-----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, BFSAhXtDeHuUFExZTa8fQjFUcqjM+Kd8vpAA6BSA4bEopIEuZUOU4n64YeMlDmbz MhP+qc7Fkp9q6r76mu+0nQ== 0000928816-97-000210.txt : 19970704 0000928816-97-000210.hdr.sgml : 19970704 ACCESSION NUMBER: 0000928816-97-000210 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970703 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: 97636018 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 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 PUTNAM CONVERTIBLE INCOME-GROWTH TRUST Putnam Convertible Income-Growth Trust SEMIANNUAL REPORT April 30, 1997 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * Putnam Convertible Income-Growth Trust's class A shares ranked 10 out of 43 convertible securities funds tracked by Lipper Analytical Services for the year ended April 30, 1997.* * "Today's uncertain stock and bond markets have caused many investors to give convertibles a closer look -- for their unique combination of defensive attributes and growth potential." -- Hugh Mullin, Fund Manager CONTENTS 4 Report from Putnam Management 9 Fund performance summary 13 Portfolio holdings 27 Financial statements * Lipper rankings are based on total return performance, vary over time, and do not reflect the effects of sales charges. The fund's class A shares ranked 5 out of 20 funds and 4 out of 12 funds for 5- and 10-year periods, respectively. The fund's class B shares (inception 7/15/93) ranked 14 out of 43 funds and 7 out of 30 funds for 1- and 3-year periods, respectively. Class M shares (inception 3/13/95) ranked 13 out of 43 funds and 14 out of 37 funds for 1- and 2-year periods, respectively. Past performance is no guarantee of future results. From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] (copyright) Karsh, Ottawa Dear Shareholder: Here are three examples of the creative thinking that goes into the management of Putnam Convertible Income-Growth Trust as it continues to deliver competitive results among its peers. Your fund's managers recently made two trips to Japan to check out a Toyota convertible -- of the financial, not automotive, variety. When Berkshire Hathaway, Warren Buffet's large holding company, offered a five-year bond that is convertible into some of the company's shares of Salomon Brothers, your fund's managers took notice. Whenever a new Thermo Electron spinoff hits the market, the fund's management is there to check it out. The following midyear report provides details. I am pleased to announce that Edward T. Shadek, Jr., has joined your fund's management team, effective in May 1997. Ned recently returned to Putnam after a five-year absence. During that time he was associated with the Michael Steinhart hedge fund in New York City and Newbold's Asset Management in Philadelphia. He has 10 years of investment experience. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees June 18, 1997 Report from the Fund Managers Hugh H. Mullin, lead manager Charles G. Pohl Edward T. Shadek, Jr. The stock and bond markets gave investors a rough ride during the six months ended April 30, 1997. In spite of the volatility -- and in some ways because of it -- Putnam Convertible Income-Growth Trust remains a standout among the convertible funds tracked by Lipper Analytical Services. The mutual fund research organization has consistently ranked the fund in the top third of its category, as shown in the fund highlight on page 2. During the semiannual period, an investment in the fund's class A shares increased in value by 7.06%, assuming reinvestment of all distributions and calculated at net asset value. This result fell characteristically between the 14.71% total return of the Standard & Poor's 500 Index(registered trademark) and the 1.22% return of the Lehman Brothers Corporate Bond Index. Taking the maximum sales charge into account, the fund's performance for the period was 0.89%. For performance of the other share classes and over longer periods, please see the tables beginning on page 9. * STOCK SELECTION, MARKET DISLOCATIONS, TAKEOVERS CONTRIBUTED TO POSITIVE RESULTS Because convertible securities possess attributes similar to both stocks and bonds, their performance typically falls somewhere between that of the two asset classes. Investors seeking some of the growth potential of stocks and some of the safety of capital represented by bonds will often invest in a portfolio of convertibles. At times of market uncertainty, equity investors may direct some assets toward convertibles as a defensive strategy. In the currently volatile securities market environment, growing numbers of investors have done just that. The resulting increase in demand may explain, at least in part, why convertibles performed relatively well during the period. In Putnam Management's view, however, careful investment selection made an equally important contribution to your fund's positive performance. The fund benefited from its large-company common stock holdings and by avoiding many of the convertible securities that experienced sharp price declines. In addition, we took advantage of opportunities arising out of market dislocations by buying securities that were out of favor and selling those that had attained lofty valuations. Sensing that the technology sector may be approaching an upturn, we have recently increased its weighting in the portfolio. We have also been gradually rebuilding the fund's energy exposure to take advantage of favorable prices in the wake of a drop in oil and gas stocks. We took profits in some financial services issues, but the portfolio remains heavily overweighted in