-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PMCYf8dCm7wEKBQOCXdOS1H3/3WWSTUfr68kAZHg6HRWQ0kNBtrBP3TrVADAlYp1 +sMulpgE6BxHDG85wHSJdA== 0000928816-96-000025.txt : 19960104 0000928816-96-000025.hdr.sgml : 19960104 ACCESSION NUMBER: 0000928816-96-000025 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19960103 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM CONVERTIBLE INCOME GROWTH TRUST CENTRAL INDEX KEY: 0000081247 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042493360 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02280 FILM NUMBER: 96500595 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND DATE OF NAME CHANGE: 19841212 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND INC /PRED/ DATE OF NAME CHANGE: 19821109 N-30D 1 CONVERTIBLE INCOME-GROWTH TRUST Putnam Convertible Income-Growth Trust [Graphic Omitted: Artwork] ANNUAL REPORT October 31, 1995 [Logo: BOSTON * LONDON * TOKYO] Fund highlights * Putnam Convertible's diversified, value-oriented approach has continued to show its merits in 1995. . . . year-to-date returns are superior to those of more than 70% of its rivals. -- Morningstar Mutual Funds analysis, September 15, 1995 * Even more than in the straight bond or stock markets, small investors are better off betting on the convertibles and preferred markets through mutual funds that offer the benefits of diversification and the research capability to track these markets. -- Fortune, September 18, 1995 CONTENTS 4 Report from Putnam Management 8 Fund performance summary 12 Portfolio holdings 23 Financial statements From the Chairman [Graphic Omitted: photo of George Putnam] (C) Karsh, Ottawa Dear Shareholder: Everyone loves a bargain, and Putnam Convertible Income-Growth Trust's managers are no exception. In the opening months of fiscal 1995, as the year-long declines in the stock and bond markets ground slowly to a halt, fund managers Hugh Mullin and Charles Pohl positioned your fund more aggressively by purchasing a variety of attractively priced convertibles. The fund benefited handsomely as a result, as the subsequent sharp rally in the financial markets boosted the value of their acquisitions. Hugh and Charlie also took profits in holdings of companies in certain industries they believed would be hit hardest by the slowing economy and diverted funds to issues with what they considered better prospects in the emerging economic environment. All in all, as they explain in greater detail in the report that follows, they were pleased with the fund's results in fiscal 1995 and believe the prevailing moderate economic growth and benign inflation provide a favorable backdrop for convertible investing in fiscal 1996. Respectfully yours, /s/George Putnam - ---------------- George Putnam Chairman of the Trustees December 20, 1995 Report from the Fund Managers Hugh H. Mullin, lead manager Charles G. Pohl So far in calendar 1995, investors have witnessed one of the strongest equity markets in recent memory, fueled by declining interest rates and relatively strong corporate profitability. Your fund took full advantage of the market's good fortunes, recording a total return for class A shares of 14.38% at net asset value for the fiscal year ended October 31, 1995. Although these results lag the 15.51% return of the Merrill Lynch All-Convertible Index for the period, the fund handily outperformed the 12.00% average total return of the 35 convertible funds tracked by Lipper Analytical Services, Inc. We attribute this solid performance to the fund's hallmark combination of sound fundamental analysis and superior sector and security selection. * FUND CAPITALIZES ON LAST YEAR'S BUYING OPPORTUNITY The market downturn of late calendar 1994 offered us an ideal opportunity to add a number of new securities to the portfolio at bargain prices. We targeted our purchases toward smaller company names that we believed were most undervalued by the marketplace. This approach allowed us to increase the fund's exposure to both small-capitalization growth companies, whose prices are sensitive to stock market performance, and high-yield convertibles, whose values respond more to movements in interest rates and the bond market. These newly acquired holdings proved their value as the domestic financial markets rebounded dramatically throughout calendar 1995. Prices of convertibles rose as both the stock and bond characteristics of these hybrid securities responded favorably to moderating inflation and lower interest rates. During the first five months of this year, convertibles issued by large- capitalization companies were the strongest performers, their prices rising in tandem with advancing blue chip stocks. Nevertheless, our valuation strategy began to bear fruit over the second half of the year as small-capitalization convertibles began to outperform their larger- cap brethren. * PROFITS FUNNELED INTO NONDURABLES Your fund's allocation to various sectors of the convertible market is the net result of detailed analysis of individual companies and their securities. Following this "bottom-up" formula, we took profits on the fund's holdings in the metals and mining, paper, and chemical industries as these holdings reached full valuation early in the fund's fiscal year. However, we also maintained exposure to a variety of other industries that remained attractively priced, including select situations in the aerospace, building, and transportation industries. The fund benefited from exposure to several of 1995's "hot" market sectors early in the game. We were able to capture exceptional gains as securities in the energy and technology sectors outperformed during the first quarter of calendar 1995. In addition, we realized significant profits in several airline and railroad holdings following the transportation sector's big run. Proceeds from these sales were shifted primarily into consumer-oriented nondurable industries and financial services such as banks, insurance companies, and savings and loan institutions. Securities in these sectors, along with those in the technology industry, proved to be the best performing holdings in the fund over the 12 months ended October 31, 1995. [Graphic Omitted: horizontal bar chart TOP INDUSTRY SECTORS* showing: Oil & gas 8.8% Banks 7.5% Insurance & finance 7.2% Consumer service 6.4% Retail 5.5% Footnote reads: (bullet)Based on net assets on 10/31/95.] TOP 10 HOLDINGS (10/31/95)* Federated Department Stores Retail store chains Banco Nacional De Mexico SA Foreign governmental bond Cellular Communications, Inc. Cellular telephone services Rogers Communications Cable broadcasting Eastman Kodak Co. Diversified imaging, chemicals and healthcare products Unisys Corp. Computer systems, related products and services Baker (J.) Inc. Footwear retailer ADT Operations Inc. Home security systems Sterling Software, Inc. Computer software Philip Morris Cos., Inc. Domestic food processing, alcohol, tobacco Footnote reads: These holdings represent 9.76% of the fund's net assets. Portfolio holdings will vary in future. * CONSUMER-ORIENTED COMPANIES PROVIDE VALUE Our analysis shows that service sector companies currently offer some of the best values in the present marketplace, allowing the fund to profit from changing consumer trends. One example of such a company is Boston Market (formerly Boston Chicken). Its well-run, rapidly growing restaurant niche business is thriving despite industry difficulties. We first purchased this convertible for your fund at a double-digit yield when the company's stock suffered a decline during the market sell-off of late 1994. Since then, the company's stock price has recovered and the convertibles have appreciated substantially. Also noteworthy are the convertibles issued by ADT Corp., whose major business is home security systems. The company's earnings are poised to expand in response to a major balance sheet restructuring and a renewed focus on its core business. ADT is an astutely managed, low-cost provider in an industry with very favorable dynamics, and we consider it one of our more promising recent additions to the portfolio. The stock of Eastman Kodak represents a common equity holding that has performed well for your fund. The positive cultural changes and improved efficiencies achieved under the direction of former Motorola CEO George Fisher have revitalized the company. Moreover, we consider the stock price to be currently undervalued at 13.5 times estimated 1996 earnings, a relatively low multiple in the present market. Another favorite holding that has performed well over the past year is Occidental Petroleum Corp., an oil company that also runs a large chemical operation. The company's recent strategy of liquidating assets and paying down its debt has resulted in substantially improved free cash flow and a healthier balance sheet. Your fund has benefited from the improved growth prospects of "Oxy Pete" through ownership of both the company's common stock and convertible preferred stock. * OUTLOOK GUARDEDLY OPTIMISTIC The prevailing moderate pace of economic growth and benign interest rate environment provide a favorable backdrop for convertible investing. Although the market is currently not as undervalued as it was at the end of calendar 1994, we believe attractive opportunities still exist, particularly in the financial services area and broad consumer sectors. In recent months, we have experienced a similar pattern to that seen in the sizzling market of late 1993, when aggressively priced new-issue convertibles came to market at a rapid pace. However, this time the corrective action of the market at large has reined in convertible pricing to reasonable levels. The supply of attractive issues is expected to remain firm as growing, small- to medium-sized companies turn to the convertible market to raise capital for expansion. We will monitor these new issues -- as well as the secondary market, of course - - - to identify those with the best combination of attractive pricing and total return potential. