. The most common types of
securitized bonds are mortgage-backed securities (MBSs) issued by the
Federal National Mortgage Association (Fannie Mae) and the Government
National Mortgage Association (Ginnie Mae). Other types of securitized
bonds include asset-backed securities (ABSs), which are typically backed
by car loans and credit card payments, and commercial mortgage-backed
securities (CMBSs), which are backed by loans on large commercial real
estate projects, such as office parks or shopping malls. Both of these
sectors performed well in comparison to investment-grade corporate
bonds. The fund's holdings in home equity and manufactured-housing ABS
securities performed particularly well. The fund's overweight to CMBSs
and ABSs, in particular, made a solid contribution to its relative
returns.
We have continued to trim the fund's weighting in the investment-grade
corporate bond sector, seeking to reduce BBB-rated holdings and replace
them with higher-rated corporates, as well as CMBSs and ABSs. For those
corporate bonds held in the portfolio, we found select opportunities in
the strong-performing energy and utilities sectors. The fund's underweight
to the automotive sector was also supportive for performance. This
industry has performed poorly due to concerns about General Motors, which
has been struggling, and to rising interest rates, which hurts the
financial performance of debt-laden auto companies. The fact that the fund
did not hold General Motors, one of the worst-performing bonds in the
Lehman Global Aggregate Bond Index, also helped its relative returns.
(Shortly after the end of the period, General Motors debt was downgraded
to below-investment-grade status by Standard & Poor's.)
[GRAPHIC OMITTED: horizontal bar chart SECTOR WEIGHTINGS AS OF 4/30/05]
SECTOR WEIGHTINGS AS OF 4/30/05
Mortgage-backed
securities 40.8%
Government
bonds 39.7%
Asset-backed
securities 15.0%
Investment-grade
bonds 4.1%
High-yield
bonds 0.3%
Emerging-market
bonds 0.1%
Footnote reads:
Weightings are shown as a percentage of market value. Holdings will vary
over time.
In the emerging markets sector, the fund's underweighted position helped
relative performance. Emerging-market bond prices generally fell due to
overvaluations, a flight to quality, and concerns that rising oil prices
would fuel inflation and result in higher interest rates, which, in
turn, could slow economic growth.
The fund's currency strategy was effective. We overweighted the
Australian dollar, British pound sterling, and Japanese yen, and
underweighted the euro and the Canadian dollar. The euro underweight was
particularly helpful, as the slowing economy in Europe has caused the
currency to decline from highs reached in 2003-2004. We were able to
overweight European bonds and underweight the euro currency by using
currency- hedging techniques.
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
Fund increased dividend payment
Effective February 2005, the fund increased its dividend payment from
$0.028 per share to $0.030 per share. Given the global interest-rate
environment, in which short-term interest rates have risen, the fund has
seen increased income from overseas bond holdings. Because of the
increased income generated, the fund was able to increase its payout to
shareholders.
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.
During the period, the fund's lower returns reflected a more cautious
bond market and a generally more mature global economic recovery. Our
forecast for the United States is for continued steady, moderate growth
with potential for a slight increase in inflation. Such an environment
would probably be consistent with more short-term interest-rate
increases by the Fed and the possibility for long-term bond yields to
move upward. In such an environment, we believe the fund's shorter
duration and higher credit quality would help it to weather the impact
of rising interest rates, if they come to pass (as we believe they
will).
In Europe, we anticipate continued sluggish economic growth in both the
major developed economies and smaller nations such as Greece and Italy,
which are experiencing increasing fiscal problems. As a result of this
forecast, we will retain the fund's emphasis on longer-term European
government bonds in the major developed nations.
Of course, we will continue to remain vigilant about any possible
economic disruptions in all regions and fixed-income markets, keeping
the fund positioned defensively while remaining well diversified and
continuing to seek select opportunities as they arise.
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-market securities, including illiquidity and
volatility. Lower-rated bonds may offer higher yields in return for more
risk. Mutual funds that invest in government securities are not
guaranteed. Mortgage-backed securities are subject to prepayment risk.
The fund invests in fewer issuers or concentrates its investments by
region or sector, and involves more risk than a fund that invests more
broadly. Mutual funds that invest in bonds are subject to certain risks,
including interest-rate risk, credit risk, and inflation risk. As
interest rates rise, the prices of bonds fall. Long-term bonds are more
exposed to interest-rate risk than short-term bonds. Unlike bonds, bond
funds have ongoing fees and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Core Fixed-Income
Team. Kevin Cronin is the Portfolio Leader and D. William Kohli is a
Portfolio Member of the fund. The Portfolio Leader and Portfolio Member
coordinate the team's management of the fund.
For a complete listing of the members of the Putnam Core Fixed-Income
Team, including those who are not Portfolio Leaders or Portfolio Members
of your fund, visit Putnam's Individual Investor Web site at
www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Member have invested in the fund (in dollar ranges).
Information shown is as of April 30, 2005, and April 30, 2004.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBER
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$1 - $10,001 - $50,001- $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
- -------------------------------------------------------------------------------------------------------------
Kevin Cronin 2005 *
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Portfolio Leader 2004 *
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D. William Kohli 2005 *
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Portfolio Member 2004 *
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Fund manager compensation
The total 2004 fund manager compensation that is attributable to your
fund is approximately $50,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers listed in
this section for their portfolio management responsibilities, calculated
based on the fund assets they manage taken as a percentage of the total
assets they manage. The compensation amount also includes a portion of
the 2004 compensation paid to the Chief Investment Officer of the team
and the Group Chief Investment Officer of the fund's broader investment
category for their oversight responsibilities, calculated based on the
fund assets they oversee taken as a percentage of the total assets they
oversee. This amount does not include compensation of other personnel
involved in research, trading, administration, systems, compliance, or
fund operations. These percentages are determined as of the fund's
fiscal period-end. For personnel who joined Putnam Management during or
after 2004, the calculation reflects annualized 2004 compensation or an
estimate of 2005 compensation, as applicable.
Other Putnam funds managed by the Portfolio Leader and Portfolio Member
Kevin Cronin is also a Portfolio Leader of Putnam American Government
Income Fund, Putnam Income Fund, Putnam Limited Duration Government
Income Fund, and Putnam U.S. Government Income Trust. He is also a
Portfolio Member of The George Putnam Fund of Boston and Putnam Equity
Income Fund.
D. William Kohli is also a Portfolio Leader of Putnam Diversified Income
Trust, Putnam Master Intermediate Income Trust, and Putnam Premier
Income Trust.
Kevin Cronin and D.William Kohli may also manage other accounts and
variable trust funds advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
There were no changes in your fund's Portfolio Leader and Portfolio
Member during the year ended April 30, 2005.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is as of
April 30, 2005, and April 30, 2004.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001- $100,001
Year $0 $10,000 $50,000 $100,000 and over
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Philippe Bibi 2005 *
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Chief Technology Officer 2004 *
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John Boneparth 2005 *
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Head of Global Institutional Mgmt 2004 *
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Joshua Brooks 2005 *
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Deputy Head of Investments N/A
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Kevin Cronin 2005 *
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Head of Investments 2004 *
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Charles Haldeman, Jr. 2005 *
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President and CEO 2004 *
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Amrit Kanwal 2005 *
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Chief Financial Officer 2004 *
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Steven Krichmar 2005 *
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Chief of Operations 2004 *
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Francis McNamara, III 2005 *
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General Counsel 2004 *
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Richard Monaghan 2005 *
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Head of Retail Management 2004 *
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Richard Robie, III 2005 *
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Chief Administrative Officer 2004 *
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Edward Shadek 2005 *
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Deputy Head of Investments N/A
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N/A indicates the individual was not a member of Putnam's Executive
Board as of 4/30/04.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended April 30, 2005. 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 4/30/05
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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 4.29% -0.41% 3.91% -1.09% 3.93% 2.93% 4.10% 0.68% 4.11%
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1 year 10.49 5.55 9.71 4.71 9.72 8.72 10.20 6.59 10.35
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5 years 53.40 46.56 47.83 45.83 47.72 47.72 51.49 46.60 51.63
Annual average 8.93 7.94 8.13 7.84 8.12 8.12 8.66 7.95 8.68
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10 years 81.73 73.60 68.70 68.70 68.60 68.60 77.23 71.44 77.31
Annual average 6.16 5.67 5.37 5.37 5.36 5.36 5.89 5.54 5.89
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Annual average
(life of fund) 7.83 7.55 6.98 6.98 7.02 7.02 7.51 7.31 7.56
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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 4.50% and 3.25%, respectively (which
for class A shares does not reflect a reduction in sales charges that
went into effect on April 1, 2005; 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 shares 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 may 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 4/30/05
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Lehman Lipper Global
Global Income Funds
Aggregate category
Bond Index* average+
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6 months 3.41% 3.34%
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1 year 10.31 9.73
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5 years 52.58 47.95
Annual average 8.82 8.07
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10 years 90.58 101.83
Annual average 6.66 7.07
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Annual average
(life of fund) -- 7.59
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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 inception date for the Lehman Global Aggregate Bond index
was 12/31/89.
+ Over the 6-month and 1-, 5-, and 10-year periods ended 4/30/05, there
were 93, 93, 63, and 34 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/05
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Class A Class B Class C Class M Class R
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Distributions (number) 6 6 6 6 6
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Income $0.214 $0.165 $0.168 $0.198 $0.202
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Capital gains -- -- -- -- --
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Total $0.214 $0.165 $0.168 $0.198 $0.202
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Share value: NAV POP NAV NAV NAV POP NAV
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10/31/04 $12.73 $13.33 $12.69 $12.70 $12.66 $13.09 $12.74
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4/30/05 13.06 13.57+ 13.02 13.03 12.98 13.42 13.06
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Current return
(end of period)
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Current dividend rate 1 2.76% 2.65% 1.94% 2.03% 2.50% 2.41% 2.48%
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Current 30-day
SEC yield (with
expense limitation) 2 3.04 2.92 2.29 2.29 2.79 2.70 2.78
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Current 30-day
SEC yield (without
expense limitation) 3 2.97 2.85 2.22 2.23 2.72 2.63 2.71
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+ Reflects a reduction in sales charges that took effect on April 1, 2005.
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, the fund limited expenses, without which
yields would have been lower. Based only on investment income,
calculated using SEC guidelines.
3 Based only on investment income, calculated using SEC guidelines.
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TOTAL RETURN FOR PERIODS ENDED 3/31/05 (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 5.56% 0.78% 5.11% 0.11% 5.11% 4.11% 5.38% 1.92% 5.47%
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1 year 5.31 0.54 4.47 -0.53 4.53 3.53 5.00 1.60 5.08
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5 years 47.98 41.33 42.48 40.48 42.63 42.63 46.24 41.52 46.21
Annual average 8.15 7.16 7.34 7.03 7.36 7.36 7.90 7.19 7.89
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10 years 83.35 75.04 70.09 70.09 70.13 70.13 79.09 73.28 78.89
Annual average 6.25 5.76 5.45 5.45 5.46 5.46 6.00 5.65 5.99
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Annual average
(life of fund) 7.80 7.52 6.95 6.95 6.99 6.99 7.48 7.28 7.53
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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. In the most
recent six-month period, your fund limited these expenses; had it not
done so, expenses would have been higher. 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 November 1, 2004, to April
30, 2005. 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 4/30/05
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $6.23 $10.01 $10.01 $7.49 $7.49
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Ending value (after
expenses) $1,042.90 $1,039.10 $1,039.30 $1,041.00 $1,041.10
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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 4/30/05.
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, 2005, use the calculation method below. To find the value of your
investment on November 1, 2004, go to www.putnaminvestments.com and log
on to your account. Click on the "Transaction History" tab in your Daily
Statement and enter 11/01/2004 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 11/1/04 [DIV] $1,000 X per $1,000 = paid
- -----------------------------------------------------------------------------
Example Based on a $10,000 investment in class A shares of your fund.
- -----------------------------------------------------------------------------
$10,000 [DIV] $1,000 X $6.23 (see table above) = $62.30
- -----------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 4/30/05
- -----------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- -----------------------------------------------------------------------------
Expenses paid per
$1,000* $6.16 $9.89 $9.89 $7.40 $7.40
- -----------------------------------------------------------------------------
Ending value (after
expenses) $1,018.70 $1,014.98 $1,014.98 $1,017.46 $1,017.46
- -----------------------------------------------------------------------------
* 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 4/30/05. 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 the average of its peer
group, as defined 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.
- -----------------------------------------------------------------------------
EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
- -----------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- -----------------------------------------------------------------------------
Your fund's annualized
expense ratio 1.23% 1.98% 1.98% 1.48% 1.48%
- -----------------------------------------------------------------------------
Average annualized expense
ratio for Lipper peer
group+ 1.21% 1.96% 1.96% 1.46% 1.46%
- -----------------------------------------------------------------------------
+ Simple average of the expenses of all front-end load funds in the fund's
Lipper peer group, calculated in accordance with Lipper's standard
method for comparing fund expenses (excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses). This average reflects each fund's
expenses for its most recent fiscal year available to Lipper as of
3/31/05. To facilitate comparison, Putnam has adjusted this average to
reflect the 12b-1 fees carried by each class of shares. The peer group
may include funds that are significantly smaller or larger than the
fund, which may limit the comparability of the fund's expenses to the
simple average, which typically is higher than the asset-weighted
average.