that sector, especially in bank and insurance holdings. We have also sought out companies that look disproportionately undervalued. Such companies are often candidates for acquisition, a situation that can result in substantial profits for holders of their securities. A good example is the health maintenance organization, Healthsource, which at the time of its takeover by Cigna, a large multiline insurance and managed-care company, was one of the fund's largest positions. The resulting increase in the value of the Cigna holdings measurably helped the fund's performance for the period. * FUND INCREASES STAKE IN NON-U.S. CONVERTIBLES We have not confined our search for attractive convertibles to the United States. Although the core mission of the fund is to invest in domestic securities, we are constantly on the lookout for select situations where we think the fundamentals are exceptional for tactical global diversification. In recent months, we have increased your fund's exposure to securities of companies headquartered outside the United States. At period's end, the fund was approaching the 10% cap allowed for such holdings. [GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Banks 7.7% Electronics and electrical equipment 7.4% Oil and gas 7.4% Retail 6.7% Insurance and finance 5.7% Footnote reads: * Based on net assets as of 4/30/97. Sector allocations will vary over time. Toyota provides an excellent example of our growing commitment to non-U.S. investments. When a large convertible debenture issued by the Japanese-based automobile manufacturer came to our attention, we decided to take a closer look. The company has a triple-A balance sheet and, because of its large export business, has a favorable sensitivity to a weakening yen. After two visits to Japan for on-site investigations and management interviews, we established a position in the fund's portfolio in December 1995. The debenture's positive performance during the semiannual period confirmed our confidence in the selection. While the Toyota issue, along with other securities discussed in this report, was viewed favorably at the end of the period, all portfolio holdings are subject to review and adjustment in accordance with the fund's investment strategy and may vary in the future. * CAPTURING A NEW TREND: BONDS OF ONE COMPANY CONVERTIBLE INTO STOCK OF ANOTHER Another trend that has developed over the past two years is the practice of companies issuing securities that are convertible into the common stock of another company. As a means of monetizing some of its Salomon Brothers holdings, Berkshire Hathaway, another triple-A issuer, recently offered a five-year bond convertible into Salomon Brothers' common stock. We were attracted to the security because we concluded that, by virtue of its short maturity and Berkshire Hathaway's strong balance sheet, the convertible was reasonably valued with very little downside risk. More importantly, Salomon Brothers management, in our opinion, is moving the company in the right direction in terms of improving returns and rationalizing the business mix. Examples of more typical convertibles held by your fund are those of Thermo Electron and several of its successful small to midsize spinoffs. You'll find them listed in various industry categories in the portfolio, all with the "Thermo" prefix. Over the past two decades, the parent company has pursued the strategy of developing certain technologies in-house, then spinning off minority portions of new subsidiaries to the public while retaining majority positions. Since the spinoffs carry the parent company's excellent credit rating, they are able to finance expansion economically and efficiently. During the period, we added significantly to these holdings as the decline in the small and mid-cap markets made their prices attractive. [GRAPHIC OMITTED: TOP TEN HOLDINGS] TOP TEN HOLDINGS Rogers Communications, convertible debentures, 2s of '05 Telecommunications Comcast Corp., convertible notes 11/8s of '07 Consumer services Banc One Corp., Series C, $3.50 convertible preferreds Banking Magna International, convertible subordinated notes, 5s of '02 Automotive equipment USF&G Corp., convertible subordinated notes 0% of '09 Insurance and finance American General Delaware Corp., $3.00 convertible preferreds Insurance and finance K mart Financing I, $3.875 convertible preferreds Retailing Texas Instruments, convertible subordinated debentures, 23/4s of '02 Electronics and electrical equipment Softkey International, Inc., 144A convertible senior notes, 51/2s of '00 Computer equipment J. Baker, Inc., convertible debentures, 7s of '02 Retailing Footnote reads: Top 10 holdings represented 7.3% of the fund's net assets. Portfolio holdings will vary over time. * OUTLOOK: SLOWER GROWTH, CONTINUED LOW INFLATION, MODERATELY HIGHER INTEREST RATES The economy is now showing some signs of slowing a bit from the vigorous pace reported in the March quarter. On this basis, we continue to look for moderate economic growth over the remainder of fiscal 1997. Similarly, we expect inflation to remain under control in the months ahead. We are also closely monitoring the interest-rate outlook, because interest rates, particularly short-term rates, historically have exerted significant influence over the convertible market. The Fed's decision to leave rates unchanged at its May meeting is no assurance against future increases. Historically the Fed has shifted monetary policy by engineering a series of small rate changes, seldom just one. In the current environment, we believe convertibles generally are fairly valued and we are still finding quite a few opportunities overall. In the main, we are optimistic about your fund's prospects during the latter half of fiscal 1997. 