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 10/31/95, there is no guarantee the fund will continue to hold these securities in the future. Performance summary This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Performance should always be considered in light of a fund's investment strategy. Putnam Convertible Income-Growth Trust is designed for investors seeking current income and capital appreciation mainly through bonds and preferred stocks convertible into common stock, with capital conservation as a secondary objective. TOTAL RETURN FOR PERIODS ENDED 10/31/95 Class A Class B Class M (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ 1 year 14.38% 7.83% 13.54% 8.54% -- -- - ------------------------------------------------------------------------ 5 years 132.98 119.58 -- -- -- -- Annual average 18.43 17.04 -- -- -- -- - ------------------------------------------------------------------------ 10 years 193.75 176.85 -- -- -- -- Annual average 11.38 10.72 -- -- -- -- - ------------------------------------------------------------------------ Life of class -- -- 20.91 17.94 12.99% 9.01% Annual average -- -- 8.60 7.44 -- -- - ------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/95 S&P 500 Lehman Bros. Corporate Index Bond Index - ------------------------------------------------------------------------ 1 year 26.41% 18.79% - ------------------------------------------------------------------------ 5 years 121.29 69.50 Annual average 17.22 11.13 - ------------------------------------------------------------------------ 10 years 320.70 176.65 Annual average 15.45 10.71 - ------------------------------------------------------------------------ Life of class B 37.45 17.13 Annual average 14.61 7.01 - ------------------------------------------------------------------------ Life of class M 21.28 12.32 - ------------------------------------------------------------------------ Performance data represent past results, do not reflect future performance, and will differ for each share class. Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions or for payments under the fund's class A distribution plan prior to its implementation. Investment returns and principal value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. POP assumes 5.75% maximum sales charge for class A shares and 3.50% for class M shares. CDSC for class B shares assumes 5% maximum contingent deferred sales charge. [Graphic Omitted: worm chart GROWTH OF A $10,000 INVESTMENT) Y-axis reads (top to bottom) $45,000 to $0 in $5,000 decrements X-axis reads (left to right) 10/85 to 10/95 in one year increments A solid black line represents Fund's Class A shares at POP ranging from $9,425 to $27,671 A solid white line represents S&P's 500 Index ranging from $10,000 to $42,070 A solid gray line represents Lehman Bros. Corporate Bond Index ranging from $10,000 to $27,665 Class A S&P 500 Lehman Bros. ------- ------- ------------ 10/85 $9,425 $10,000 $10,000 10/86 11,739 13,319 12,063 10/87 10,917 14,171 12,297 10/88 12,380 16,262 13,927 10/89 14,224 20,548 15,654 10/90 11,883 19,011 16,322 10/91 16,523 25,364 19,196 10/92 19,524 27,887 21,330 10/93 23,769 32,045 24,562 10/94 24,205 33,281 23,290 10/95 27,671 42,070 27,665 Cumulative total return of a $10,000 investment since 10/31/85 S&P Index $42,070 Fund's Class A shares at POP $27,671 Lehman Bros. Corporate Bond Index $27,665 Footnote reads: Past performance is no assurance of future results. A $10,000 investment in the fund's class B shares at inception on 7/15/93 would have been valued at $12,091 on 10/31/95 ($11,794 with a redemption at the end of the period). A $10,000 investment in the fund's class M shares at inception on 3/13/95 would have been valued at $11,299 at net asset value on 10/31/95 ($10,901 at the maximum applicable 3.50% sales charge). PRICE AND DISTRIBUTION INFORMATION 12 months ended 10/31/95 Class A Class B Class M - ------------------------------------------------------------------------ Distributions: - ------------------------------------------------------------------------ No. 4 4 3 - ------------------------------------------------------------------------ Income $0.960 $0.840 $0.699 - ------------------------------------------------------------------------ Capital gains - ------------------------------------------------------------------------ Long-term 0.868 0.868 0.000 - ------------------------------------------------------------------------ Short-term 0.293 0.293 0.000 - ------------------------------------------------------------------------ Total 2.121 2.001 0.699 - ------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------ 10/31/94 $19.09 $20.25 $19.00 -- -- - ------------------------------------------------------------------------ 3/13/95 -- -- -- $17.79 $18.44 (inception of class M shares) - ------------------------------------------------------------------------ 10/31/95 19.42 20.60 19.30 19.37 20.07 - ------------------------------------------------------------------------ Current return NAV POP NAV NAV POP - ------------------------------------------------------------------------ End of period - ------------------------------------------------------------------------ Current dividend rate1 4.94% 4.66% 4.31% 4.77% 4.60% - ------------------------------------------------------------------------ Current 30-day SEC yield2 4.77 4.49 3.98 4.24 4.09 - ------------------------------------------------------------------------ 1 Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2 Based only on investment income, calculated using SEC guidelines. TOTAL RETURN FOR PERIODS ENDED 9/30/95 (most recent calendar quarter) Class A Class B Class M (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ [S] [C] [C] [C] [C] [C] [C] 1 year 16.26% 9.56% 15.54% 10.54% -- -- - ------------------------------------------------------------------------ 5 years 122.03 109.34 -- -- -- Annual average 17.30 15.92 -- -- -- -- - ------------------------------------------------------------------------ 10 years 206.47 188.82 -- -- -- -- Annual average 11.85 11.19 -- -- -- -- - ------------------------------------------------------------------------ Life of class -- -- 23.22 20.22 15.03% 10.98% Annual average -- -- 9.91 8.69 -- -- - ------------------------------------------------------------------------ Performance data represent past results, do not reflect future performance, and will differ for each share class. Investment returns and principal value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. TERMS AND DEFINITIONS Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of the fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at purchase. POP performance figures assume the maximum 5.75% sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied when class B shares are redeemed and assumes redemption at the end of the fiscal period. Your fund's 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. Standard & Poor's 500 Index is an unmanaged list of large-capitalization common stocks and is frequently used as a general gauge of stock market performance. Lehman Brothers Corporate Bond Index is an unmanaged list of corporate bonds. These indexes assume reinvestment of all distributions and do not take into account brokerage commissions or other costs. The fund's portfolio contains securities that do not match those in the indexes. It is not possible to invest directly in an index. Report of independent accountants For the Year Ended October 31, 1995 To the Trustees and Shareholders of Putnam Convertible Income-Growth Trust We have audited the accompanying statement of assets and liabilities of Putnam Convertible Income-Growth Trust , including the portfolio of investments owned, as of October 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Convertible Income-Growth Trust as of October 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated therein, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Boston, Massachusetts December 15, 1995 Portfolio of investments owned October 31, 1995