Understanding your fund's
portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries,
economies, and markets. Portfolio turnover is a measure of how often a
fund's managers buy and sell securities for your fund. A portfolio
turnover of 100%, for example, means that the managers sold and replaced
securities valued at 100% of a fund's assets within a one-year period.
Funds with high turnover may be more likely to generate capital gains
and dividends that must be distributed to shareholders as taxable
income. High turnover may also cause a fund to pay more brokerage
commissions and other transaction costs, which may detract from
performance.
Funds that invest in bonds or other fixed-income instruments may have
higher turnover than funds that invest only in stocks. Short-term bond
funds tend to have higher turnover than longer-term bond funds, because
shorter-term bonds will mature or be sold more frequently than
longer-term bonds. You can use the table below to compare your fund's
turnover with the average turnover for funds in its Lipper category.
- ------------------------------------------------------------------------------
TURNOVER COMPARISONS
percentage of holdings that change every year
- ------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------
Putnam Global
Income Trust 162% 198% 331%* 293%* 301%
- ------------------------------------------------------------------------------
Lipper Global Income
Funds category
average 165% 188% 185% 212% 190%
- ------------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on October 31. Turnover data for the fund's Lipper
category is calculated based on the average of the turnover of each fund
in the category for its fiscal year ended during the indicated year.
Fiscal years vary across funds in the Lipper category, which may limit
the comparability of the fund's portfolio turnover rate to the Lipper
average. Comparative data for 2004 is based on information available as
of 3/31/05.
* Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
Risk comparison
This risk comparison is designed 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 0.38
Taxable bond
fund average 0.30
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 March 31, 2005. 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. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 4.50% maximum sales charge for class A
shares (since reduced to 3.75%) 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
global investment-grade fixed-income securities, excluding the United
States.
Lehman Aggregate Bond Index is an unmanaged index of U.S.
investment-grade fixed-income securities.
Lehman Global Aggregate Bond Index is an unmanaged index of global
investment-grade fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
S&P/Citigroup World Ex-U.S. Growth Primary Market Index (PMI) is an
unmanaged index of mostly large- and some small-cap stocks from
developed countries, excluding the United States, chosen for their
growth orientation.
S&P/Citigroup World Ex-U.S. Value Primary Market Index (PMI) is an
unmanaged index of mostly large- and some small-cap 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.
Trustee approval of management contract
General conclusions
The Board of Trustees of the Putnam funds oversees the management of
each fund and, as required by law, determines annually whether to
approve the continuance of each fund's management contract with Putnam
Management. In this regard the Board of Trustees, with the assistance of
its Contract Committee consisting solely of Independent Trustees,
requests and evaluates all information it deems reasonably necessary in
the circumstances. Over the course of several months beginning in March
and ending in June of 2004, the Contract Committee reviewed the
information provided by Putnam Management and other information
developed with the assistance of the Board's independent counsel and
independent staff. The Contract Committee reviewed and discussed key
aspects of this information with all of the Independent Trustees. Upon
completion of this review, the Contract Committee recommended and the
Independent Trustees approved the continuance of your fund's contract,
effective July 1, 2004.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the
services being provided to the fund, the fees paid by competitive funds
and the costs incurred by Putnam Management in providing such service,
and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may
exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any
single factor. Some of the factors that figured particularly in the
Trustees' deliberations are described below.
Model fee schedules and categories; total expenses
The Trustees, working in cooperation with Putnam Management, have
developed and implemented a series of model fee schedules for the Putnam
funds designed to ensure that each fund's management fee is consistent
with the fees for similar funds in the Putnam complex and compares
favorably with fees paid by competitive funds sponsored by other advisors.
The Trustees reviewed the model fee schedule currently in effect for the
fund, including fee levels and breakpoints, and the assignment of the fund
to a particular fee category under this structure. The Trustees also
reviewed comparative fee and expense information for competitive funds.
The Trustees concluded that no changes should be made in the fund's
current fee schedule at this time. The Trustees noted that expense ratios
for a number of Putnam funds had been increasing recently as a result of
declining net assets and the natural operation of fee breakpoints. They
noted that such expense ratio increases were currently being controlled by
expense limitations implemented in January 2004. They also noted that the
competitive landscape regarding mutual fund fees may be changing as a
result of fee reductions accepted by various other fund groups in
connection with recent regulatory settlements and greater focus on fees
and expenses in the mutual fund industry generally. The Trustees indicated
an intention to monitor these developments closely.
Economies of scale
As noted above, the Trustees concluded that the fee schedule currently
in effect for your fund represents an appropriate sharing of economies
of scale at current asset levels. The Trustees indicated their intention
to continue their ongoing consideration of economies of scale and in
particular to consider further the possible operation of such economies
in the event that a significant recovery in the equity markets or net
fund sales were to raise asset levels substantially above current
levels. In this regard, the Trustees noted that they had reviewed data
relating to the substantial increase in asset levels of the Putnam funds
that occurred during the years leading up to the market peak in 2000,
the subsequent decline in assets and the resulting impact on revenues
and expenses of Putnam Management. The Trustees also noted that recent
declines in net assets in many Putnam funds, together with significant
changes in the cost structure of Putnam Management have altered the
economics of Putnam Management's business in significant ways. The
Trustees concluded that they would monitor these changes carefully and
evaluate the resulting impact on Putnam Management's economics and the
sharing of economies of scale between the parties.
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under the Management Contracts.
The Trustees recognized that a high quality investment process -- as
measured by the experience and skills of the individuals assigned to the
management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract
and retain high-quality personnel -- does not guarantee favorable
investment results for every fund in every time period. The Trustees
considered the investment performance of each fund over multiple time
periods and considered information comparing the fund's performance with
various benchmarks and with the performance of competitive funds. The
Trustees noted the satisfactory investment performance of many Putnam
funds.
They also noted the disappointing investment performance of certain
funds in recent years and continued to discuss with senior management of
Putnam Management the factors contributing to such under-performance and
actions being taken to improve performance. The Trustees recognized
that, in recent years, Putnam Management has made significant changes in
its investment personnel and processes and in the fund product line in
an effort to address areas of underperformance. The Trustees indicated
their intention to continue to monitor performance trends to assess the
effectiveness of these changes and to evaluate whether additional
remedial changes are warranted. As a general matter, the Trustees
concluded that consultation between the Trustees and Putnam Management
represents the most effective way to address investment performance
problems. The Trustees believe that investors in the Putnam funds and
their financial advisors have, as a general matter, effectively placed
their trust in the Putnam organization, under the supervision of the
funds' Trustees, to make appropriate decisions regarding the management
of the funds. The Trustees believe that the termination of the
Management Contract and engagement of a new investment adviser for
under-performing funds, with all the attendant disruptions, would not
serve the interests of fund shareholders at this time and would not
necessarily provide any greater assurance of improved investment
performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam
Management may receive in connection with the services it provides under
the Management Contract with your fund. These include principally
benefits related to brokerage and soft-dollar allocations, which pertain
mainly to funds investing in equity securities. The Trustees believe
that soft-dollar credits and other potential benefits associated with
the allocation of fund brokerage represent assets of the funds that
should be used for the benefit of fund shareholders. The Trustees noted
recent trends in the allocation of fund brokerage, including commission
costs, the allocation of brokerage to firms that provide research
services to Putnam Management, and the sources and application of
available soft-dollar credits. Effective December 31, 2003, reflecting a
decision made by the Trustees earlier that year, Putnam Management
ceased allocating brokerage in connection with the sale of fund shares.
In addition, in preparing its budget for commission allocations in 2004,
Putnam Management voluntarily reduced substantially the allocation of
brokerage commissions to acquire research services from third-party
service providers. In light of evolving best practices in the mutual
fund industry, the Trustees concluded that this practice should be
further curtailed and possibly eliminated in the near future. The
Trustees indicated that they would continue to monitor the allocation of
the funds' brokerage to ensure that the principle of "best price and
execution" remains paramount in the portfolio trading process.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of the annual contract
reviews included information regarding fees charged by Putnam Management
and its affiliates to institutional clients such as defined benefit
pension plans and college endowments. This information included
comparison of such fees with fees charged to the Putnam funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees devoted special attention to
these issues and reviewed recent articles by critics of mutual fund
fees, articles by the ICI defending such fee differences, and relevant
guidance provided by decisions of the courts. The Trustees observed, in
this regard, that the differences in fee rates between institutional
clients and mutual funds are by no means uniform when examined by
individual asset sectors, suggesting that differences in the pricing of
investment management services to these types of clients reflects to a
substantial degree historical competitive forces operating in separate
market places. In reaching their conclusions, the Trustees considered
the fact that fee rates across all asset sectors are higher on average
for mutual funds than for institutional clients, and also considered the
differences between the services that Putnam provides to the Putnam
funds and those that it provides to institutional clients of the firm.
Settlement of regulatory charges related to market timing
Finally, in reaching their conclusions, the Trustees considered all
matters pertinent to the administrative charges filed against Putnam
Management by the SEC and the Commonwealth of Massachusetts in October
2003 relating to market timing, the firm's settlement of those charges,
and the conclusions and recommendations of the Trustees' Audit and
Pricing Committee based on its review of these matters. The Trustees
considered the actions taken by the owner of Putnam Management and its
new senior management to terminate or discipline the individuals
involved, to implement new compliance systems, to indemnify the funds
against all costs and liabilities related to these matters, and
otherwise to ensure that the interests of the funds and their
shareholders are fully protected. The Trustees noted that, in addition
to the settlements of the regulatory charges which will provide
comprehensive restitution for any losses suffered by shareholders, the
new senior management of Putnam Management has moved aggressively to
control expense ratios of funds affected by market timing, to reduce
charges to new investors, to improve disclosure of fees and expenses,
and to emphasize the paramount role of investment performance in
achieving shareholders' investment goals.
Other information for shareholders
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.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
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 the fund's net investment gain or loss, 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, 2005 (Unaudited)
Foreign government bonds and notes (36.5%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
CHF 2,900,000 Austria (Republic of) notes
Ser. EMTN, 3 3/8s, 2012 $2,678,010
EUR 3,000,000 Austria (Republic of) 144A notes
Ser. EMTN, 3.8s, 2013 4,014,130
CAD 6,557,000 Canada Housing Trust govt. guaranty
5.1s, 2007 (Canada) 5,446,590
DKK 9,640,000 Denmark (Kingdom of) bonds 6s, 2009 1,904,965
USD 1,000,000 Export Development Canada government
bonds 4s, 2007 (Canada) 1,003,500
EUR 4,036,000 France (Government of) bonds 5 3/4s,
2032 6,759,545
EUR 1,907,063 France (Government of) bonds 4s,
2013 2,594,565
EUR 2,693,000 Germany (Federal Republic of) bonds
5s, 2012 3,881,093
EUR 6,930,000 Germany (Federal Republic of) bonds
4 3/4s, 2008 9,549,048
EUR 3,510,000 Germany (Federal Republic of) bonds
Ser. 97, 6s, 2007 4,809,347
CHF 1,900,000 Italy (Republic of) unsub. notes
Ser. 11, Tranche 1, 3 1/8s, 2010 1,721,830
EUR 4,500,000 Netherlands (Government of) bonds
5s, 2012 6,496,919
JPY 20,000,000 Philippines (Republic of) 144A sr.
sub. notes 3.2s, 2005 191,230
USD 500,000 Quebec (Province of) notes 5s, 2009
(Canada) 513,760
SEK 7,760,000 Sweden (Government of) bonds Ser.
3101, 4s, 2008 1,367,271
SEK 3,585,000 Sweden (Government of) debs. Ser.