CONVERTIBLE BONDS AND NOTES (43.4%)* PRINCIPAL AMOUNT VALUE Aerospace and Defense (0.9%) - ------------------------------------------------------------------------------------------------------------ $ 1,850,000 Diagnostic Retrieval Systems 144A cv. sr. sub. notes, 9s, 2003 $ 1,850,000 3,250,000 Rohr Industries, Inc. cv. sub. deb., 7s, 2012 2,730,000 3,050,000 UNC Inc. cv. sub. deb., 7 1/2s, 2006 2,767,875 ---------------- 7,347,875 Automotive (0.7%) - ------------------------------------------------------------------------------------------------------------ 4,500,000 Magna International cv. sub. deb., 5s, 2002 4,567,500 1,750,000 Mascotech, Inc. cv. sub. deb., 4 1/2s, 2003 1,340,938 ---------------- 5,908,438 Banks (2.0%) - ------------------------------------------------------------------------------------------------------------ 11,000,000 Banco Nacional De Mexico SA cv. bonds, 7s, 1999 (Mexico) 8,580,000 1,750,000 Banco Nationale Mexico (Bahamas) 144A cv. company guaranty, 7s, 1999 1,365,000 6,500,000 Mitsubishi Bank Ltd. International Finance (Bermuda) cv. guaranteed notes, 3s, 2002 (Japan) 6,743,750 ---------------- 16,688,750 Basic Industrial Products (1.4%) - ------------------------------------------------------------------------------------------------------------ 840,000 Agco Corp. cv. sub. deb., 6 1/2s, 2008 2,956,800 3,700,000 SKF Corp. 144A cv. zero%, 2002 (Sweden) 2,812,768 2,500,000 Thermo Electron Corp. cv. deb., 5s, 2001 3,787,500 1,590,000 Titan Wheel International Inc. cv. sub. deb., 4 3/4s, 2000 1,955,700 ---------------- 11,512,768 Broadcasting (0.4%) - ------------------------------------------------------------------------------------------------------------ 3,100,000 International Cabletel Inc. 144A cv. sub. deb., 7 1/4s, 2005 3,534,000 Building and Construction (0.6%) - ------------------------------------------------------------------------------------------------------------ 3,000,000 Empresas Ica Sociedad ADS cv. sub. deb., 5s, 2004 (Mexico) 1,605,000 1,500,000 Falcon Homes cv. sub. deb., 7 1/4s, 1999 1,275,000 1,805,000 U.S. Home Corp. cv. deb., 4 7/8s, 2005 1,624,500 ---------------------- 4,504,500 Business Equipment and Services (2.3%) - ------------------------------------------------------------------------------------------------------------ 5,250,000 Conner Peripherals Inc. cv. sub. deb., 6 1/2s, 2002 5,085,938 1,550,000 Danka Business Systems 144A cv. sub. notes, 6 3/4s, 2002 (United Kingdom) 2,046,000 6,000,000 Maxtor Corp. cv. sub. deb., 5 3/4s, 2012 4,110,000 9,600,000 Unisys Corp. cv. sub. notes, 8 1/4s, 2000 7,920,000 ---------------------- 19,161,938 CONVERTIBLE BONDS AND NOTES PRINCIPAL AMOUNT VALUE Computer Services & Software (0.8%) - ------------------------------------------------------------------------------------------------------------ $ 4,200,000 Sterling Software, Inc. cv. sub. deb., 5 3/4s, 2003 $ 6,903,750 Computers (0.2%) - ------------------------------------------------------------------------------------------------------------ 1,165,000 EMC Corp. cv. sub. notes, 4 1/4s, 2001 1,170,825 Conglomerates (0.8%) - ------------------------------------------------------------------------------------------------------------ 2,000,000 Alfa S.A. 144A cv. sub notes, 8s, 2000 1,915,000 1,200,000 Dart & Kraft Inc. 144A cv. unsub. deb., 7 3/4s, 1998 2,748,000 1,500,000 Samsung Heavy Industries cv. deb., 1/2s, 2009 1,680,000 ---------------------- 6,343,000 Consumer Durable Goods (0.4%) - ------------------------------------------------------------------------------------------------------------ 8,000,000 Whirlpool Corp. cv. deb. LYON (Liquid Yield Option Notes), zero%, 201 3,200,000 Consumer Non Durables (2.1%) - ------------------------------------------------------------------------------------------------------------ 2,750,000 Bell Sports Corp. cv. sub. deb., 4 1/4s, 2000 2,041,875 11,500,000 Coleman Worldwide Corp. cv. sr. sec. notes LYON, zero%, 2013 3,392,500 1,455,000 Dibrell Brothers, Inc. cv. sub. deb., 7 3/4s, 2006 1,629,600 2,000,000 Dixie Yarns, Inc. cv. deb., 7s, 2012 1,545,000 3,050,000 Fieldcrest Cannon, Inc. cv. sub. deb., 6s, 2012 2,440,000 400,000 Interface, Inc. sinking fund cv. deb., 8s, 2013 413,000 8,045,000 Standard Commercial Corp. cv. sub. deb., 7 1/4s, 2007 5,872,850 ---------------------- 17,334,825 Consumer Services (5.9%) - ------------------------------------------------------------------------------------------------------------ 16,000,000 ADT Operations Inc. cv. sub. notes, zero%, 2010 7,200,000 15,100,000 Boston Market Inc. cv. notes LYON, zero%, 2015 4,379,000 1,400,000 CML Group, Inc. cv. jr. sub. deb., 5 1/2s, 2003 1,099,000 6,245,000 CML Group, Inc. 144A cv. jr. sub. deb., 5 1/2s, 2003 4,808,650 12,750,000 Comcast Corp. cv. notes, 1 1/8s, 2007 6,279,375 1,500,000 Comcast Corp. cv. sub. deb. stepped-coupon, 3 3/8s, (5 1/2s, 9/9/97), 2005 (STP) 1,432,500 20,150,000 Hollinger, Inc. cv. LYON, zero%, 2013 6,120,563 2,050,000 National Education Corp. cv. sub. deb., 6 1/2s, 2011 1,445,250 5,500,000 News America Holdings Inc. LYON, zero%, 2013 2,413,125 7,530,000 Pharmaceutical Marketing Services Inc. 144A cv. deb., 6 1/4s, 2003 6,024,000 280,000 Pharmaceutical Marketing Services Inc. cv. notes, 6 1/4s, 2003 218,400 5,200,200 Time-Warner, Inc. cv. deb., 8 3/4s, 2015 5,414,708 2,780,000 WMS Industries, Inc. cv. deb., 5 3/4s, 2002 2,512,425 ---------------------- 49,346,996 Electronics and Electrical Equipment (1.8%) - ------------------------------------------------------------------------------------------------------------ 3,000,000 Magnetek, Inc. cv. deb., 8s, 2001 2,790,000 3,115,000 Motorola Inc. cv. sub. deb. LYON, zero%, 2013 2,492,000 4,745,000 Richardson Electronics Ltd. cv. sub. deb., 7 1/4s, 2006 3,920,556 2,500,000 Siemens Capital Corp. Guaranty, 8s, 2002 3,331,250 3,285,000 Solectron Corp. cv. sub. LYON, zero%, 2012 2,759,400 ---------------------- 15,293,206 CONVERTIBLE BONDS AND NOTES PRINCIPAL AMOUNT VALUE Electronic Components and Instruments (0.6%) - ------------------------------------------------------------------------------------------------------------ $ 1,410,000 Thermo Instrument Systems Inc. cv. deb., 3 3/4s, 2000 $ 2,030,400 1,700,000 Thermo Optek Corp. 144A cv. bonds, 5s, 2000 1,751,000 1,295,000 Thermo Quest Corp. cv. co. guaranty, 5s, 2000 1,346,800 ---------------------- 5,128,200 Environmental Control (1.4%) - ------------------------------------------------------------------------------------------------------------ 2,300,000 Enclean, Inc. cv. sub. deb., 7 1/2s, 2001 2,400,383 2,500,000 OHM Corp. cv. sub. deb., 8s, 2006 2,281,250 1,460,000 U.S. Filter Corp. 144A cv. sub. notes, 6s, 2005 1,540,300 6,378,000 WMX Technologies, Inc. cv. sub. notes, 2s, 2005 5,325,630 ---------------------- 11,547,563 Food (0.5%) - ------------------------------------------------------------------------------------------------------------ 3,500,000 Chiquita Brands International cv. deb., 7s, 2001 3,150,000 1,000,000 Chiquita Brands International, Inc. 144A cv. sub. deb., 7s, 2001 900,000 ---------------------- 4,050,000 Food and Beverages (0.5%) - ------------------------------------------------------------------------------------------------------------ 4,000,000 Grand Metropolitan PLC cv. unsub. deb., 6 1/2s, 2000 (United Kingdom) 4,520,000 Health Care (2.4%) - ------------------------------------------------------------------------------------------------------------ 4,600,000 Cabot Medical Corp. cv. deb., 7 1/2s, 1999 4,628,750 2,740,000 Careline, Inc. cv. sr. sub. notes, 8s, 2001 2,966,050 8,205,000 Quantum Health Resources, Inc. cv. sub. deb., 4 3/4s, 2000 6,379,388 6,500,000 Theratx Inc. cv. sub. notes, 8s, 2002 6,045,000 ---------------------- 20,019,188 Hospital Management and Medical Services (1.2%) - ------------------------------------------------------------------------------------------------------------ 4,500,000 Integrated Health Services cv. sr. sub. deb, 5 3/4s, 2001 4,297,500 3,270,000 Integrated Health Services, Inc. cv. sub. deb., 6s, 2003 3,204,600 3,185,000 Sun Healthcare Group Inc. 144A cv. sub., 6s, 2004 2,619,663 ---------------------- 10,121,763 Insurance and Finance (2.7%) - ------------------------------------------------------------------------------------------------------------ 3,800,000 Aegon NV 144A cv. deb., 4 3/4s, 2004 5,187,000 5,000,000 NAC Re Corp. cv. deb., 5 1/4s, 2002 4,950,000 5,000,000 Old Republic International Corp. cv. sub. deb., 5 3/4s, 2002 5,612,500 1,990,000 Trenwick Group, Inc. cv. deb., 6s, 1999 2,116,863 8,000,000 USF&G Corp. cv. sub. notes, zero %, 2009 4,540,000 ---------------------- 22,406,363 Medical Supplies (0.2%) - ------------------------------------------------------------------------------------------------------------ 1,250,000 Benson Eyecare Corp. cv. sub. notes, 8s, 2001 1,562,500 CONVERTIBLE BONDS AND NOTES PRINCIPAL AMOUNT VALUE Metals and Mining (0.8%) - ------------------------------------------------------------------------------------------------------------ $ 3,379,500 Quanex Corp. cv. sub. deb., 6.88s, 2007 $ 3,100,691 3,360,000 Teck Corp. cv. sub. deb., 3 3/4s, 2006 3,225,600 ---------------------- 6,326,291 Oil and Gas (2.0%) - ------------------------------------------------------------------------------------------------------------ 4,000,000 Apache Corp. 144A cv. sub. deb., 6s, 2002 4,255,000 2,900,000 Cross Timbers Oil Co. cv. deb., 5 1/4s, 2003 2,486,750 2,000,000 Pennzoil Co. cv. sub. deb., 6 1/2s, 2003 2,320,000 2,295,000 Pogo Producing Co. sub. notes, 5 1/2s, 2004 2,444,175 2,500,000 Seacor Holdings. cv. sub. deb., 6s, 2003 2,575,000 3,500,000 Wainoco Oil Corp. cv. sub. deb., 7 3/4s, 2014 2,887,500 ---------------------- 16,968,425 Oil and Gas Pipelines (0.7%) - ------------- -------------------------------------------------------------------------------------------- 5,000,000 SFP Pipeline Holdings Inc. cv. variable rate exch. deb., 11.16s, 2010(PIK) 6,200,000 Pharmaceuticals (1.5%) - ------------- -------------------------------------------------------------------------------------------- 7,115,000 Alza Corp. cv. sub. notes LYON, zero%, 2014 2,668,125 12,630,000 Roche Holdings, Inc. cv. unsub. deb. LYON, zero%, 2010 (Switzerland) 5,241,450 5,425,000 Sandoz Capital Ltd. 144A cv. company guaranty, 2s, 2002 (British Virgin Islands) 4,760,438 ---------------------- 12,670,013 REIT's (1.5%) - ------------- -------------------------------------------------------------------------------------------- 1,850,000 Alexander Haagen Properties cv. sub. deb., Ser. A, 7 1/2s, 2001 1,507,750 3,080,000 Camden Property Trust cv. sub. deb., 7.33s, 2001 2,899,050 6,400,000 Liberty Property Trust cv. sub. deb., 8s, 2001 6,560,000 2,250,000 Malan Realty Investors cv. sub. notes, 9 1/2s, 2004 1,878,750 ---------------------- 12,845,550 Restaurants (0.2%) - ------------- -------------------------------------------------------------------------------------------- 2,800,000 Flagstar Corp. cv. jr. sub., 10s, 2014 1,788,500 Retail (4.0%) - ------------- -------------------------------------------------------------------------------------------- 9,610,000 Baker (J.) Inc. cv. deb., 7s, 2002 7,303,600 10,650,000 Federated Department Stores cv. deb., 9.72s, 2004 10,595,992 3,750,000 Food Lion, Inc. 144A cv. deb., 5s, 2003 3,637,500 3,450,000 Ingles Markets, Inc. cv. sub. deb., 10s, 2008 3,506,063 2,375,000 Lowes Companies Inc. cv. deb., 3s, 2003 2,570,938 3,965,000 Michaels Stores, Inc. cv. sub. notes stepped-coupon, 4 3/4s, (6 3/4s, 1/15/96), 2003(STP) 3,137,306 4,500,000 Office Depot Inc. cv. notes LYON, zero%, 2008 2,964,375 ---------------------- 33,715,774 CONVERTIBLE BONDS AND NOTES PRINCIPAL AMOUNT VALUE Telecommunication (2.3%) - ------------------------------------------------------------------------------------------------------------ $ 10,500,000 Cellular Communications, Inc. 144A cv. sub. deb. zero % 1999 $ 8,662,500 17,000,000 Rogers Communications cv. deb., 2s, 2005 (Canada) 8,606,250 6,000,000 U S Cellular Corp. cv. notes LYON, zero%, 2015 2,130,000 ---------------------- 19,398,750 Transportation (0.6%) - ------------------------------------------------------------------------------------------------------------ 3,395,000 Alaska Air Group cv. deb., 6 1/2s, 2005 3,199,788 1,500,000 Hudson General Corp. cv. sub. deb., 7s, 2011 1,387,500 ---------------------- 4,587,288 ---------------------- Total Convertible Bonds and Notes $ 362,107,039 (cost $345,482,280) COMMON STOCKS (26.8%)* NUMBER OF SHARES VALUE Aerospace and Defense (0.4%) - ------------------------------------------------------------------------------------------------------------ 35,000 Lockheed Martin Corp. $ 2,384,375 20,000 Northrop Grumman Corp. 1,145,000 ---------------------- 3,529,375 Automotive (0.4%) - ------------------------------------------------------------------------------------------------------------ 54,535 Chrysler Corp. 2,815,369 20,000 General Motors Corp. 875,000 ---------------------- 3,690,369 Banks (2.1%) - ------------------------------------------------------------------------------------------------------------ 40,000 BankAmerica Corp. 2,300,000 50,000 Comerica, Inc. 1,681,250 40,000 CoreStates Financial Corp. 1,455,000 25,000 First Bank System, Inc. 1,243,750 110,000 Fleet Financial Group, Inc. 4,262,500 44,500 Keycorp 1,501,875 27,000 Lincoln National Corp. 1,204,875 60,000 National City Corp. 1,852,500 80,000 PNC Bank Corp. 2,100,000 ---------------------- 17,601,750 Basic Industrial Products (0.8%) - ------------------------------------------------------------------------------------------------------------ 65,000 Ball Corp. 1,795,625 13,000 Deere (John) & Co. 1,161,875 50,000 General Signal Corp. 1,593,750 60,000 Harnischfeger Industries, Inc. 1,890,000 ---------------------- 6,441,250 Business Services (0.9%) - ------------------------------------------------------------------------------------------------------------ 40,000 Dun & Bradstreet Corp. 2,390,000 20,000 IBM Corp. 1,945,000 25,000 Xerox Corp. 3,243,750 ---------------------- 7,578,750 COMMON STOCKS NUMBER OF SHARES VALUE Chemicals (1.1%) - ------------------------------------------------------------------------------------------------------------ 20,000 Dow Chemical Co. $ 1,372,500 35,000 du Pont (E.I.) de Nemours & Co., Ltd. 2,183,125 20,000 Grace (W.R.) & Co. 1,115,000 34,175 Lubrizol Corp. 982,531 35,000 Union Carbide Corp. 1,325,625 65,000 Witco Chemical Corp. 1,836,250 ---------------------- 8,815,031 Conglomerates (1.4%) - ------------------------------------------------------------------------------------------------------------ 21,000 ITT Corp. 2,572,500 25,000 Johnson Controls Inc. 1,456,250 60,000 Ogden Corp. 1,365,000 38,000 TRW, Inc. 2,498,500 40,000 Tenneco Inc. 1,755,000 25,000 United Technologies Corp. 2,218,750 ---------------------- 11,866,000 Consumer Non Durables (2.1%) - ------------------------------------------------------------------------------------------------------------ 50,000 American Brands, Inc. 2,143,750 40,600 Avon Products, Inc. 2,887,675 20,000 Clorox Co. 1,435,000 34,000 Kimberly-Clark Corp. 2,469,250 80,000 Philip Morris Cos., Inc. 6,760,000 80,000 Universal Corp. 1,680,000 ---------------------- 17,375,675 Electronics and Electrical Equipment (0.7%) - ------------------------------------------------------------------------------------------------------------ 40,000 Eaton Corp. 2,050,000 25,000 Emerson Electric Co. 1,781,250 33,000 General Electric Co. 2,087,250 ---------------------- 5,918,500 Environmental Control (0.3%) - ------------------------------------------------------------------------------------------------------------ 100,000 WMX Technologies, Inc. 2,812,500 Food and Beverages (1.5%) - ------------------------------------------------------------------------------------------------------------ 29,100 Anheuser-Busch Cos., Inc. 1,920,600 50,000 Brown Forman Corp. 1,906,250 62,328 ConAgra, Inc. 2,407,410 50,000 Heinz (H.J.) Co. 2,325,000 80,000 Sara Lee Corp. 2,350,000 60,000 Whitman Corporation 1,275,000 ---------------------- 12,184,260 Forest Products (0.3%) - ------------------------------------------------------------------------------------------------------------ 25,000 Potlatch Corp. 1,053,125 40,000 Weyerhaeuser Co. 1,765,000 ---------------------- 2,818,125 COMMON STOCKS NUMBER OF SHARES VALUE Health Care (0.4%) - ------------------------------------------------------------------------------------------------------------ 90,000 Baxter International, Inc. $ 3,476,250 Insurance and Finance (2.3%) - ------------------------------------------------------------------------------------------------------------ 40,000 AON Corp. 1,645,000 40,000 Aetna Life & Casualty Co. 2,815,000 25,000 American Express Co. 1,015,625 47,000 Bankers Trust New York Corp. 2,996,250 45,000 Beneficial Corp. 2,205,000 18,000 CIGNA Corp. 1,784,250 17,000 Federal National Mortgage Association 1,782,875 52,000 Morgan (J.P.) & Co., Inc. 4,010,500 8,200 SAFECO Corp. 526,338 ---------------------- 18,780,838 Metals and Mining (0.6%) - ------------------------------------------------------------------------------------------------------------ 8,335 Freeport McMoran, Inc. 311,508 51,250 Freeport-McMoRan Copper & Gold Co., Inc. Class A 1,172,344 155,106 Freeport-McMoRan Copper & Gold Co., Inc. Class B 3,528,662 ---------------------- 5,012,514 Oil and Gas (2.9%) - ------------------------------------------------------------------------------------------------------------ 42,857 Amoco Corp. 2,737,491 15,000 Atlantic Richfield Co. 1,601,250 25,000 British Petroleum PLC ADR (United Kingdom) 2,206,250 40,000 Enron Corp. 1,375,000 45,000 Exxon Corp. 3,436,875 100,000 Occidental Petroleum Corp. 2,150,000 35,000 Panhandle Eastern Corp. 883,750 35,000 Phillips Petroleum Co. 1,128,750 30,000 Questar Corp. 903,750 25,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 3,071,875 40,000 Sonat, Inc. 1,150,000 30,000 Texaco, Inc. 2,043,750 50,000 Ultramar Corp. 1,218,750 ---------------------- 23,907,491 Pharmaceuticals (1.7%) - ------------------------------------------------------------------------------------------------------------ 30,000 American Home Products Corp. 2,658,750 40,000 Bristol-Myers Squibb Co. 3,050,000 12,000 Lilly (Eli) & Co. 1,159,500 35,000 Smithkline Beecham PLC ADR (United Kingdom) 1,815,625 60,000 Upjohn Co. 3,045,000 30,000 Warner-Lambert Co. 2,553,750 ---------------------- 14,282,625 Photography (1.3%) - ------------------------------------------------------------------------------------------------------------ 131,844 Eastman Kodak Co. 8,256,731 50,000 Polaroid Corp. 2,137,500 ---------------------- 10,394,231 COMMON STOCKS NUMBER OF SHARES VALUE Publishing (0.3%) - ------------------------------------------------------------------------------------------------------------ 25,000 McGraw-Hill, Inc. $ 2,046,875 Real Estate (0.5%) - ------------------------------------------------------------------------------------------------------------ 100,000 LTC Properties, Inc. 1,450,000 55,000 National Health Investors, Inc. 1,650,000 100,000 South West Property Trust, Inc. 1,212,500 ---------------------- 4,312,500 Retail (1.5%) - ------------------------------------------------------------------------------------------------------------ 27,000 Dayton Hudson Corporation 1,856,250 200,000 K mart Corp. 1,625,000 50,000 May Department Stores Co. 1,962,500 50,000 Melville Corporation 1,600,000 40,000 Penney (J.C.) Co., Inc. 1,685,000 65,000 Rite Aid Corp. 1,755,000 50,000 Sears, Roebuck & Co. 1,700,000 ---------------------- 12,183,750 Transportation (0.7%) - ------------------------------------------------------------------------------------------------------------ 25,000 Conrail, Inc. 1,718,750 15,000 Norfolk Southern Corp. 1,158,750 80,000 Ryder System, Inc. 1,930,000 20,000 Union Pacific Corp. 1,307,500 ---------------------- 6,115,000 Utilities (2.6%) - ------------------------------------------------------------------------------------------------------------ 25,000 Airtouch Communications, Inc.(NON) 712,500 38,000 American Telephone & Telegraph Co. 2,432,000 26,900 Bell Atlantic Corp. 1,711,513 50,000 Central Maine Power Co. 693,750 35,805 Cinergy Corp. 1,015,967 20,000 Houston Industries, Inc. 927,500 53,000 Northeast Utilities Co. 1,311,750 50,000 NYNEX Corp. 2,350,000 45,000 Public Service Co. of Colorado 1,535,625 40,000 Public Service Enterprise Group, Inc. 1,175,000 30,000 SBC Communications, Inc. 1,676,250 60,000 SCE Corp. 1,020,000 60,000 Sprint Corp. 2,310,000 40,000 Texas Utilities Electric Co. 1,470,000 35,000 US West, Inc. 1,666,875 ---------------------- 22,008,730 ---------------------- Total Common Stocks (cost $192,124,569) $ 223,152,389 CONVERTIBLE PREFERRED STOCKS (21.8%)* NUMBER OF SHARES VALUE Aerospace and Defense (0.4%) - ------------------------------------------------------------------------------------------------------------ 70,000 Kaman Corp., $3.25 cv. pfd. $ 3,342,500 CONVERTIBLE PREFERRED STOCKS NUMBER OF SHARES VALUE Automotive (1.6%) - ------------------------------------------------------------------------------------------------------------ 64,875 Federal Mogul Corp., $3.875 cv. pfd. $ 3,665,438 62,500 Ford Motor Co., $4.2 dep. shs. cv. pfd., Ser. A 5,875,000 55,000 General Motor Corp., $3.25 dep. shs. cv. pfd. 3,685,000 ---------------------- 13,225,438 Banks (3.4%) - ------------------------------------------------------------------------------------------------------------ 17,500 Citicorp, $5.375 cv. pfd., Ser. 13 3,110,625 29,000 First Bank System, Inc., $3.5625 cv. pfd., Ser. 91-A 2,490,375 54,500 First Chicago Corp., $2.875 cv. pfd., Ser. B 3,515,250 65,000 National City Corp., $4 cv. pfd. 4,793,750 19,025 Peoples Bank, $4.25 cv. pfd., Ser. A 2,263,975 40,000 RCSB Financial, Inc., $1.75 cv. pfd. 1,410,000 45,000 Roosevelt Financial Group, $3.25 cv. pfd. 2,778,750 76,200 Southern National Corp., $1.6875 cv. pfd., Ser. A 2,914,650 29,800 Sovereign Bancorp Inc., $3.13 cv. pfd. 1,687,425 78,350 Union Planters Corp., $2 cv. pfd., Ser. E 2,977,300 ---------------------- 27,942,100 Building and Construction (0.3%) - ------------------------------------------------------------------------------------------------------------ 71,450 Southdown, Inc., $2.875 cv. pfd. 2,715,100 Business Equipment (0.3%) - ------------------------------------------------------------------------------------------------------------ 40,000 Storage Technology Corp., $3.25 cv. pfd. 2,300,000 Business Equipment and Services (0.3%) - ------------------------------------------------------------------------------------------------------------ 32,000 Alco Standard Corp., $5.03 cv. pfd. 2,736,000 Conglomerates (0.6%) - ------------------------------------------------------------------------------------------------------------ 115,000 Corning, Inc., $3 cv. pfd. 5,175,000 Consumer Non Durables (0.8%) - ------------------------------------------------------------------------------------------------------------ 94,475 Fieldcrest Cannon $3 dep. cv. pfd., Ser. A 4,345,850 332,500 RJR Nabisco Holdings $0.6012 sr. cv. pfd., Ser. C 2,078,125 ---------------------- 6,423,975 Consumer Services (0.5%) - ------------------------------------------------------------------------------------------------------------ 64,500 Service Corp.International $6.25 cv. pfd. 4,547,250 Electronics and Electrical Equipment (0.3%) - ------------------------------------------------------------------------------------------------------------ 196,500 Westinghouse Electric Corp. 144A, $1.3 cv. pfd., Ser. C 2,775,563 Energy Related (0.4%) - ------------------------------------------------------------------------------------------------------------ 51,750 Diamond Shamrock, Inc. 144A, $2.5 cv. pfd. 2,930,344 8,000 Maxus Energy Corp., $4 cv. pfd. 348,000 ---------------------- 3,278,344 CONVERTIBLE PREFERRED STOCKS NUMBER OF SHARES VALUE Entertainment (0.2%) - ------------------------------------------------------------------------------------------------------------ 114,000 Bally Entertainment Corp., $8.5 cv. pfd. $ 1,268,250 Food (0.7%) - ------------------------------------------------------------------------------------------------------------ 120,000 Chiquita Brands International Inc., $5.75 cv. pfd. 6,030,000 Health Care (0.5%) - ------------------------------------------------------------------------------------------------------------ 80,000 Beverly Enterprises Inc., $2.75 cv. pfd. 4,080,000 Health Maintenance Organizations (0.4%) - ------------------------------------------------------------------------------------------------------------ 145,000 FHP International Corp., $1.25 cv. pfd., Ser. A 3,443,750 Insurance and Finance (2.2%) - ------------------------------------------------------------------------------------------------------------ 66,800 Allstate Corp., $2.3 cv. pfd. 2,905,800 109,000 American General Delaware Corp., $3 cv. pfd. 5,640,750 56,825 Penncorp Financial Group Inc., $6.75 cv. pfd. 3,423,706 55,600 St Paul Capital LLC, $3 cv. pfd. 3,002,400 73,000 USF&G Corp., $4.10 cv. pfd, Ser. A 3,650,000 ---------------------- 18,622,656 Metals and Mining (2.2%) - ------------------------------------------------------------------------------------------------------------ 30,166 Alumax, Inc., $4 cv. pfd., Ser. A 3,710,418 64,225 Amax Gold, Inc., $3.75 cv. pfd., Ser. B 3,034,631 18,820 Armco, Inc., $3.625 cv. pfd. 962,173 200,000 Freeport-McMoRan Copper Co., Inc., stepped-coupon $1.25 ($1.75, 8/1/96) (STP) 4,775,000 99,900 Pittston Mineral Corp., $6.25 cv. pfd. 3,496,500 60,000 WHX Corp., $3.25 cv. pfd., Ser. A 2,647,500 ---------------------- 18,626,222 Oil and Gas (3.9%) - ------------------------------------------------------------------------------------------------------------ 57,500 Ashland, Inc., $3.125 cv. pfd. 3,148,125 230,681 Atlantic Ritchfield Co., $2.23 cv. pfd. 5,161,487 60,000 Lomak Petroleum, Inc. 144A $4.0625 cv. pfd. 1,500,000 40,085 McDermott International, Inc. 144A, $2.875 cum. cv. pfd., Ser. C 1,458,092 116,800 Occidental Petroleum Corp. 144A, $3.875 cv. pfd. 6,497,000 95,000 Parker & Parsley Petro. 