1041, 6 3/4s, 2014 637,144
GBP 3,538,000 United Kingdom treasury bonds
7 1/2s, 2006 7,063,940
GBP 610,000 United Kingdom treasury bonds
4 1/4s, 2036 1,128,805
GBP 425,000 United Kingdom treasury bonds
2 1/2s, 2009 1,993,345
--------------
Total Foreign government bonds and
notes (cost $55,986,688) $63,755,037
U.S. government agency mortgage obligations (26.5%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corporation Pass-Through
Certificates
$425,364 6 1/2s, with due dates from June 1,
2031 to June 1, 2034 $442,337
Federal National Mortgage
Association Pass-Through
Certificates
2,165,148 7s, with due dates from August 1,
2025 to March 1, 2034 2,290,206
72,625 7s, February 1, 2016 76,022
700,000 7s, TBA, May 1, 2035 738,938
14,537,888 6 1/2s, with due dates from
September 1, 2028 to January 1, 2035 15,132,376
31,942 6s, August 1, 2034 32,814
1,690,000 6s, TBA, May 1, 2035 1,734,626
800,000 5 1/2s, TBA, June 1, 2035 806,062
11,072,000 5 1/2s, TBA, May 1, 2035 11,179,260
690,000 5 1/2s, TBA, May 1, 2020 706,146
691,115 5s, April 1, 2019 697,215
1,900,000 5s, TBA, June 1, 2035 1,876,992
1,900,000 5s, TBA, May 1, 2035 1,881,742
7,900,000 4 1/2s, TBA, May 1, 2020 7,815,446
837,841 4s, with due dates from May 1, 2019
to June 1, 2019 813,360
--------------
Total U.S. government agency
mortgage obligations
(cost $46,033,167) $46,223,542
U.S. treasury obligations (0.5%) (a) (cost $759,395)
Principal amount Value
- -------------------------------------------------------------------------------
$646,000 U.S. Treasury Bonds 6 1/4s, May 15,
2030 $804,371
Asset-backed securities (15.8%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$15,187 ABSC NIMS Trust 144A Ser. 03-HE5,
Class A, 7s, 2033 $15,225
Aegis Asset Backed Securities Trust
144A
34,627 Ser. 04-1N, Class Note, 5s, 2034 34,627
32,047 Ser. 04-2N, Class N1, 4 1/2s, 2034 31,972
75,092 Ser. 04-4N, Class Note, 5s, 2034 75,092
American Home Mortgage Investment
Trust FRB Ser. 05-1
855,908 Class 4A1, 4.992s, 2045 865,403
771,895 Class 5A1, 5.001s, 2045 780,338
Ameriquest Finance NIM Trust 144A
Ser. 04-RN9
102,000 Class N2, 10s, 2034 (Cayman Islands) 94,483
91,097 Class N1, 4.8s, 2034 (Cayman
Islands) 91,097
246,364 Amortizing Residential Collateral
Trust Ser. 02-BC3, Class A,
Interest Only (IO), 6s, 2005 1,065
10,838 AQ Finance NIM Trust 144A Ser.
03-N9A, Class Note, 7.385s,
2033 (Cayman Islands) 10,865
Argent NIM Trust 144A
17,228 Ser. 03-N8, Class A, 5.56s, 2034
(Cayman Islands) 17,228
27,650 Ser. 04-WN4, Class A, 4.459s, 2034
(Cayman Islands) 27,572
Asset Backed Funding Corp. NIM Trust
144A
103,844 Ser. 04-0PT5, Class N1, 4.45s, 2034
(Cayman Islands) 103,844
42,600 Ser. 04-FF1, Class N1, 5s, 2034
(Cayman Islands) 42,656
120,914 Asset Backed Securities Corp. Home
Equity Loan Trust FRB Ser.
05-HE1, Class A3, 3.14s, 2035 120,939
80,000 Bank One Issuance Trust FRB Ser.
03-C4, Class C4, 3.984s, 2011 81,695
4,583,836 Bayview Financial Asset Trust Ser.
03-X, Class A, IO, 0.9s, 2006 78,841
Bear Stearns Alternate Trust
128,368 Ser. 04-11, Class 2A2, 4.961s, 2034 129,683
600,482 Ser. 04-12, Class 2A2, 5.112s, 2035 608,138
Bear Stearns Asset Backed Securities
NIM Trust 144A
52,631 Ser. 04-FR1, Class A1, 5s, 2034
(Cayman Islands) 52,631
168,025 Ser. 04-HE10, Class A1, 4 1/4s, 2034
(Cayman Islands) 167,605
50,000 Ser. 04-HE10, Class A2, 5s, 2034
(Cayman Islands) 50,000
71,459 Ser. 04-HE6, Class A1, 5 1/4s, 2034
(Cayman Islands) 71,559
44,971 Ser. 04-HE7N, Class A1, 5 1/4s, 2034 45,041
38,839 Ser. 04-HE8N, Class A1, 5s, 2034 38,839
81,000 Bear Stearns Asset Backed
Securities, Inc. Ser. 04-FR3, Class
M6, 6.1s, 2034 81,810
Bombardier Capital Mortgage Securitization Corp.
41,517 Ser. 00-A, Class A2, 7.575s, 2030 30,405
148,705 Ser. 00-A, Class A4, 8.29s, 2030 122,310
296,520 Ser. 99-B, Class A3, 7.18s, 2015 221,648
185,723 Ser. 99-B, Class A4, 7.3s, 2016 141,319
250,000 Capital One Multi-Asset Execution
Trust FRB Ser. 02-C1, Class
C1, 5.704s, 2010 263,906
49,000 CARMAX Auto Owner Trust Ser. 04-2,
Class D, 3.67s, 2011 48,584
CARSSX Finance, Ltd. 144A FRB Ser.
04-AA
220,034 Class B3, 6.304s, 2011 (Cayman
Islands) 222,131
557,514 Class B4, 8.454s, 2011 (Cayman
Islands) 568,250
506,360 CDC Mortgage Capital Trust Ser.
02-HE2, Class A, IO, 5 1/4s, 2005 4,277
170,000 Chase Credit Card Master Trust FRB
Ser. 03-3, Class C, 4.034s, 2010 173,910
86,425 Chase Funding Net Interest Margin
144A Ser. 04-OPT1, Class
Note, 4.458s, 2034 86,209
CHEC NIM Ltd., 144A Ser. 04-2
51,040 Class N1, 4.45s, 2034 (Cayman
Islands) 51,037
35,000 Class N2, 8s, 2034 (Cayman Islands) 34,800
25,000 Class N3, 8s, 2034 (Cayman Islands) 21,500
EUR 240,000 Chester Asset Receivables Dealings
PLC FRN Ser. 02-B, Class C, 3.335s,
2009 (United Kingdom) 314,594
Conseco Finance Ser. 02-C
$309,833 Class AFIO, IO, 7 1/2s, 2032 10,317
173,571 Class AVIO, IO, 7 1/2s, 2032 5,849
Conseco Finance Securitizations Corp.
296,935 Ser. 00-2, Class A4, 8.48s, 2030 297,072
409,517 Ser. 00-4, Class A4, 7.73s, 2031 399,185
56,000 Ser. 00-4, Class A5, 7.97s, 2032 47,867
781,000 Ser. 00-4, Class A6, 8.31s, 2032 689,906
325,000 Ser. 01-04, Class A4, 7.36s, 2033 330,700
449,000 Ser. 01-1, Class A5, 6.99s, 2032 426,863
441,045 Ser. 02-2, Class A, IO, 8 1/2s, 2033 115,703
3,104,000 Countrywide Alternative Loan Trust
Ser. 05-24, Class 1X, IO, 5s, 2035 86,330
Countrywide Asset Backed
Certificates 144A
14,847 Ser. 03-5NF, Class NF, 6 3/4s, 2034 14,889
137,511 Ser. 04-1NIM, Class Note, 6s, 2034 138,385
291,349 Ser. 04-6N, Class N1, 6 1/4s, 2035 293,443
47,631 Ser. 04-BC1N, Class Note, 5 1/2s,
2035 47,765
Countrywide Home Loans
1,371,748 Ser. 04-25, Class 2X, IO, 1.08s,
2035 44,582
2,658,763 Ser. 05-2, Class 2X, IO, 0.978s,
2035 87,241
129,915 CS First Boston Mortgage Securities
Corp. 144A Ser. 04-FR1N, Class A,
5s, 2034 129,915
420,000 First Chicago Lennar Trust 144A Ser.
97-CHL1, Class E, 7.676s, 2039 438,900
99,247 First Consumers Master Trust FRN
Ser. 01-A, Class A, 3.264s, 2008 98,441
First Franklin Mortgage Loan NIM
Trust 144A
55,791 Ser. 04-FF10, Class N1, 4.45s, 2034
(Cayman Islands) 55,787
44,994 Ser. 04-FF7A, Class A, 5s, 2034 45,003
Fremont NIM Trust 144A
67,797 Ser. 04-3, Class A, 4 1/2s, 2034 67,587
44,057 Ser. 04-3, Class B, 7 1/2s, 2034 42,242
9,111 Ser. 04-A, Class Note, 4 3/4s, 2034 9,075
45,394 Ser. 04-B, Class Note, 4.703s, 2034 45,394
145,430 GE Capital Credit Card Master Note
Trust FRB Ser. 04-2, Class
C, 3.434s, 2010 145,430
214,579 GMAC Mortgage Corp. Loan Trust Ser.
05-AR1, Class 1A2, 4.432s, 2035 214,780
Granite Mortgages PLC FRB
EUR 455,000 Ser. 03-2, Class 2C1, 5.2s, 2043
(United Kingdom) 634,945
GBP 340,000 Ser. 03-2, Class 3C, 6.49s, 2043
(United Kingdom) 675,010
$100,000 Ser. 02-1, Class 1C, 4.445s, 2042
(United Kingdom) 101,570
70,000 Ser. 02-2, Class 1C, 4.395s, 2043
(United Kingdom) 71,120
Green Tree Financial Corp.
87,865 Ser. 94-4, Class B2, 8.6s, 2019 64,399
203,128 Ser. 94-6, Class B2, 9s, 2020 169,442
84,541 Ser. 95-4, Class B1, 7.3s, 2025 83,485
89,000 Ser. 99-3, Class A6, 6 1/2s, 2031 91,212
1,275,000 Ser. 99-5, Class A5, 7.86s, 2030 1,137,623
712,015 Greenpoint Manufactured Housing Ser.
00-3, Class IA, 8.45s, 2031 687,595
549,000 GS Auto Loan Trust 144A Ser. 04-1,
Class D, 5s, 2011 541,093
GSAMP Trust 144A
5,145 Ser. 03-HE1N, Class Note, 7 1/4s,
2033 5,145
20,497 Ser. 04-FM1N, Class Note, 5 1/4s,
2033 20,466
38,547 Ser. 04-HE1N, Class N1, 5s, 2034 38,470
226,260 Ser. 04-NIM1, Class N1, 5 1/2s, 2034 225,920
26,725 Ser. 04-SE2N, Class Note, 5 1/2s,
2034 26,699
302,727 High Income Trust Securities 144A
FRB Ser. 03-1A, Class A, 3.27s,
2036 (Cayman Islands) 296,672
Holmes Financing PLC FRB
57,000 Ser. 8, Class 2C, 3.861s, 2040
(United Kingdom) 57,267
50,000 Ser. 4, Class 3C, 4.441s, 2040
(United Kingdom) 50,640
Home Equity Asset Trust 144A
18,577 Ser. 02-5N, Class A, 8s, 2033 18,577
27,722 Ser. 03-7N, Class A, 5 1/4s, 2034 27,740
38,356 Ser. 04-1N, Class A, 5s, 2034 38,356
52,330 Ser. 04-3N, Class A, 5s, 2034 52,330
59,135 Ser. 04-4N, Class A, 5s, 2034 59,135
232,657 Ser. 04-5N, Class A, 5 1/4s, 2034 232,657
127,760 Ser. 05-6N, Class A, 5 1/4s, 2035 127,331
300,000 LNR CDO, Ltd. 144A FRB Ser. 02-1A,
Class FFL, 5.77s, 2037 (Cayman
Islands) 296,400
Long Beach Asset Holdings Corp. NIM
Trust 144A
26,425 Ser. 04-2, Class N1, 4.94s, 2034 26,425
86,666 Ser. 04-5, Class Note, 5s, 2034 86,857
GBP 200,000 Lothian Mortgages PLC 144A FRN Ser.
3A, Class D, 5.731s, 2039 (United
Kingdom) 381,940
$35,601 Marriott Vacation Club Owner Trust
144A Ser. 04-1A, Class C, 5.265s,
2026 35,862
Master Asset Backed Securities NIM
Trust 144A
16,066 Ser. 04-CI3, Class N1, 4.45s, 2034 16,066
76,256 Ser. 04-CI5, Class N1, 4.946s, 2034 76,371
82,000 Ser. 04-CI5, Class N2, 9s, 2034 81,672
50,641 Ser. 04-HE1A, Class Note, 5.191s,
2034 50,815
170,000 MBNA Credit Card Master Note Trust
FRN Ser. 03-C5, Class C5, 4.134s,
2010 173,452
Merrill Lynch Mortgage Investors, Inc.
5,834 Ser. 03-WM3N, Class N1, 8s, 2005 5,839
66,000 Ser. 04-WMC3, Class B3, 5s, 2035 63,979
Merrill Lynch Mortgage Investors,
Inc. 144A
25,362 Ser. 03-OP1N, Class N1, 7 1/4s, 2034 25,385
25,195 Ser. 04-FM1N, Class N1, 5s, 2035
(Cayman Islands) 25,195
39,859 Ser. 04-HE1N, Class N1, 5s, 2006 39,598
23,315 Ser. 04-WM2N, Class N1, 4 1/2s, 2005 23,228
61,102 Ser. 04-WM3N, Class N1, 4 1/2s, 2005 60,796
170,000 Metris Master Trust 144A FRN Ser.
01-2, Class C, 4 3/4s, 2009 169,811
226,634 MMCA Automobile Trust Ser. 02-1,
Class B, 5.37s, 2010 227,087
50,000 Morgan Stanley ABS Capital I FRB
Ser. 04-HE8, Class B3, 6.22s, 2034 51,808
5,251 Morgan Stanley ABS Capital I 144A
Ser. 04-NC2N, Class Note, 6 1/4s,
2033 5,264
Morgan Stanley Auto Loan Trust 144A
34,000 Ser. 04-HB1, Class D, 5 1/2s, 2011 33,743
86,000 Ser. 04-HB2, Class E, 5s, 2012 82,517
Morgan Stanley Dean Witter Capital I
FRB
27,348 Ser. 01-NC3, Class B1, 5.47s, 2031 27,231
42,872 Ser. 01-NC4, Class B1, 5.52s, 2032 42,475
286,896 Neon Capital, Ltd. 144A limited
recourse sec. notes Ser. 96,
1.458s, 2013 (Cayman Islands) (F)
(g) (h) 301,459
30,607 New Century Mortgage Corp. NIM Trust
144A Ser. 03-B, Class Note, 6 1/2s,
2033 30,684
72,433 Nomura Asset Acceptance Corp. 144A
Ser. 04-R2, Class PT, 10.118s, 2034 78,680
60,317 Novastar NIM Trust 144A Ser. 04-N2,
Class Note, 4.458s, 2034 60,317
Oakwood Mortgage Investors, Inc.
56,398 Ser. 00-A, Class A2, 7.765s, 2017 48,289
309,000 Ser. 00-D, Class A4, 7.4s, 2030 194,352
130,307 Ser. 01-C, Class A2, 5.92s, 2017 77,409
423,140 Ser. 01-E, Class A2, 5.05s, 2019 331,053
306,339 Ser. 02-A, Class A2, 5.01s, 2020 252,963
102,000 Ser. 02-B, Class A4, 7.09s, 2032 91,004
449,136 Ser. 02-C, Class A1, 5.41s, 2032 395,726
311,339 Ser. 99-D, Class A1, 7.84s, 2029 291,892
97,942 Oakwood Mortgage Investors, Inc.
144A Ser. 01-B, Class A4, 7.21s,
2030 92,122
4,271 Option One Mortgage Securities Corp.
NIM Trust 144A Ser. 03-5, Class
Note, 6.9s, 2033 4,292
Park Place Securities NIM Trust 144A
48,462 Ser. 04-MCWN1, Class A, 4.458s, 2034 48,583
82,000 Ser. 04-WCW2, Class D, 7.387s, 2034
(Cayman Islands) 82,312
17,026 Pass-Through Amortizing Credit Card
Trust Ser. 02-1A, Class A3FL, 5.83s,
2012 17,056
149,899 People's Choice Net Interest Margin
Note 144A Ser. 04-2, Class A, 5s,
2034 150,236
Permanent Financing PLC FRB
120,000 Ser. 3, Class 3C, 4.12s, 2042
(United Kingdom) 121,632
177,000 Ser. 4, Class 3C, 3.77s, 2042
(United Kingdom) 178,425
49,000 Ser. 5, Class 2C, 3.62s, 2042
(United Kingdom) 49,322
GBP 204,000 Ser. 6, Class 3C, 5.686s, 2042
(United Kingdom) 389,579
Pillar Funding PLC 144A FRB
$120,000 Ser. 04-1A, Class C1, 4.01s, 2011
(United Kingdom) 120,657
100,000 Ser. 04-2A, Class C, 3.89s, 2011
(United Kingdom) 100,096
Providian Gateway Master Trust 144A
FRN
170,000 Ser. 04-BA, Class D, 4.354s, 2010 170,403
152,000 Ser. 04-EA, Class D, 3.884s, 2011 152,037
445,967 Residential Accredit Loans, Inc.
Ser. 04-QA6, Class NB1, 5.005s, 2034 450,903
113,626 Residential Asset Securities Corp.
144A Ser. 04-N10B, Class A1, 5s,
2034 113,626
466,138 Residential Asset Securitization
Trust IFB Ser. 03-A6, Class A5,
IO, 4.48s, 2033 25,492
50,000 Residential Mortgage Securities 144A
FRB Ser. 20A, Class B1A,
5.766s, 2038 (United Kingdom) 95,485
SAIL Net Interest Margin Notes 144A
23,669 Ser. 03-12A, Class A, 7.35s, 2033
(Cayman Islands) 23,896
41,951 Ser. 03-13A, Class A, 6 3/4s, 2033
(Cayman Islands) 42,240
9,648 Ser. 03-3, Class A, 7 3/4s, 2033
(Cayman Islands) 9,705
45,350 Ser. 03-5, Class A, 7.35s, 2033
(Cayman Islands) 44,588
11,798 Ser. 03-8A, Class A, 7s, 2033
(Cayman Islands) 11,875
28,147 Ser. 03-9A, Class A, 7s, 2033
(Cayman Islands) 28,156
31,272 Ser. 03-BC2A, Class A, 7 3/4s, 2033
(Cayman Islands) 30,966
123,172 Ser. 04-10A, Class A, 5s, 2034
(Cayman Islands) 123,209
49,548 Ser. 04-2A, Class A, 5 1/2s, 2034
(Cayman Islands) 49,558
120,345 Ser. 04-4A, Class A, 5s, 2034
(Cayman Islands) 120,369
50,000 Ser. 04-4A, Class B, 7 1/2s, 2034
(Cayman Islands) 49,800
56,012 Ser. 04-7A, Class A, 4 3/4s, 2034
(Cayman Islands) 55,956
42,773 Ser. 04-7A, Class B, 6 3/4s, 2034
(Cayman Islands) 41,670
41,669 Ser. 04-8A, Class B, 6 3/4s, 2034
(Cayman Islands) 41,164
118,892 Ser. 04-AA, Class A, 4 1/2s, 2034
(Cayman Islands) 118,571
38,929 Ser. 04-BNCA, Class A, 5s, 2034
(Cayman Islands) 38,940
159,826 Sasco Net Interest Margin Trust 144A
Ser. 05-WF1A, Class A, 4 3/4s, 2035 160,193
Sharps SP I, LLC Net Interest Margin
Trust 144A
33,761 Ser. 03-0P1N, Class NA, 4.45s, 2033 33,761
11,177 Ser. 03-HS1N, Class N, 7.48s, 2033 11,205
4,491 Ser. 03-NC1N, Class N, 7 1/4s, 2033 4,491
20,443 Ser. 04-4N, Class Note, 6.65s, 2034 20,443
28,163 Ser. 04-HE2N, Class NA, 5.43s, 2034 28,092
Structured Adjustable Rate Mortgage
Loan Trust
73,866 Ser. 04-10, Class 1A1, 4.94s, 2034 74,711
96,780 Ser. 04-16, Class 1A2, 5.032s, 2034 97,929
3,231,795 Ser. 04-19, Class 2A1X, IO, 0.479s,
2035 56,556
573,085 Ser. 04-20, Class 1A2, 5.092s, 2035 579,588
956,845 Ser. 05-1, Class 1A1, 5.16s, 2035 968,949
907,195 Ser. 05-7, Class 1A3, 5.416s, 2035 921,932
4,540,413 Ser. 05-9, Class AX, IO, 0.492s,
2035 136,212
Structured Asset Investment Loan
Trust
279,999 Ser. 03-BC8, Class A, IO, 6s, 2005 5,381
1,959,999 Ser. 04-1, Class A, IO, 6s, 2005 27,958
Structured Asset Securities Corp.
400,000 IFB Ser. 05-6, Class 5A8, 8.3s, 2035 381,262
295,909 Ser. 02-HF1, Class A, IO, 6s, 2005 1,279
188,000 TIAA Real Estate CD0, Ltd. 144A FRN
Ser. 02-1A, Class III, FRN, 7.6s,
2037 (Cayman Islands) 199,574
Wells Fargo Home Equity Trust 144A
69,556 Ser. 04-1N, Class A, 5s, 2034 69,765
150,065 Ser. 04-2, Class N1, 4.45s, 2034
(Cayman Islands) 150,056
49,000 Ser. 04-2, Class N2, 8s, 2034
(Cayman Islands) 46,550
70,259 WFS Financial Owner Trust Ser. 04-3,
Class D, 4.07s, 2012 69,795
167,000 Whole Auto Loan Trust 144A Ser.
04-1, Class D, 5.6s, 2011 166,687
--------------
Total Asset-backed securities
(cost $27,472,322) $27,555,612
Corporate bonds and notes (14.2%) (a)
Principal amount Value
Capital Goods (0.1%)
- -------------------------------------------------------------------------------
$185,000 Waste Management, Inc. company
guaranty 6 3/8s, 2012 $201,917
Communication Services (0.4%)
- -------------------------------------------------------------------------------
100,000 Ameritech Capital Funding company
guaranty 6 1/4s, 2009 106,205
60,000 AT&T Wireless Services, Inc. sr.
notes 8 3/4s, 2031 81,825
115,000 AT&T Wireless Services, Inc. sr.
notes 7 7/8s, 2011 132,313
100,000 France Telecom notes 8 3/4s, 2031
(France) 135,383
150,000 Telefonica Europe BV company
guaranty 7 3/4s, 2010 (Netherlands) 172,023
80,000 Vodafone Group PLC notes 7 7/8s,
2030 (United Kingdom) 105,148
--------------
732,897
Conglomerates (0.1%)
- -------------------------------------------------------------------------------
90,000 Tyco International Group SA company
guaranty 6 3/4s, 2011 (Luxembourg) 98,807
Consumer Cyclicals (0.3%)
- -------------------------------------------------------------------------------
170,000 DaimlerChrysler NA Holding Corp.
company guaranty 7.2s, 2009 180,168
360,000 Ford Motor Credit Corp. notes
7 7/8s, 2010 346,463
--------------
526,631
Consumer Staples (0.6%)
- -------------------------------------------------------------------------------
220,000 AT&T Broadband Corp. company
guaranty 8 3/8s, 2013 267,083
170,000 Cox Enterprises, Inc. 144A notes
4 3/8s, 2008 168,466
73,074 CVS Corp. 144A pass-through
certificates 6.117s, 2013 77,732
230,000 Echostar DBS Corp. sr. notes 5 3/4s,
2008 226,263
120,000 Miller Brewing Co. 144A notes
5 1/2s, 2013 123,464
5,000 News America, Inc. debs. 7 1/4s,
2018 5,758
115,000 TCI Communications, Inc. debs. 9.8s,
2012 146,522
--------------
1,015,288
Financial (8.8%)
- -------------------------------------------------------------------------------
120,000 AXA Financial, Inc. sr. notes
7 3/4s, 2010 137,758
35,000 Bank of New York Co., Inc. (The) sr.
sub. notes FRN 3.4s, 2013 33,860
EUR 1,500,000 Bayerische Landesbank bonds Ser. 5,
5 1/4s, 2009 (Germany) 2,112,394
$275,000 Bosphorus Financial Services Ltd.
144A sec. FRN 4.81s, 2012 (Cayman
Islands) 274,941
95,000 CIT Group, Inc. sr. notes 7 3/4s,
2012 110,418
EUR 9,300,000 Depfa ACS Bank sr. sec. public loan
notes 3 1/4s, 2008 (Ireland) 12,226,522
$50,000 General Electric Capital Corp. notes
Ser. A, 6 3/4s, 2032 59,669
95,000 Goldman Sachs Group, Inc. (The)
notes 4 3/4s, 2013 93,365
125,000 Household Finance Corp. notes
6 3/8s, 2012 136,222
35,000 Nationwide Financial Services, Inc.
notes 5 5/8s, 2015 36,044
115,000 Principal Life Global Funding I 144A
sec. notes 5 1/4s, 2013 119,143
--------------
15,340,336
Government (2.9%)
- -------------------------------------------------------------------------------
CHF 700,000 European Investment Bank
supranational bank bonds 3 1/2s,
2014 (Luxembourg) 659,650
EUR 1,500,000 Norddeutsche Landesbank Girozentrale
bonds Ser. 7, 5 3/4s, 2010 (Germany) 2,208,236
CHF 2,375,000 Oester Postspark Bawag foreign
government guaranty Ser. EMTN,
3 1/4s, 2011 (Austria) 2,179,229
--------------
5,047,115
Health Care (0.1%)
- -------------------------------------------------------------------------------
15,000 American Home Products Corp. notes
6.95s, 2011 16,700
75,000 Bayer Corp. 144A FRB 6.2s, 2008 78,551
120,000 Wyeth notes 5 1/2s, 2013 124,275
--------------
219,526
Technology (--%)
- -------------------------------------------------------------------------------
75,000 Motorola, Inc. notes 7 5/8s, 2010 85,265
Utilities & Power (0.9%)
- -------------------------------------------------------------------------------
40,000 AEP Texas Central Co. sr. notes
Ser. D, 5 1/2s, 2013 41,317
310,000 Consumers Energy Co. 1st mtge.
Ser. B, 5 3/8s, 2013 316,254
90,000 Duke Capital Corp. sr. notes Ser. A,
6 1/4s, 2005 90,473
40,000 National Fuel Gas Co. notes 5 1/4s,
2013 40,774
85,000 Northern States Power Co. 1st mtge.