144A, $3.125 cv. pfd. 4,132,500 75,520 Santa Fe Energy Resources, Inc., $1.4 cv. pfd. 1,368,800 56,825 Tejas Gas Corp., $2.65 cv. pfd. 2,613,950 82,000 Unocal Corp. 144A, $3.5 cv. pfd. 4,243,500 71,000 Western Gas Resources Inc., $2.625 cv. pfd. 2,547,125 ---------------------- 32,670,579 Oil Service (0.6%) - ------------------------------------------------------------------------------------------------------------ 65,000 Grant Geophysical, Inc., $2.4375 cv. pfd. 991,250 85,500 Noble Drilling Corp., $1.5 cv. pfd. 2,126,813 56,300 Reading & Bates Corp., $1.625 cv. pfd. 1,956,425 ---------------------- 5,074,488 CONVERTIBLE PREFERRED STOCKS NUMBER OF SHARES VALUE REIT's (1.4%) - ------------------------------------------------------------------------------------------------------------ 63,500 Oasis Residential, Inc., $2.25 cv. pfd., Ser. A $ 1,603,375 195,000 Security Capital Pacific Trust, $1.75 cv. pfd., Ser. A 4,631,250 67,950 Rouse Co., $3.25 cv. pfd., Ser. A 3,660,806 74,490 Tanger Factory Outlet Centers, $1.575 cv. pfd. 1,564,290 ---------------------- 11,459,721 Transportation (0.5%) - ------------------------------------------------------------------------------------------------------------ 31,500 Burlington Northern Santa Fe, $3.125 cv. pfd., Ser. A 2,803,500 20,000 Sea Containers Ltd., $4 cv. pfd. 962,500 ---------------------- 3,766,000 Utilities (0.3%) - ------------------------------------------------------------------------------------------------------------ 45,000 Philippine Long Distance Telephone Co., $7 cv. pfd., Ser. III 2,385,000 Total Convertible Preferred Stock (cost $178,855,604) 181,887,936 SHORT-TERM INVESTMENTS (6.7%)* PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ $ 10,000,000 Federal Home Loan Bank 5.6s, January 22, 1996 $9,873,356 43,373,000 Interest in $357,916,000 joint repurchase agreement dated October 31, 1995 with Lehman Brothers Inc., due November 1, 1995 with respect to various U.S. Treasury obligations - maturity value of $43,380,060 for an effective yield of 5.86%. 43,380,060 3,000,000 Penney (J.C.) Funding Corp. 5.74s, November 16, 1995 2,992,825 ---------------------- Total Short-Term Investments (cost $56,246,241) $ 56,246,241 ---------------------- Total Investments (cost $772,708,694)*** $ 823,393,605 - ------------------------------------------------------------------------------------------------------------ (a) Percentages indicated are based on net assets of $833,707,949. (NON) Non-income producing security. (STP) The interest rate shown parenthetically represents the next interest rate to be paid and the date the fund will begin accruing this rate. (PIK) Interest may be received in cash or additional securities at the discretion of the issuer. (b) The aggregate identified cost for federal income tax purposes is $772,653,805, resulting in gross unrealized appreciation and depreciation of $82,864,062 and $32,124,262 respectively, or net unrealized appreciation of $50,739,800. ADR or ADS after the name of a foreign holding stands for American Depository Receipt and American Depository Shares, respectively, representing foreign securities on deposit with a domestic custodian bank. 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. The accompanying notes are an integral part of these financial statements.
Putnam Convertible Income-Growth Trust Statement of assets and liabilities October 31, 1995 Assets - -------------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $772,708,694) (Note 1) $ 823,393,605 - -------------------------------------------------------------------------------------------------------- Cash 302,239 - -------------------------------------------------------------------------------------------------------- Dividends, interest and other receivables 6,689,450 - -------------------------------------------------------------------------------------------------------- Receivable for securities sold 25,221,879 - -------------------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 847,944 - -------------------------------------------------------------------------------------------------------- Total assets 856,455,117 Liabilities - -------------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 1,057,461 - -------------------------------------------------------------------------------------------------------- Payable for securities purchased 19,901,932 - -------------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 1,296,500 - -------------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 1,263 - -------------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 553 - -------------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 182,603 - -------------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 228,641 - -------------------------------------------------------------------------------------------------------- Other accrued expenses 78,215 - -------------------------------------------------------------------------------------------------------- Total liabilities 22,747,168 - -------------------------------------------------------------------------------------------------------- Net assets $ 833,707,949 Represented by - -------------------------------------------------------------------------------------------------------- Paid-in-capital (Notes 1 and 4) $ 741,406,643 - -------------------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 109,501,119 - -------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments (Notes 1 and 3) 30,666,277 - -------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 50,684,910 - -------------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $ 932,258,949 Computation of net asset value and offering price - -------------------------------------------------------------------------------------------------------- Net asset value and redemption price of class A shares ($756,645,442 divided by 38,971,272 shares) $19.42 - -------------------------------------------------------------------------------------------------------- Offering price per Class A share (100/94.25 of $19.42)* $20.60 - -------------------------------------------------------------------------------------------------------- Net asset value and offering price of class B shares ($75,309,141 divided by 3,902,809 shares)** $19.30 - -------------------------------------------------------------------------------------------------------- Net asset value and redemption price of class M shares ($1,753,366 divided by 90,543 shares) $19.37 - -------------------------------------------------------------------------------------------------------- Offering price per Class M share (100/96.50 of $19.37)* $20.07 - -------------------------------------------------------------------------------------------------------- *On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
Statement of operations Year Ended October 31, 1995 Investment Income: - ----------------------------------------------------------------------------------- Interest $ 24,460,302 - ----------------------------------------------------------------------------------- Dividends (net of foreign tax of $52,164) 19,885,629 - ----------------------------------------------------------------------------------- Total investment income 44,345,931 Expenses: - ----------------------------------------------------------------------------------- Compensation of Manager (Note 2) 5,131,646 - ----------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 1,338,469 - ----------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 24,151 - ----------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,805,368 - ----------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 506,776 - ----------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 4,147 - ----------------------------------------------------------------------------------- Administrative services (Note 2) 15,476 - ----------------------------------------------------------------------------------- Auditing 26,031 - ----------------------------------------------------------------------------------- Reports to shareholders 85,976 - ----------------------------------------------------------------------------------- Legal 22,283 - ----------------------------------------------------------------------------------- Postage 117,761 - ----------------------------------------------------------------------------------- Registration Fees 5,763 - ----------------------------------------------------------------------------------- Other expenses 257,124 - ----------------------------------------------------------------------------------- Total expenses 9,340,971 - ----------------------------------------------------------------------------------- Expense reduction (Note 2) (518,578) - ----------------------------------------------------------------------------------- Net expense 8,822,393 - ----------------------------------------------------------------------------------- Net investment income 35,523,538 - ----------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 31,193,122 - ----------------------------------------------------------------------------------- Net unrealized appreciation of investments during the year 37,340,783 - ----------------------------------------------------------------------------------- Net gain on investments 68,533,905 - ----------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 104,057,443 - ----------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Year ended October 31 -------------------------------------- 1995 1994 - ------------------------------------------------------------------------------------------------------------------- Increase in net assets - ------------------------------------------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------------------------------------------- Net investment income $ 35,523,538 $ 29,762,366 - ------------------------------------------------------------------------------------------------------------------- Net realized gain on investments 31,193,122 46,186,880 - ------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation(depreciation) of investments 37,340,783 (63,310,458) - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 104,057,443 12,638,788 - ------------------------------------------------------------------------------------------------------------------- Distributions: - ------------------------------------------------------------------------------------------------------------------- From net investment income - ------------------------------------------------------------------------------------------------------------------- Class A (36,798,209) (26,305,107) - ------------------------------------------------------------------------------------------------------------------- Class B (2,264,082) (686,066) - ------------------------------------------------------------------------------------------------------------------- Class M (28,669) -- - ------------------------------------------------------------------------------------------------------------------- From net realized gain on investments - ------------------------------------------------------------------------------------------------------------------- Class A (42,106,385) (31,369,489) - ------------------------------------------------------------------------------------------------------------------- Class B (2,126,191) (510,511) - ------------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 83,596,336 63,202,221 - ------------------------------------------------------------------------------------------------------------------- Total increase in net assets 104,330,243 16,969,836 - ------------------------------------------------------------------------------------------------------------------- Net Assets - ------------------------------------------------------------------------------------------------------------------- Beginning of year 729,377,706 712,407,870 - ------------------------------------------------------------------------------------------------------------------- End of year (including undistributed net investment income of $10,950,119 and $14,316,064, respectively) $ 833,707,949 $ 729,377,706 - ------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period)
March 13, 1995 July 15,1993 (commencement commencement of operations ) to operations) to October 31 Year ended October 31 October 31 1995 1995 1994 1993 Class M Class B - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $17.79 $19.00 $20.35 $19.53 - ------------------------------------------------------------------------------------------------------------------- Investment operations - ------------------------------------------------------------------------------------------------------------------- Net investment income .64 .69 .74 .23 - ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 1.64 1.61 (.55) .82 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.28 2.30 .19 1.05 - ------------------------------------------------------------------------------------------------------------------- Less distributions - ------------------------------------------------------------------------------------------------------------------- From net investment income (.70) (.84) (.66) (.23) - ------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (1.16) (.88) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions (.70) (2.00) (1.54) (.23) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $19.37 $19.30 $19.00 $20.35 - ------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%) (a) 12.99(b) 13.54 1.00 5.43(b) - ------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,753 $75,309 $31,432 $4,439 - ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) 1.04(b) 1.91 1.71 .52(b) - ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.89(b) 3.92 3.58 .91(b) - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 69.52 69.52 48.37 66.63 - ------------------------------------------------------------------------------------------------------------------- Financial highlights (continued) (For a share outstanding throughout the period) Year ended October 31 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $19.09 $20.38 $17.60 $15.78 $12.12 - ------------------------------------------------------------------------------------------------------------------------------- Investment operations - ------------------------------------------------------------------------------------------------------------------------------- Net investment income .85 .81 .87 .89 .88 - ------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 1.60 (.46) 2.87 1.89 3.74 - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.45 .35 3.74 2.78 4.62 - ------------------------------------------------------------------------------------------------------------------------------- Less distributions - ------------------------------------------------------------------------------------------------------------------------------- From net investment income (.96) (.74) (.96) (.96) (.96) - ------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (1.16) (.90) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Total distributions (2.12) (1.64) (.96) (.96) (.96) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $19.42 $19.09 $20.38 $17.60 $15.78 - ------------------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%) (a) 14.38 1.84 21.74 18.16 39.05 - ------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $756,645 $697,946 $707,969 $599,866 $570,752 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) 1.16 .96 .96 1.11 1.15 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 4.64 4.16 4.55 5.32 6.07 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 69.52 48.37 66.63 59.89 78.72 - ------------------------------------------------------------------------------------------------------------------------------- (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Not annualized. (c) The ratio of expenses to average net assets for the period ended October 31, 1995 includes amounts paid through brokerage service and expense offset arrangements. Prior period ratios exclude these amounts (See Note 2)