Ser. B, 8s, 2012 102,358
50,000 PP&L Capital Funding, Inc. company
guaranty Ser. D, 8 3/8s, 2007 54,091
150,000 Public Services Co. of Colorado sr.
notes Ser. A, 6 7/8s, 2009 163,247
EUR 505,000 Veolia Environnement sr. unsub.
notes Ser. EMTN, 5 3/8s, 2018
(France) 726,001
$34,492 York Power Funding 144A notes 12s,
2007 (Cayman Islands) (In default)
(NON) (F) 1
--------------
1,534,516
--------------
Total Corporate bonds and notes
(cost $20,580,460) $24,802,298
Collateralized mortgage obligations (13.0%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$81,000 Amresco Commercial Mortgage Funding
I 144A Ser. 97-C1, Class H, 7s,
2029 $83,594
100,000 Banc of America Commercial Mortgage,
Inc. 144A Ser. 01-PB1, Class K,
6.15s, 2035 104,248
Banc of America Large Loan 144A FRB
100,000 Ser. 02-FL2A, Class L1, 5.89s, 2014 100,031
100,000 Ser. 05-BOCA, Class L, 4.53s, 2016 100,152
156,000 Banc of America Structured Security
Trust 144A Ser. 02-X1, Class
A3, 5.436s, 2033 162,892
100,000 Bear Stearns Commercial Mortgage
Securitization Corp. Ser.
00-WF2, Class F, 8.453s, 2032 118,203
100,000 Bear Stearns Commercial Mortgage
Securitization Corp. 144A Ser.
04-ESA, Class K, 5.45s, 2016 100,000
Chase Commercial Mortgage Securities
Corp. 144A Ser. 98-1
362,000 Class F, 6.56s, 2030 387,984
89,000 Class G, 6.56s, 2030 95,351
203,000 Class H, 6.34s, 2030 175,966
340,000 Commercial Mortgage Acceptance Corp.
Ser. 97-ML1, Class A3, 6.57s, 2030 353,426
Commercial Mortgage Acceptance Corp.
144A
157,000 Ser. 98-C1, Class F, 6.23s, 2031 166,346
55,000 Ser. 98-C2, Class F, 5.44s, 2030 55,870
158,000 Commercial Mortgage Pass-Through
Certificates 144A Ser.
01-FL4A, Class D, 3.804s, 2013 156,815
119,000 CS First Boston Mortgage Securities
Corp. Ser. 97-C2, Class F, 7.46s,
2035 128,947
CS First Boston Mortgage Securities
Corp. 144A
87,000 FRB Ser. 03-TF2A, Class L, 6.954s,
2014 86,708
81,000 Ser. 02-CP5, Class M, 5 1/4s, 2035 58,333
219,000 DLJ Commercial Mortgage Corp. Ser.
99-CG2, Class B4, 6.1s, 2032 226,192
129,000 DLJ Commercial Mortgage Corp. 144A
Ser. 99-CG2, Class B3, 6.1s, 2032 133,571
DLJ Mortgage Acceptance Corp. 144A
Ser. 97-CF1
61,000 Class B1, 7.91s, 2030 65,446
160,000 Class A3, 7.76s, 2030 168,101
GBP 92,204 European Loan Conduit FRN Ser. 6X,
Class E, 6.6683s, 2010 (United
Kingdom) 178,512
GBP 48,023 European Loan Conduit 144A FRN Ser.
6A, Class F, 7.116s, 2010 (United
Kingdom) 93,672
Fannie Mae
$400,194 FRB Ser. 05-22, Class UF, zero %,
2035 410,342
500,000 FRB Ser. 05-45, Class DC, 3.26s,
2030 564,700
156,584 IFB Ser. 02-97, Class TW, IO,
6 1/2s, 2031 26,452
1,046,718 IFB Ser. 03-118, Class SF, IO,
5.08s, 2033 122,581
768,159 IFB Ser. 03-122, Class SA, IO,
4.08s, 2028 57,124
812,811 IFB Ser. 03-122, Class SJ, IO,
4.08s, 2028 59,969
178,719 IFB Ser. 03-87, Class SP, 10.395s,
2032 177,821
196,970 IFB Ser. 05-16, Class SI, IO, 3.63s,
2035 11,141
350,640 IFB Ser. 05-17, Class ES, IO, 3.73s,
2035 35,995
545,332 IFB Ser. 05-17, Class SA, IO, 3.68s,
2035 47,291
603,635 IFB Ser. 05-17, Class SE, IO, 3.68s,
2035 48,951
164,891 IFB Ser. 05-17, Class SY, IO, 3.73s,
2035 16,257
621,170 IFB Ser. 05-23, Class SG, IO, 3.68s,
2035 44,647
1,394,223 IFB Ser. 05-29, Class SC, IO, 3.73s,
2035 126,351
486,762 IFB Ser. 05-29, Class SD, IO, 3.73s,
2035 39,549
800,465 IFB Ser. 05-29, Class SX, IO, 3.68s,
2035 59,535
1,829,836 IFB Ser. 05-29, Class SY, IO, 3.68s,
2035 152,963
300,000 IFB Ser. 05-37, Class SU, 18s, 2035 368,384
224,684 Ser. 00-T6, Class A1, 7 1/2s, 2030 238,424
259,516 Ser. 01-T10, Class A2, 7 1/2s, 2041 275,943
289,134 Ser. 01-T12, Class A2, 7 1/2s, 2041 307,296
389,318 Ser. 01-T7, Class A1, 7 1/2s, 2041 413,125
30,473,958 Ser. 02-26, IO, 0.249s, 2048 170,648
12,054,737 Ser. 02-T18, IO, 0.52s, 2042 144,347
241,510 Ser. 02-T4, Class A3, 7 1/2s, 2041 256,858
715,404 Ser. 02-T4, Class A4, 9 1/2s, 2041 777,098
722,560 Ser. 02-T4, IO, 0.45s, 2041 6,280
98,589 Ser. 02-T6, Class A2, 7 1/2s, 2041 104,672
47,108 Ser. 02-W3, Class A5, 7 1/2s, 2028 50,178
1,570,986 Ser. 03-22, IO, 6s, 2033 291,629
597,820 Ser. 03-26, Class OI, IO, 5 1/2s,
2032 95,264
2,141,008 Ser. 03-45, Class AI, IO, 5 1/2s,
2033 320,482
399,068 Ser. 03-71, Class IE, IO, 5 1/2s,
2033 77,956
2,095,625 Ser. 03-W10, Class 1, IO, 1.985s,
2043 99,542
2,037,001 Ser. 03-W17, Class 12, IO, 1.159s,
2033 56,331
1,790,586 Ser. 03-W6, Class 11, IO, 1.508s,
2042 13,595
Fannie Mae
1,637,575 Ser. 03-W6, Class 21, IO, 0.658s,
2042 969
4,492,133 Ser. 03-W8, Class 12, IO, 1.639s,
2042 173,349
924,516 Ser. 04-23, IO, 5 1/2s, 2034 191,401
110,000 Ser. 05-45, Class PC, IO, 11 1/4s,
2035 121,220
767,033 Ser. 05-45, Class PL, IO, 3 3/4s,
2035 66,042
69,120 Ser. 254, Class 2, IO, 7 1/2s, 2024 15,939
62,511 Ser. 318, Class 2, IO, 6s, 2032 12,262
1,049,620 Ser. 329, Class 2, IO, 5 1/2s, 2033 221,540
592,551 Ser. 331, Class 1, IO, 5 1/2s, 2032 110,451
1,440,697 Ser. 333, Class 2, IO, 5 1/2s, 2033 305,998
2,628,413 Ser. 338, Class 2, IO, 5 1/2s, 2033 557,516
479,588 Ser. 343, Class 25, IO, 4 1/2s, 2018 73,031
273,716 Ser. 343, Class 26, IO, 4 1/2s, 2018 43,164
1,958,722 Ser. 343, Class 27, IO, 4 1/2s, 2018 312,528
368,921 Ser. 346, Class 2, IO, 5 1/2s, 2033 76,494
1,727,597 Ser. 350, Class 2, IO, 5 1/2s, 2034 357,885
3,435,187 Ser. 353, Class 1, Principal Only
(PO), zero %, 2034 2,596,170
765,432 Ser. 354, Class 1, PO, zero %, 2034 606,986
485,878 Ser. 99-T2, Class A1, 7 1/2s, 2039 518,133
82,820 Federal Home Loan Mortgage Corp.
Structured Pass-Through
Securities Ser. T-42, Class A5,
7 1/2s, 2042 88,176
225,000 FFCA Secured Lending Corp. Ser.
99-1A, Class C1, 7.59s, 2025 157,500
209,000 First Union-Lehman Brothers
Commercial Mortgage Trust II Ser.
97-C2, Class F, 7 1/2s, 2029 242,864
114,000 First Union-Lehman Brothers-Bank of
America 144A Ser. 98-C2, Class G,
7s, 2035 128,224
Freddie Mac
405,401 IFB Ser. 2763, Class SC, 16.785s,
2032 457,085
400,000 IFB Ser. 2945, Class SA, 6.977s,
2020 396,872
481,529 IFB Ser. 2828, Class GI, IO, 4.546s,
2034 61,476
267,424 IFB Ser. 2869, Class SH, IO, 4.346s,
2034 24,722
1,266,752 IFB Ser. 2869, Class JS, IO, 4.296s,
2034 115,191
249,108 IFB Ser. 2882, Class SL, IO, 4.246s,
2034 25,945
456,323 IFB Ser. 2815, Class PT, IO, 4.096s,
2032 41,925
712,150 IFB Ser. 2594, Class OS, IO, 4.096s,
2032 47,959
1,420,157 IFB Ser. 2962, Class BS, IO, 3.83s,
2035 96,748
443,617 IFB Ser. 2927, Class SI, IO, 5.546s,
2035 65,335
352,812 IFB Ser. 2927, Class ES, IO, 3.746s,
2035 29,605
485,985 IFB Ser. 2950, Class SM, IO, 3.746s,
2016 37,056
188,291 Ser. 224, IO, 6s, 2033 36,255
826,781 Ser. 226, IO, 5 1/2s, 2034 177,287
345,933 Ser. 223, IO, 5 1/2s, 2032 70,272
243,979 Ser. 2553, Class IJ, IO, 5 1/2s,
2020 5,111
3,442,937 Ser. 227, IO, 5s, 2034 825,222
180,528 Ser. 2696, PO, zero %, 2033 133,370
53,000 GE Capital Commercial Mortgage Corp.
144A Ser. 00-1, Class H, 6.131s,
2033 33,540
24,657 GMAC Commercial Mortgage Securities,
Inc. 144A FRN Ser. 02-FL1A, Class D,
5.66s, 2014 24,627
Government National Mortgage
Association
394,920 IFB Ser. 03-114, Class SP, 11.04s,
2027 406,385
585,440 IFB Ser. 04-86, Class SW, IO, 3.76s,
2034 43,167
1,405,848 IFB Ser. 05-28, Class SA, IO, 3.35s,
2035 74,905
356,738 Ser. 05-13, Class PI, IO, 5 1/2s,
2033 57,970
319,929 Ser. 05-13, Class MI, IO, 5 1/2s,
2032 49,958
95,000 GS Mortgage Securities Corp. II 144A
FRB Ser. 03-FL6A, Class L, 6.204s,
2015 95,534
Guggenheim Structured Real Estate
Funding, Ltd. 144A Ser. 05-1
175,000 Class D, 5s, 2030 174,790
100,000 Class E, 5s, 2030 99,711
331,000 IStar Asset Receivables Trust Ser.
02-1A, Class E, 4.295s, 2020 331,199
4,295,769 JP Morgan Chase Commercial Mortgage
Securities Corp. 144A Ser. 04-FL1A,
Class X1A, IO, 0.929s, 2019 35,011
238,000 LB Commercial Conduit Mortgage Trust
144A Ser. 98-C4, Class J, 5.6s,
2035 172,708
Lehman Brothers Floating Rate
Commercial Mortgage Trust 144A FRB
170,000 Ser. 03-LLFA, Class L, 6.7s, 2014 164,268
66,000 Ser. 04-LLFA, Class H, 3.76s, 2017 66,251
65,597 Ser. 03-C4, Class A, 3.51s, 2015 65,761
156,000 Mach One Commercial Mortgage Trust
144A Ser. 04-1A, Class H, 6.721s,
2040 152,961
Merrill Lynch Mortgage Investors, Inc.
496 Ser. 99-C1, Class A1, 7.37s, 2031 495
49,000 Ser. 98-C3, Class E, 7.143s, 2030 54,192
360,000 Morgan Stanley Capital I 144A Ser.
04-RR, Class F7, 6s, 2039 255,828
78,000 Mortgage Capital Funding, Inc. FRB
Ser. 98-MC2, Class E, 7.262s, 2030 83,661
PNC Mortgage Acceptance Corp. 144A
100,000 Ser. 00-C1, Class J, 6 5/8s, 2010 93,118
76,000 Ser. 00-C2, Class J, 6.22s, 2033 78,181
255,000 Pure Mortgages 144A FRB Ser. 04-1A,
Class F, 6.132s, 2034 (Ireland) 255,255
GBP 99,376 Quick Star PLC FRN Class 1-D,
5.758s, 2011 (United Kingdom) 190,462
$130,429 Salomon Brothers Mortgage Securities
VII Ser. 96-C1, Class E, 8.421s,
2028 131,942
Titan Europe PLC 144A FRN Ser. 04-2A
EUR 100,000 Class D, 3.044s, 2014 (Ireland) 129,080
EUR 119,000 Class C, 2.644s, 2014 (Ireland) 153,605
$100,000 Wachovia Bank Commercial Mortgage
Trust 144A FRB Ser. 05-WL5A, Class
L, 6.19s, 2018 98,653
87,000 Washington Mutual Asset Securities
Corp. 144A Ser. 05-C1A, Class
G, 5.72s, 2014 86,786
--------------
Total Collateralized mortgage
obligations (cost $23,811,499) $22,655,363
Short-term investments (8.3%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$14,094,715 Putnam Prime Money Market Fund (e) $14,094,715
350,000 U.S. Treasury Bills 2.748%, June 30,
2005 (SEG) 348,397
--------------
Total Short-term investments
(cost $14,443,112) $14,443,112
- -------------------------------------------------------------------------------
Total Investments
(cost $189,086,643) $200,239,335
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $174,669,583.
(NON) Non-income-producing security.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at April 30, 2005.
(F) Security is valued at fair value following procedures approved by
the Trustees (Note 1).
(e) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
(g) The notes are secured by debt and equity securities and equity
participation agreements held by Neon Capital, Ltd.
(h) The notes are primarily secured by shares of PSF Group Holdings,
Inc. class A common stock valued at approximately $198,200.
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 at April 30, 2005.
The rates shown on Inverse Floating Rate Bonds (IFB), which are
securities paying interest rates that vary inversely to changes in the
market interest rates, are the current interest rates at April 30, 2005.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at April 30, 2005: (as a
percentage of Portfolio Value)
Austria 4.4%
Canada 3.5
Cayman Islands 2.1
Denmark 1.0
France 5.1
Germany 11.3
Ireland 6.4
Italy 0.9
Netherlands 3.3
Sweden 1.0
United Kingdom 7.0
United States 53.6
Other 0.4
------
Total 100.0%
Forward currency contracts to buy at April 30, 2005 (Unaudited)
(aggregate face value $53,803,525)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Australian Dollar $9,692,925 $9,543,706 7/20/05 $149,219
British Pound 3,022,877 2,999,723 6/15/05 23,154
Euro 1,075,758 1,082,856 6/15/05 (7,098)
Japanese Yen 34,254,579 35,287,613 5/18/05 (1,033,034)
Korean Won 2,351,401 2,263,087 5/18/05 88,314
Polish Zloty 420,631 464,426 6/15/05 (43,795)
South African Rand 440,432 427,210 7/20/05 13,222
Swedish Krona 859,683 866,292 6/15/05 (6,609)
Swiss Franc 436,136 434,416 6/15/05 1,720
Taiwan Dollar 446,822 434,196 5/18/05 12,626
- ------------------------------------------------------------------------------------------------------
$(802,281)
- ------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at April 30, 2005 (Unaudited)
(aggregate face value $33,380,531)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Australian Dollar $4,598,979 $4,518,564 7/20/05 $(80,415)
British Pound 3,202,044 3,170,929 6/15/05 (31,115)
Canadian Dollar 4,824,749 4,948,128 7/20/05 123,379
Danish Krone 778,576 792,556 6/15/05 13,980
Euro 6,746,931 6,812,619 6/15/05 65,688
Japanese Yen 1,125,832 1,112,390 5/18/05 (13,442)
Norwegian Krone 502,357 502,032 6/15/05 (325)
Swedish Krona 3,606,190 3,710,331 6/15/05 104,141
Swiss Franc 7,636,626 7,812,982 6/15/05 176,356
- ------------------------------------------------------------------------------------------------------
$358,247
- ------------------------------------------------------------------------------------------------------
Futures contracts outstanding at April 30, 2005 (Unaudited)
Unrealized
Number of Expiration appreciation/
contracts Value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Euro 90 day (Long) 15 $3,590,250 Sep-06 $5,749
Euro 90 day (Long) 15 3,593,625 Jun-06 (64)
Euro 90 day (Short) 11 2,638,350 Mar-06 (2,074)
Euro 90 day (Short) 14 3,362,275 Dec-05 2,421
Euro 90 day (Short) 14 3,368,925 Sep-05 3,946
Euro 90 day (Short) 15 3,621,563 Jun-05 5,143
Euro-Bobl 5 yr (Long) 38 5,586,353 Jun-05 81,336
Euro-Bund 10 yr (Short) 17 2,648,374 Jun-05 (66,092)
Interest Rate Swap 10 yr (Short) 29 3,203,594 Jun-05 (47,439)
Japanese Government
Bond - Mini 10 yr (Long) 89 11,923,794 Jun-05 242,823
Japanese Government
Bond - TSE 10 yr (Long) 5 6,697,331 Jun-05 138,682
U.S. Treasury Bond
20 yr (Long) 150 17,226,563 Jun-05 280,122
U.S. Treasury Note
10 yr (Long) 92 10,250,813 Jun-05 77,350
U.S. Treasury Note
5 yr (Short) 294 31,885,219 Jun-05 (127,327)
- ------------------------------------------------------------------------------------------------------
$594,576
- ------------------------------------------------------------------------------------------------------
TBA sale commitments outstanding at April 30, 2005 (Unaudited)
(proceeds receivable $13,841,273)
Principal Settlement
Agency amount date Value
- ------------------------------------------------------------------------------------------------------
FNMA, 6s, May 1, 2035 $1,690,000 5/12/05 $1,734,626
FNMA, 5 1/2s, May 1, 2035 1,000,000 5/12/05 1,009,688
FNMA, 5s, June 1, 2035 800,000 6/13/05 790,312
FNMA, 5s, May 1, 2035 1,900,000 5/12/05 1,881,742
FNMA, 5s, May 1, 2020 690,000 5/17/05 695,526
FNMA, 4 1/2s, June 1, 2020 7,900,000 6/16/05 7,801,250
- ------------------------------------------------------------------------------------------------------
$13,913,144
- ------------------------------------------------------------------------------------------------------
Interest rate swap contracts outstanding at April 30, 2005 (Unaudited)
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- ------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. dated
March 25, 2004 to pay semi-annually 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 $173,087
Agreement with Credit Suisse First Boston
International dated July 7, 2004 to pay
semi-annually the notional amount multiplied
by 4.945% and receive quarterly the notional
amount multiplied by the three month
USD-LIBOR. 932,200 7/9/14 (36,403)
Agreement with Credit Suisse First Boston
International dated July 7, 2004 to receive
semi-annually the notional amount multiplied
by 2.931% and pay quarterly the notional
amount multiplied by the three month
USD-LIBOR. 736,600 7/9/06 (1,950)
Agreement with Merrill Lynch Capital
Services, Inc. dated February 16, 2005 to
receive semi-annually the notional amount
multiplied by the six month Euribor and pay
at maturity the notional amount multiplied
by 2.5645%. EUR 11,300,000 2/19/07 (63,899)
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 semi-annually the notional amount
multiplied by 0.399%. JPY 1,135,000,000 10/1/07 (58,796)
Agreement with UBS, AG dated April 25,
2005 to pay annually the notional amount
multiplied by 2.974% and receive semi-
annually the notional amount multiplied by
the six month EUR-EURIBOR-Telerate. EUR 4,400,000 4/27/10 (13,286)
Agreement with UBS, AG dated April 25,
2005 to receive annually the notional amount
multiplied by 2.453% and pay semi-annually
the notional amount multiplied by the six
month EUR-EURIBOR-Telerate. EUR 2,300,000 4/27/07 4,385
Agreement with UBS, AG dated April 25,
2005 to receive annually the notional amount
multiplied by 3.563% and pay semi-annually
the notional amount multiplied by the six
month EUR-EURIBOR-Telerate. EUR 2,100,000 4/27/15 11,825
Agreement with UBS, AG dated April 4,
2005 to pay quarterly the notional amount
multiplied by 2.61% and receive semi-annually
the notional amount multiplied by the six
month EUR-EURIBOR-Telerate. EUR 19,000,000 4/6/07 (104,160)
- ------------------------------------------------------------------------------------------------------
$(89,197)
- ------------------------------------------------------------------------------------------------------
Total return swap contracts outstanding at April 30, 2005 (Unaudited)
Notional Termination Unrealized
amount date appreciation
- ------------------------------------------------------------------------------------------------------
Agreement with Citibank dated
April 4, 2005 to pay at maturity the notional
amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA 8.5+
Commercial Mortgage Backed Securities
Index adjusted by a modified duration factor
and an accrual of 85 basis points plus the
beginning of the period nominal spread of the
Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index and receive
at maturity the notional amount multiplied by
the nominal spread depreciation of the Lehman
Brothers AAA 8.5+ Commercial Mortgage
Backed Securities Index adjusted by a modified
duration factor. $1,330,000 6/1/05 $3,802
Agreement with Citigroup Financial
Products, Inc. dated April 22, 2005 to receive
at maturity the notional amount multiplied by
the nominal spread appreciation of the Lehman
Brothers AAA 8.5+ Commercial Mortgage
Backed Securities Index adjusted by a modified
duration factor and an accrual of 40 basis points
plus the beginning of the period nominal spread
of the Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index and pay at
maturity the notional amount multiplied by the
nominal spread depreciation of the Lehman
Brothers AAA 8.5+ Commercial Mortgage
Backed Securities Index adjusted by a modified
duration factor. 1,975,000 11/1/05 690
Agreement with Deutsche Bank AG dated
April 13, 2005 to receive at maturity the
notional amount multiplied by the nominal
spread appreciation of the Lehman Brothers
AAA 8.5+ Commercial Mortgage Backed
Securities Index adjusted by a modified duration
factor and an accrual of 100 basis points plus
the beginning of the period nominal spread of
the Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index and pay at
maturity the notional amount multiplied by the
nominal spread depreciation of the Lehman
Brothers AAA 8.5+ Commercial Mortgage
Backed Securities Index adjusted by a modified
duration factor. 1,846,300 5/13/05 2,812
Agreement with Goldman Sachs Capital
Markets, L.P. dated December 29, 2004 to
pay at maturity the notional amount multiplied
by the spread depreciation of the Lehman
Brothers AAA Commercial Mortgage Backed
Securities Index adjusted by a modified duration
factor and receive at maturity the notional
amount multiplied by the appreciation of the
Lehman Brothers AAA Commercial Mortgage
Backed Securities Index plus 8 basis points. 12,286,000 7/1/05 41,146
Agreement with Goldman Sachs Capital
Markets, L.P. dated October 29, 2004 to
receive at maturity the notional amount
multiplied by the nominal spread appreciation
of the Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index adjusted by
a modified duration factor and an accrual of
25 basis points plus the beginning of the period
nominal spread of the Lehman Brothers AAA
8.5+ Commercial Mortgage Backed Securities
Index and pay at maturity the notional amount
multiplied by the nominal spread depreciation
of the Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index adjusted by a
modified duration factor. 2,708,878 5/2/05 4,389
- ------------------------------------------------------------------------------------------------------
$52,839
- ------------------------------------------------------------------------------------------------------
Credit default contracts outstanding at April 30, 2005 (Unaudited)
Unrealized
Notional appreciation/
amount (depreciation)
- ------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs Capital Markets effective
April 15, 2005, maturing on June 20, 2010, to receive/(pay) a
premium based on the difference between the original spread
on issue and the market spread on day of execution and pay
quarterly 40 basis points times the notional amount. Upon a
credit default event of a reference entity within the DJ IG CDX 4
Index, the fund receives a payment of the proportional notional
amount times the difference between the par value and the
then-market value of the reference entity within the DJ IG CDX
4 Index. $1,975,000 $17,579
Agreement with Goldman Sachs Capital Markets effective
April 15, 2005, maturing on June 20, 2010, to receive a premium
based on the difference between the original spread on issue and
the market spread on day of execution and receive quarterly 66.25
basis points times the notional amount. Upon a credit default event
of a reference entity within the DJ IG CDX 4 Index 7-10% tranche,
the fund makes a payment of the proportional notional amount
times the difference between the par value and the then-market
value of the reference entity within the DJ IG CDX 4 Index
7-10% tranche. 1,975,000 (569)
Agreement with Lehman Brothers Finance S.A. effective April 26,
2005, maturing on June 20, 2010, to receive/(pay) a premium based
on the difference between the original spread on issue and the market
spread on day of execution and to pay quarterly 40 basis points times
the notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index, the fund receives a payment of
the proportional notional amount times the difference between the
par value and the then-market value of the reference entity within
the DJ IG CDX Series 4 Index. 1,960,000 4,478
Agreement with Lehman Brothers Finance S.A. effective
April 26, 2005, maturing on June 20, 2010, to receive a premium
based on the difference between the original spread on issue
and the market spread on day of execution and receive quarterly
56 basis points times the notional amount. Upon a credit default
event of a reference entity within the DJ IG CDX 4 Index 7-10%
tranche, the fund makes a payment of the proportional notional
amount times the difference between the par value and the then-
market value of the reference entity within the DJ IG CDX 4 Index
7-10% tranche. 1,960,000 (8,951)
Agreement with Lehman Brothers Finance S.A. effective
April 15, 2005, maturing on June 20, 2010, to receive a premium
based on the difference between the original spread on issue and
the market spread on day of execution and receive quarterly 65
basis points times the notional amount. Upon a credit default event
of a reference entity within the DJ IG CDX 4 Index 7-10% tranche,
the fund makes a payment of the proportional notional amount
times the difference between the par value and the then-market
value of the reference entity within the DJ IG CDX 4 Index
7-10% tranche. 987,500 (164)
Agreement with Lehman Brothers Finance S.A. effective April 21,
2005, maturing on June 20, 2010, to receive a premium based on the
difference between the original spread on issue and the market spread
on day of execution and receive quarterly 57 basis points times the
notional amount. Upon a credit default event of a reference entity
within the DJ IG CDX 4 Index 7-10% tranche, the fund makes a
payment of the proportional notional amount times the difference
between the par value and the then-market value of the reference
entity within the DJ IG CDX 4 Index 7-10% tranch. 980,000 (3,940)
Agreement with Lehman Brothers Finance S.A. effective April 21,
2005, maturing on June 20, 2010, to receive/(pay) a premium based
on the difference between the original spread on issue and the market
spread on day of execution and to pay quarterly 40 basis points times
the notional amount. Upon a credit default event of any reference
entity within the DJ IG CDX Series 4 Index, the fund receives a
payment of the proportional notional amount times the difference
between the par value and the then-market value of the reference
entity within the DJ IG CDX Series 4 Index. 980,000 (14,660)
Agreement with Lehman Brothers Finance S.A. effective
April 15, 2005, maturing on June 20, 2010, to pay quarterly
40 basis points times the notional amount. Upon a credit
default event of any reference entity within the DJ IG CDX
Series 4 Index, the fund receives a payment of the proportional
notional amount times the difference between the par value and
the then-market value of the reference entity within the DJ IG
CDX Series 4 Index. 987,500 463
- ------------------------------------------------------------------------------------------------------
$(5,764)
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
April 30, 2005 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $174,991,928) $186,144,620
- -------------------------------------------------------------------------------
Affiliated issuers (identified cost $14,094,715) (Note 5) 14,094,715
- -------------------------------------------------------------------------------
Cash 413,677
- -------------------------------------------------------------------------------
Foreign currency (cost $744,267) (Note 1) 752,067
- -------------------------------------------------------------------------------
Interest and other receivables 1,993,041
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 654,689
- -------------------------------------------------------------------------------