Notes to financial statements October 31, 1995 Note 1 Significant accounting policies The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks current income and capital appreciation by investing primarily in bonds and preferred stocks convertible into common stock with capital preservation as a secondary objective. The fund offers class A, class B and class M shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end sales charge, but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class M shares are sold with a maximum front-end sales charge of 3.50% and pay an ongoing distribution fee that is lower than class B shares and higher than class A shares. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price, except that U.S. government obligations are stated at the mean between the last reported bid and asked prices. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair value following procedures approved by the Trustees. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. Discount on zero coupon bonds, stepped-coupon bonds, and payment in kind bonds is accreted according to the effective yield method. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and 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 gains and losses on foreign currency transactions 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. F) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income or capital gains or unrealized appreciation on securities held and for excise tax on income and capital gains. G) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include treatment of market discount and non-taxable dividends. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended October 31, 1995, the fund reclassified $201,478 to increase undistributed net investment income and $73,665 to decrease paid-in-capital, with a decrease to accumulated net realized gains of $127,813. The calculation of net investment income per share in the financial highlights table excludes these adjustments. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Investment Management, Inc., the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., for management and investment advisory services is paid quarterly based on the average net assets of the fund for the quarter. Such fee is based on the following annual rates: 0.65% of the first $500 million of average net assets, 0.55% of the next $500 million, 0.50% of the next $500 million and 0.45% of any amount over $1.5 billion, subject, under current law, to reduction, in any year to the extent that expenses (exclusive of brokerage, interest and taxes) of the fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million and 1.5% of any amount over $100 million and by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of the Manager on the fund's portfolio transactions. The fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Trustees of the fund receive an annual Trustee's fee of $1,530 and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. During the year ended October 31, 1995, the fund adopted a Trustee Fee Deferral Plan (the "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 in the fund and are invested in the fund or in other Putnam funds until distribution in accordance with the Plan. Custodial functions for the funds assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the year ended October 31, 1995, fund expenses were reduced by $518,578 under expense offset and brokerage service arrangements with PFTC. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the offset arrangement in an income-producing asset if it had not entered into such arrangements. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets attributable to class A, class B and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to class A, class B and class M shares, respectively. For the year ended October 31, 1995, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $195,008 and $4,391 from the sale of class A and class M shares, respectively and received $82,202 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the year ended October 31, 1995, Putnam Mutual Funds Corp., acting as underwriter received $1,008 on class A redemptions. Note 3 Purchases and sales of securities During the year ended October 31, 1995, purchases and sales of investment securities other than U.S. government obligations and short- term investments aggregated $535,616,857 and $497,333,740, respectively. There were no purchases or sales of U.S. government obligations during the year. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At October 31, 1995, there was an unlimited number of shares of beneficial interest authorized. Year ended October 31, 1995 Class A Shares Amount - ---------------------------------------------------- Shares sold 4,766,671 $87,884,467 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 3,881,585 68,270,063 - ---------------------------------------------------- 8,648,256 156,154,530 Shares repurchased (6,229,598) (116,013,292) - ---------------------------------------------------- Net increase 2,418,658 $40,141,238 - ---------------------------------------------------- Year ended October 31, 1994 Class A Shares Amount - ---------------------------------------------------- Shares sold 4,188,443 $81,687,225 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,532,365 48,925,153 - ---------------------------------------------------- 6,720,808 130,612,378 Shares repurchased (4,900,211) (95,396,464) - ---------------------------------------------------- Net increase 1,820,597 $35,215,914 - ---------------------------------------------------- Year ended October 31, 1995 Class B Shares Amount - ---------------------------------------------------- Shares sold 2,743,660 $51,118,308 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 188,683 3,340,889 - ---------------------------------------------------- 2,932,343 54,459,197 Shares repurchased (683,424) (12,747,189) - ---------------------------------------------------- Net increase 2,248,919 $41,712,008 - ---------------------------------------------------- Year ended October 31, 1994 Class B Shares Amount - ---------------------------------------------------- Shares sold 1,817,330 $35,252,070 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 46,690 896,897 - ---------------------------------------------------- 1,864,020 36,148,967 Shares repurchased (428,280) (8,162,660) - ---------------------------------------------------- Net increase 1,435,740 $27,986,307 - ---------------------------------------------------- March 13, 1995 (commencement of operations) to October 31, 1995 Class M Shares Amount - ---------------------------------------------------- Shares sold 115,560 $2,231,842 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,279 24,919 - ---------------------------------------------------- 116,839 2,256,761 - ---------------------------------------------------- Shares repurchased (26,296) (513,671) - ---------------------------------------------------- Net increase 90,543 $1,743,090 - ---------------------------------------------------- Our commitment to quality service * CHOOSE AWARD-WINNING SERVICE. Putnam Investor Services has won the DALBAR Quality Tested Service Seal for the past five years. In 1994, over 80,000 tests of 55 shareholder service components demonstrated that Putnam outperformed the industry standard in every category. * HELP YOUR INVESTMENT GROW. Set up a systematic program for investing with as little as $25 a month from a Putnam money market fund or from your checking or savings account.* * SWITCH FUNDS EASILY. You can move money from one account to another with the same class of shares without a service charge. (This privilege is subject to change or termination.) * ACCESS YOUR MONEY QUICKLY. You can get checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. For details about any of these or other services, contact your financial advisor or call the toll-free number shown below and speak with a helpful Putnam representative. * To make an additional investment in this or any other Putnam fund, contact your financial advisor or call our toll-free number: 1-800-225- 1581. *Regular investing of course, does not guarantee a profit or protect against a loss in a declining market. Federal tax information (Unaudited) Pursuant to Section 852 of the Internal Revenue Code, the fund hereby designates $0.87 per share (or if different, the amount necessary to offset net capital gain earned by the fund) for all share classes as capital gain dividends for its taxable year ended October 31, 1995. The fund has designated 41.66% of the distributions from net investment income as qualifying for the dividends received deductions for corporations. The Form 1099 you receive in January 1996 will show the tax status of all distributions paid to your account in calendar 1995. Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P. TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III Eli Shapiro A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Peter Carman Vice President Brett C. Browchuk Vice President Thomas V. Reilly Vice President Hugh H. Mullin Vice President and Fund Manager Charles G. Pohl Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President John D. Hughes Vice President and Treasurer Beverly Marcus Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam Convertible Income-Growth Trust. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary. For more information, or to request a prospectus, call toll free: 1-800-225-1581. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution, are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency, and involve risk, including the possible loss of principal amount invested. [Logo: Putnam Investments] The Putnam Funds One Post Office Square Boston Massachusetts, 02109 Bulk Rate U.S. Postage PAID Putnam Investments 21696-008/223/920 12/95 -----END PRIVACY-ENHANCED MESSAGE-----