Receivable for securities sold 2,877,759
- -------------------------------------------------------------------------------
Receivable for sales of delayed delivery securities (Note 1) 30,142,652
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 785,691
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 338,539
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 242,136
- -------------------------------------------------------------------------------
Receivable for closed swap contracts (Note 1) 1,415
- -------------------------------------------------------------------------------
Receivable for open credit default contracts (Note 1) 22,520
- -------------------------------------------------------------------------------
Premiums paid on credit default contracts (Note 1) 26,784
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 68,407
- -------------------------------------------------------------------------------
Total assets 238,558,712
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 4,353,766
- -------------------------------------------------------------------------------
Payable for purchases of delayed delivery securities (Note 1) 42,824,151
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 320,860
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 216,270
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 54,420
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 70,769
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,107
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 61,066
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 1,229,725
- -------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 470,451
- -------------------------------------------------------------------------------
Payable for open swap contracts (Note 1) 278,494
- -------------------------------------------------------------------------------
Payable for open credit default contracts (Note 1) 28,284
- -------------------------------------------------------------------------------
TBA sale commitments, at value (proceeds receivable
$13,841,273) (Note 1) 13,913,144
- -------------------------------------------------------------------------------
Other accrued expenses 66,622
- -------------------------------------------------------------------------------
Total liabilities 63,889,129
- -------------------------------------------------------------------------------
Net assets $174,669,583
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and
4) $209,834,120
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,463,355
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (48,721,155)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 11,093,263
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $174,669,583
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($113,839,049 divided by 8,718,002 shares) $13.06
- -------------------------------------------------------------------------------
Offering price per class A share (100/96.25 of $13.06)* $13.57
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($28,465,771 divided by 2,187,096 shares)** $13.02
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($2,774,490 divided by 212,972 shares)** $13.03
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($29,571,106 divided by 2,278,068 shares) $12.98
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $12.98)*** $13.42
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($19,167 divided by 1,468 shares) $13.06
- -------------------------------------------------------------------------------
* On single retail sales of less than $100,000. On sales of $100,000 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.
*** 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.
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Six months ended April 30, 2005 (Unaudited)
Interest income (including interest income of $208,782
from investments in affiliated issuers) (Note 5) $3,360,898
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 600,614
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 152,417
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 76,196
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 10,707
- -------------------------------------------------------------------------------
Administrative services (Note 2) 15,053
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 136,950
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 145,374
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 10,504
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 76,898
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 27
- -------------------------------------------------------------------------------
Other 96,517
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 2,300
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (2,300)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Notes 2 and 5) (112,692)
- -------------------------------------------------------------------------------
Total expenses 1,208,565
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (5,381)
- -------------------------------------------------------------------------------
Net expenses 1,203,184
- -------------------------------------------------------------------------------
Net investment income 2,157,714
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,434,137
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 736,873
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 1,310,064
- -------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 207,643
- -------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (153,129)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
contracts, swap contracts, and TBA sale commitments during
the period (2,783,848)
- -------------------------------------------------------------------------------
Net gain on investments 4,751,740
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,909,454
- -------------------------------------------------------------------------------
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 2005* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $2,157,714 $4,260,566
- -------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 7,688,717 6,339,902
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currencies (2,936,977) 6,014,790
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 6,909,454 16,615,258
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (1,806,930) (9,754,705)
- -------------------------------------------------------------------------------
Class B (374,213) (3,001,842)
- -------------------------------------------------------------------------------
Class C (26,891) (157,674)
- -------------------------------------------------------------------------------
Class M (475,265) (2,919,582)
- -------------------------------------------------------------------------------
Class R (157) (91)
- -------------------------------------------------------------------------------
Redemption fees (Note 1) 9,250 24,261
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) 3,522,762 (36,244,212)
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets 7,758,010 (35,438,587)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 166,911,573 202,350,160
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $2,463,355 and
$2,989,097, respectively) $174,669,583 $166,911,573
- -------------------------------------------------------------------------------
* 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 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.73 $12.65 $11.39 $10.97 $10.77 $11.91
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .17 (d) .33 (d) .40 .46 .58 .63
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .37 .88 1.31 .43 .23 (1.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .54 1.21 1.71 .89 .81 (.49)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.21) (1.13) (.45) (.47) (.16) --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.45) (.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (1.13) (.45) (.47) (.61) (.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- (e) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.06 $12.73 $12.65 $11.39 $10.97 $10.77
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 4.29* 9.99 15.18 8.35 7.63 (4.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $113,839 $104,736 $120,099 $99,140 $82,093 $91,173
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .61* (d) 1.29 (d) 1.31 1.29 1.24 1.19
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.34* (d) 2.65 (d) 3.23 4.21 5.32 5.57
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.97* (f) 162.13 197.79 331.06 (g) 292.73 (g) 301.44
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 involuntary contractual expense limitation and waivers
of certain fund expenses in connection with investments in Putnam Prime
Money Market Fund during the period. As a result of such limitation and
waivers, the expenses of the fund for the periods ended April 30, 2005
and October 31, 2004 reflect a reduction of 0.07% and 0.09%,
respectively, of average net assets for class A shares (Notes 2 and 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes dollar roll transactions.
(g) 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 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.69 $12.61 $11.36 $10.94 $10.74 $11.88
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .13 (d) .24 (d) .30 .38 .50 .54
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .37 .87 1.30 .43 .22 (1.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .50 1.11 1.60 .81 .72 (.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.17) (1.03) (.35) (.39) (.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.39) (.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (1.03) (.35) (.39) (.52) (.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- (e) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.02 $12.69 $12.61 $11.36 $10.94 $10.74
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.91* 9.20 14.27 7.60 6.85 (4.98)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $28,466 $29,246 $41,469 $29,498 $18,123 $21,293
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .98* (d) 2.04 (d) 2.06 2.04 1.99 1.94
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .97* (d) 1.93 (d) 2.44 3.33 4.58 4.83
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.97* (f) 162.13 197.79 331.06 (g) 292.73 (g) 301.44
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 involuntary contractual expense limitation and waivers
of certain fund expenses in connection with investments in Putnam Prime
Money Market Fund during the period. As a result of such limitation and
waivers, the expenses of the fund for the periods ended April 30, 2005
and October 31, 2004 reflect a reduction of 0.07% and 0.09%,
respectively, of average net assets for class B shares (Notes 2 and 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes dollar roll transactions.
(g) 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.70 $12.62 $11.37 $10.96 $10.75 $11.91
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .12 (d) .23 (d) .29 .37 .49 .55
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .38 .88 1.32 .43 .24 (1.14)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .50 1.11 1.61 .80 .73 (.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.17) (1.03) (.36) (.39) (.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.39) (.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (1.03) (.36) (.39) (.52) (.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- (e) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.03 $12.70 $12.62 $11.37 $10.96 $10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 3.93* 9.16 14.30 7.48 6.94 (5.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,774 $1,682 $2,337 $1,048 $415 $298
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .98* (d) 2.04 (d) 2.06 2.04 1.99 1.94
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .95* (d) 1.90 (d) 2.35 3.22 4.52 4.93
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.97* (f) 162.13 197.79 331.06 (g) 292.73 (g) 301.44
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 involuntary contractual expense limitation and waivers
of certain fund expenses in connection with investments in Putnam Prime
Money Market Fund during the period. As a result of such limitation and
waivers, the expenses of the fund for the periods ended April 30, 2005
and October 31, 2004 reflect a reduction of 0.07% and 0.09%,
respectively, of average net assets for class C shares (Notes 2 and 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes dollar roll transactions.
(g) 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 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.66 $12.58 $11.33 $10.91 $10.72 $11.86
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .16 (d) .30 (d) .37 .44 .57 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .36 .87 1.29 .42 .20 (1.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .52 1.17 1.66 .86 .77 (.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.20) (1.09) (.41) (.44) (.15) --
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.43) (.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (1.09) (.41) (.44) (.58) (.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- (e) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.98 $12.66 $12.58 $11.33 $10.91 $10.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 4.10* 9.77 14.86 8.16 7.31 (4.49)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $29,571 $31,245 $38,446 $43,686 $52,481 $107,329
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .73* (d) 1.54 (d) 1.56 1.54 1.49 1.44
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.22* (d) 2.40 (d) 3.02 4.02 5.18 5.31
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.97* (f) 162.13 197.79 331.06 (g) 292.73 (g) 301.44
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 involuntary contractual expense limitation and waivers
of certain fund expenses in connection with investments in Putnam Prime
Money Market Fund during the period. As a of such limitation and
waivers, the expenses of the fund for the periods ended April 30, 2005
and October 31, 2004 reflect a reduction of 0.07% and 0.09%,
respectively, of average net assets for class M shares (Notes 2 and 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes dollar roll transactions.
(g) 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
- ------------------------------------------------------------------------------------------
Six months For the period
ended December 1,
April 30 2003+ to
Per-share (Unaudited) October 31,
operating performance 2005 2004
- ------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.74 $12.81
- ------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------
Net investment income (a) (b) .15 .27
- ------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .37 .73
- ------------------------------------------------------------------------------------------
Total from
investment operations .52 1.00
- ------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------
From net investment income (.20) (1.07)
- ------------------------------------------------------------------------------------------
Total distributions (.20) (1.07)
- ------------------------------------------------------------------------------------------
Redemption fees (c) -- --
- ------------------------------------------------------------------------------------------
Net asset value,
end of period $13.06 $12.74
- ------------------------------------------------------------------------------------------
Total return at
net asset value (%)(d) 4.11* 8.21*
- ------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $19 $2
- ------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) (e) .73* 1.41*
- ------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 1.12* 2.21*
- ------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.97* (f) 162.13
- ------------------------------------------------------------------------------------------
+ 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 involuntary contractual expense limitation and waivers
of certain fund expenses in connection with investments in Putnam Prime
Money Market Fund during the period. As a result of such limitation and
waivers, the expenses of the fund for the periods ended April 30, 2005
and October 31, 2004 reflect a reduction of 0.07% and 0.09%,
respectively, of average net assets for class R shares (Notes 2 and 5).
(c) Amount represents less than $0.01 per share.
(d) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(e) Includes amounts paid through expense offset arrangements (Note 2).
(f) Portfolio turnover excludes dollar roll transactions.
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
April 30, 2005 (Unaudited)
Note 1
Significant accounting policies
Putnam Global Income Trust (the "fund"), a Massachusetts business trust,
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 the objective of seeking 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 fund's investments.
The fund offers class A, class B, class C, class M and class R shares.
Class A and class M shares are sold with a maximum front-end sales
charge of 3.75% and 3.25%, respectively, and do not pay a contingent
deferred sales charge. Prior to April 1, 2005, the maximum front-end
sales charge for class A shares was 4.50%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a
front-end sales charge 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 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 R shares, which are offered
to qualified employee-benefit plans are sold without a front-end sales
charge or a contingent deferred sales charge. The expenses for class A,
class B, class C, class M and class R shares may differ based on each
class' distribution fee, which is identified in Note 2.
Prior to April 19, 2004, a redemption fee of 1.00% which is retained by
the fund, applied 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. The redemption fee is accounted for as an
addition to paid-in-capital.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees
applicable to such classes). 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 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 certain 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 Pursuant to an exemptive order from the
Securities and Exchange Commission, 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 issues 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) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are 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. All premiums/discounts
are amortized/accreted on a yield-to-maturity basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when 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.
F) 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. Risks may exceed amounts recognized on the
statement of assets and liabilities. Forward currency contracts
outstanding at period end, if any, are listed after the fund's
portfolio.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. 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. If a written call
option is exercised, the premium originally received is recorded as an
addition to sales proceeds. If a written put option is exercised, the
premium originally received is recorded as a reduction to the cost of
investments.
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.
H) Total return swap contracts The fund may enter into total return swap
contracts, which are arrangements to exchange a market linked return for a
periodic payment, both based on a notional principal amount. To the extent
that the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the
fund will receive a payment from or make a payment to the counterparty.
Total return 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 in the
price of the underlying security or index, the possibility that there is
no liquid market for these agreements or that the counterparty may default
on its obligation to perform. Risk of loss may exceed amounts recognized
on the statement of assets and liabilities. Total return swap contracts
outstanding at period end, if any, are listed after the fund's portfolio.
I) 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. Risk of loss 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.
J) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront or
periodic 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.
Periodic payments received or paid by the fund are recorded as realized
gains or losses. 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. Risks of loss may exceed amounts
recognized on the statement of assets and liabilities. Credit default
contracts outstanding at period end, if any, are listed after the fund's
portfolio.
K) 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.
L) 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.
M) Dollar rolls To enhance returns, the fund may enter into dollar rolls
(principally using TBAs) in which the fund sells securities for delivery
in the current month and simultaneously contracts to purchase similar
securities on a specified future date. During the period between the
sale and subsequent purchase, the fund will not be entitled to receive
income and principal payments on the securities sold. The fund will,
however, retain the difference between the initial sales price and the
forward price for the future purchase. The fund will also be able to
earn interest on the cash proceeds that are received from the initial
sale. The fund may be exposed to market or credit risk if the price of
the security changes unfavorably or the counterparty fails to perform
under the terms of the agreement.
N) 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 of 1986 (the "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 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, 2004, the fund had a capital loss carryover of
$56,173,757 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
- --------------------------------
$22,291,896 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 $189,086,643, resulting
in gross unrealized appreciation and depreciation of $13,002,578 and
$1,849,886, respectively, or net unrealized appreciation of $11,152,692.
O) 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.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through October 31, 2005 to the extent necessary to ensure that the
fund's expenses do not exceed the average expenses of the front-end load
funds viewed by Lipper Inc. as having the same investment classification
or objective as the fund. The expense reimbursement is based on a
comparison of the fund's expenses with the average annualized operating
expenses of the funds in its Lipper peer group for each calendar quarter
during the fund's last fiscal year, excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses. For the period ended April 30, 2005,
Putnam Management waived $97,487 of its management fee from the fund.
For the period ended April 30, 2005, Putnam Management has assumed
$2,300 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 6).
Effective September 13, 2004, Putnam Investments Limited ("PIL"), an
affiliate of Putnam Management, is authorized by the Trustees to manage
a separate portion of the assets of the fund as determined by Putnam
Management from time to time. Putnam Management pays a quarterly
sub-management fee to PIL for its services at an annual rate of 0.40% of
the average net assets of the portion of the fund managed by PIL.
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 ended April 30, 2005, the
fund paid PFTC $224,511 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, 2005,
the fund's expenses were reduced by $5,381 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $842, 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 Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
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, 2005, Putnam Retail Management,
acting as underwriter, received net commissions of $4,965 and $311 from
the sale of class A and class M shares, respectively, and received
$15,201 and $68 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, 2005, Putnam Retail Management, acting as
underwriter, received no monies on class A and class M redemptions,
respectively.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2005, cost of purchases and
proceeds from sales of investment securities other than U.S. government
securities and short-term investments aggregated $160,501,409 and
$148,359,281, respectively. Purchases and sales of U.S. government
securities aggregated $12,974,977 and $15,604,389, respectively.
Note 4
Capital shares
At April 30, 2005, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 1,661,875 $21,696,606
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 116,009 1,511,081
- ----------------------------------------------------------------
1,777,884 23,207,687
Shares repurchased (1,285,484) (16,766,274)
- ----------------------------------------------------------------
Net increase 492,400 $6,441,413
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 2,401,951 $29,980,070
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 668,639 8,266,318
- ----------------------------------------------------------------
3,070,590 38,246,388
Shares repurchased (4,340,199) (54,129,808)
- ----------------------------------------------------------------
Net decrease (1,269,609) $(15,883,420)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 388,546 $5,044,374
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 25,201 327,805
- ----------------------------------------------------------------
413,747 5,372,179
Shares repurchased (531,077) (6,889,928)
- ----------------------------------------------------------------
Net decrease (117,330) $(1,517,749)
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 969,980 $12,037,829
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 216,681 2,670,393
- ----------------------------------------------------------------
1,186,661 14,708,222
Shares repurchased (2,170,879) (27,028,527)
- ----------------------------------------------------------------
Net decrease (984,218) $(12,320,305)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 89,152 $1,158,754
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,521 19,811
- ----------------------------------------------------------------
90,673 1,178,565
Shares repurchased (10,109) (130,996)
- ----------------------------------------------------------------
Net increase 80,564 $1,047,569
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 62,292 $774,008
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 11,505 141,946
- ----------------------------------------------------------------
73,797 915,954
Shares repurchased (126,551) (1,571,722)
- ----------------------------------------------------------------
Net decrease (52,754) $(655,768)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 45,314 $589,389
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,914 24,816
- ----------------------------------------------------------------
47,228 614,205
Shares repurchased (237,468) (3,079,456)
- ----------------------------------------------------------------
Net decrease (190,240) $(2,465,251)
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 103,755 $1,293,427
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 10,776 132,521
- ----------------------------------------------------------------
114,531 1,425,948
Shares repurchased (702,762) (8,812,996)
- ----------------------------------------------------------------
Net decrease (588,231) $(7,387,048)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 1,730 $22,623
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 12 157
- ----------------------------------------------------------------
1,742 22,780
Shares repurchased (460) (6,000)
- ----------------------------------------------------------------
Net increase 1,282 $16,780
- ----------------------------------------------------------------
For the period December 1, 2003
(commencement of operations)
to October 31, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 190 $2,383
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1 14
- ----------------------------------------------------------------
191 2,397
Shares repurchased (5) (68)
- ----------------------------------------------------------------
Net increase 186 $2,329
- ----------------------------------------------------------------
At April 30, 2005, Putnam, LLC owned 86 class R shares of the
fund (5.86% of class R shares outstanding), valued at $1,123.
Note 5
Investment in Putnam Prime
Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange
Commission, the fund invests in Putnam Prime Money Market Fund, an
open-end management investment company managed by Putnam Management.
Management fees paid by the fund are reduced by an amount equal to the
management and administrative services fees paid by Putnam Prime Money
Market Fund with respect to assets invested by the fund in Putnam Prime
Money Market Fund. For the period ended April 30, 2005, management fees
paid were reduced by $15,205 relating to the fund's investment in Putnam
Prime Money Market Fund. Income distributions earned by the fund are
recorded as income in the statement of operations and totaled $208,782 for
the period ended April 30, 2005. During the period ended April 30, 2005,
cost of purchases and cost of sales of investments in Putnam Prime Money
Market Fund aggregated $79,462,872 and $83,316,693, respectively.
Note 6
Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected 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.
Pursuant to these settlement agreements, Putnam Management will pay a
total of $193.5 million in penalties and restitution, with $153.5 million
being paid to shareholders and the funds. The restitution amount will be
allocated to shareholders pursuant to a plan developed by an independent
consultant, with payments to shareholders currently expected by the end of
the summer.
The Securities and Exchange Commission'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 will bear any costs incurred by Putnam
funds in connection with these lawsuits. 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.
Putnam Investments has recorded a charge of $30 million for the estimated
cost that it believes will be necessary to address issues relating to the
calculation of certain amounts paid by the Putnam mutual funds in previous
years. The previous payments were cost reimbursements by the Putnam funds
to Putnam for transfer agent services relating to defined contribution
operations. Putnam currently anticipates that any payments made by Putnam
related to this issue will be paid to the Putnam funds. Review of this
issue is ongoing.
Results of November 11, 2004
shareholder meeting
(Unaudited)
A special meeting of shareholders of the fund was held on November 11, 2004.
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
For Withheld
- -----------------------------------------------------------------
Jameson A. Baxter 9,580,803 341,600
Charles B. Curtis 9,584,308 338,095
Myra R. Drucker 9,590,489 331,914
Charles E. Haldeman, Jr. 9,592,602 329,801
John A. Hill 9,583,260 339,143
Ronald J. Jackson 9,582,707 339,696
Paul L. Joskow 9,584,140 338,263
Elizabeth T. Kennan 9,582,023 340,380
John H. Mullin, III 9,587,434 334,969
Robert E. Patterson 9,584,270 338,133
George Putnam, III 9,584,162 338,241
A.J.C. Smith* 9,583,955 338,448
W. Thomas Stephens 9,588,271 334,132
Richard B. Worley 9,594,792 327,611
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility
permitted by the Investment Company Act was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
7,680,568 485,311 1,756,524
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
7,647,760 500,714 1,773,929
* Mr. Smith resigned from the Board of Trustees on January 14, 2005.
All tabulations are rounded to nearest whole number.
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money
Market Fund was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
7,864,837 330,347 1,727,219
A motion with respect to a proposal to approve an amendment to the fund's
Agreement and Declaration of Trust was not brought before the meeting and
accordingly no vote was taken with respect to the proposal.
All tabulations are rounded to nearest whole number.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund before investing. For a prospectus
containing this and other information for any Putnam fund or product, call
your financial advisor at 1-800-225-1581 and ask for a prospectus. Please
read the prospectus carefully before investing.
Growth Funds
Discovery Growth Fund
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund*
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Vista Fund
Voyager Fund
Blend Funds
Capital Appreciation Fund
Capital Opportunities Fund
Europe Equity Fund*
Global Equity Fund*
Global Natural Resources Fund*
International Capital
Opportunities Fund*
International Equity Fund*
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
Value Funds
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth
and Income
International Growth and Income Fund*
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund+
Income Funds
American Government Income Fund
Diversified Income Trust
Floating Rate Income Fund
Global Income Trust*
High Yield Advantage Fund*+
High Yield Trust*
Income Fund
Limited Duration Government
Income Fund++
Money Market Fund [SECTI0N MARK]
U.S. Government Income Trust
* A 1% redemption fee on total assets redeemed or exchanged between 6 and
90 days of purchase may be imposed for all share classes of these funds.
+ Closed to new investors.
++ Formerly Putnam Intermediate U.S. Government Income Fund.
[SECTI0N MARK] An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible
to lose money by investing in the fund.
The Putnam family of funds
Tax-free Income Funds
AMT-Free Insured Municipal Fund**
Tax Exempt Income Fund
Tax Exempt Money Market Fund
Tax-Free High Yield Fund
State tax-free income funds:
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
Asset Allocation Portfolios
Putnam Asset Allocation Portfolios--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
Putnam RetirementReady[REGISTRATION MARK] Funds
Putnam RetirementReady Funds -- ten investment portfolios that offer
diversification among stocks, bonds, and money market instruments and adjust
to become more conservative over time based on a target date for withdrawing
assets.
The ten funds:
Putnam RetirementReady 2050 Fund
Putnam RetirementReady 2045 Fund
Putnam RetirementReady 2040 Fund
Putnam RetirementReady 2035 Fund
Putnam RetirementReady 2030 Fund
Putnam RetirementReady 2025 Fund
Putnam RetirementReady 2020 Fund
Putnam RetirementReady 2015 Fund
Putnam RetirementReady 2010 Fund
Putnam RetirementReady Maturity Fund
** Formerly Putnam Tax-Free Insured Fund.
With the exception of money market funds, a 2% redemption fee may be
applied to shares exchanged or sold within 5 days of purchase.
Check your account balances and the most recent month-end performance at
www.putnaminvestments.com.
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
Investment Sub-Manager
Putnam Investments Limited
57-59 St. James Street
London, England SW1A 1LD
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
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
W. Thomas Stephens
Richard B. Worley
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
Steven D. Krichmar
Vice President and Principal
Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Senior Vice President, Staff
Counsel and Compliance Liaison
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
Charles A. Ruys de Perez
Vice President and Chief
Compliance Officer
Judith Cohen
Vice President, 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.
SA031-225012 6/05
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
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
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, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.
(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
and 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 27, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and 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 27, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 27, 2005