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 4/30/97, there is no guarantee the fund will continue to hold these securities in the future. Performance summary This section provides information about your fund's performance, which should always be considered in light of its 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 4/30/97 Class A Class B Class M (inception date) (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months 7.06% 0.89% 6.59% 1.74% 6.78% 3.03% - ------------------------------------------------------------------------------ 1 year 12.47 6.01 11.58 6.60 11.91 7.98 - ------------------------------------------------------------------------------ 5 years 92.39 81.30 -- -- -- -- Annual average 13.98 12.64 -- -- -- -- - ------------------------------------------------------------------------------ 10 years 172.37 156.69 -- -- -- -- Annual average 10.54 9.89 -- -- -- -- - ------------------------------------------------------------------------------ Life of class -- -- 52.25 49.25 42.72 37.69 Annual average -- -- 11.73 11.14 18.08 16.12 - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/97 Lehman Bros. S&P 500 Corporate Index Bond Index - ------------------------------------------------------------------------------ 6 months 14.71% 1.22% - ------------------------------------------------------------------------------ 1 year 25.12 7.44 - ------------------------------------------------------------------------------ 5 years 119.75 48.95 Annual average 17.06 8.30 - ------------------------------------------------------------------------------ 10 years 274.55 143.30 Annual average 14.12 9.30 - ------------------------------------------------------------------------------ Life of class B 95.97 25.95 Annual average 19.41 6.20 - ------------------------------------------------------------------------------ Life of class M 71.69 20.77 Annual average 28.84 9.09 - ------------------------------------------------------------------------------ Performance data represent past results, do not reflect future performance, and will differ for each share class. They do not take into account any adjustment for taxes payable on reinvested distributions or, for class A shares, distribution fees prior to implementation of the class A distribution plan in 1990. 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 the applicable sales charge, with the maximum being 5%. PRICE AND DISTRIBUTION INFORMATION 6 months ended 4/30/97 Class A Class B Class M - ------------------------------------------------------------------------------ Distributions (number): 2 2 2 - ------------------------------------------------------------------------------ Income $0.480 $0.407 $0.437 - ------------------------------------------------------------------------------ Capital gains: - ------------------------------------------------------------------------------ Long-term 0.906768 0.906768 0.906768 - ------------------------------------------------------------------------------ Short-term 0.637232 0.637232 0.637232 - ------------------------------------------------------------------------------ Total $2.024 $1.951 $1.981 - ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------------ 10/31/96 $21.24 $22.54 $21.09 $21.14 $21.91 - ------------------------------------------------------------------------------ 4/30/97 20.66 21.92 20.48 20.54 21.28 - ------------------------------------------------------------------------------ Current return: NAV POP NAV NAV POP - ------------------------------------------------------------------------------ (end of period) - ------------------------------------------------------------------------------ Current dividend rate1 4.65% 4.38% 4.00% 4.19% 4.04% - ------------------------------------------------------------------------------ Current 30-day SEC yield2 5.04 4.75 4.30 4.55 4.39 - ------------------------------------------------------------------------------ 1Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2Based on investment income, calculated using SEC guidelines. TOTAL RETURN FOR PERIODS ENDED 3/31/97 (most recent calendar quarter) Class A Class B Class M (inception date) (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months 6.25% 0.13% 5.83% 1.01% 5.98% 2.27% - ------------------------------------------------------------------------------ 1 year 12.96 6.46 12.13 7.13 12.40 8.48 - ------------------------------------------------------------------------------ 5 years 92.11 81.09 -- -- -- -- Annual average 13.95 12.61 -- -- -- -- - ------------------------------------------------------------------------------ 10 years 163.44 148.24 -- -- -- -- Annual average 10.17 9.52 -- -- -- -- - ------------------------------------------------------------------------------ Life of class -- -- 50.10 47.10 40.64 35.68 Annual average -- -- 11.57 10.96 18.10 16.05 - ------------------------------------------------------------------------------ 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 Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 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 at the time of the redemption of class B shares and assumes redemption at the end of the 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. COMPARATIVE BENCHMARKS 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. * Securities indexes assume reinvestment of all distributions and interest payments and do not take in account brokerage fees or taxes. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index. PUTNAM GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund Diversified Equity Trust Europe Growth Fund Global Growth Fund Global Natural Resources Fund * Health Sciences Trust International Growth Fund + International New Opportunities Fund Investors Fund New Opportunities Fund OTC & Emerging Growth Fund [DBL. DAGGERS] Vista Fund Voyager Fund Voyager Fund II PUTNAM GROWTH AND INCOME FUNDS Balanced Retirement Fund Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Growth and Income Fund II International Growth and Income Fund New Value Fund Utilities Growth and Income Fund PUTNAM INCOME FUNDS American Government Income Fund Diversified Income Trust Diversified Income Trust II Federal Income Trust Global Governmental Income Trust High Yield Advantage Fund High Yield Trust Income Fund Intermediate U.S. Government Income Fund Preferred Income Fund U.S. Government Income Trust PUTNAM TAX-FREE INCOME FUNDS Municipal Income Fund Tax Exempt Income Fund Tax-Free High Yield Fund Tax-Free Insured Fund State tax-free income funds [SECTION MARK] Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania LIFESTAGESM FUNDS Putnam Asset Allocation Funds--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 MOST CONSERVATIVE INVESTMENTS ** Putnam money market funds: ++ California Tax Exempt Money Market Fund Money Market Fund New York Tax Exempt Money Market Fund Tax Exempt Money Market Fund CDs and savings accounts [2 DBL. DAGGERS] * Formerly Natural Resources Fund + Formerly Overseas Growth Fund [DBL. DAGGER] Formerly OTC Emerging Growth Fund [SECTION MARK] Not available in all states. ** Relative to above. ++ An investment in a money market fund is neither insured nor guaranteed by the U.S. government. These funds are managed to maintain a price of $1.00 per share, although there is no assurance that this price will be maintained in the future. [2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of deposit offer a fixed rate of return and may be insured up to certain limits by federal/state agencies. Savings accounts may also be insured up to certain limits. Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Please read it carefully before you invest or send money. Portfolio of investments owned April 30, 1997 (Unaudited)
CONVERTIBLE BONDS AND NOTES (44.2%) * PRINCIPAL AMOUNT VALUE Aerospace and Defense (0.5%) - ------------------------------------------------------------------------------------------------------------ $ 3,750,000 Rohr Industries, Inc. cv. sub. deb. 7s, 2012 $ 3,337,500 2,103,000 UNC, Inc. cv. sub. deb. 7 1/2s, 2006 2,092,485 -------------- 5,429,985 Airlines (0.2%) - ------------------------------------------------------------------------------------------------------------ 2,000,000 Reno Air, Inc. cv. sr. notes 9s, 2002 2,060,000 Automotive (2.0%) - ------------------------------------------------------------------------------------------------------------ 9,740,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 5,539,625 8,200,000 Magna International cv. sub. deb. 5s, 2002 8,917,500 3,750,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 3,262,500 JPY 400,000,000 Toyota Motor Corp. cv. deb. 1.2s, 1998 (Japan) 5,983,784 -------------- 23,703,409 Banks (1.4%) - ------------------------------------------------------------------------------------------------------------ 2,089,000 Banamex (Nassau Branch) 144A cv. jr. sub. notes 11s, 2003(Bahamas) 2,151,670 380,000 Banco Nationale Mexico 144A cv. company guaranty 7s, 1999(Bahamas) 363,850 7,500,000 Mitsubishi Bank Ltd. International Finance (Bermuda) cv. trust guaranteed notes 3s, 2002(Japan) 7,621,875 JPY 830,000,000 Sumitomo Bank Ltd. 144A cv. bank guarantee 0 3/4s, 2001(Japan) 6,959,692 -------------- 17,097,087 Basic Industrial Products (1.3%) - ------------------------------------------------------------------------------------------------------------ 1,964,000 Cooper Industries, Inc. cv. sub. 7.05s, 2015 2,180,040 3,700,000 SKF Corp. 144A cv. deb. zero %, (Sweden) 2,712,563 3,000,000 Thermo Electron Corp. cv. deb. 5s, 2001 4,950,000 5,750,000 Thermo Electron Corp. 144A cv. sub. 4 1/4s, 2003 6,202,813 -------------- 16,045,416 Broadcasting (0.4%) - ------------------------------------------------------------------------------------------------------------ 4,350,000 International Cabletel, Inc. 144A cv. deb. 7 1/4s, 2005 4,181,438 450,000 International Cabletel, Inc. cv. sub. notes 7s, 2008 383,625 -------------- 4,565,063 Building and Construction (0.4%) - ------------------------------------------------------------------------------------------------------------ 3,500,000 Continental Homes Holding cv. sub. notes 6 7/8s, 2002 3,250,625 1,805,000 U.S. Home Corp. cv. deb. 4 7/8s, 2005 1,624,500 -------------- 4,875,125 Business Equipment and Services (1.8%) - ------------------------------------------------------------------------------------------------------------ 750,000 Career Horizons, Inc. cv. bonds 7s, 2002 1,263,750 1,500,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 1,263,750 9,050,000 Corporate Express, Inc. 144A cv. notes 4 1/2s, 2000 7,726,438 7,006,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 4,834,140 750,000 U.S. Office Products Co. cv. sub notes 5 1/2s, 2003 635,625 6,440,000 U.S. Office Products Co. 144A cv. sub. notes 5 1/2s, 2003 5,401,550 -------------- 21,125,253 Chemicals (0.5%) - ------------------------------------------------------------------------------------------------------------ 2,250,000 Hercules, Inc. cv. deb. 8s, 2010 5,982,188 Computer Equipment (1.2%) - ------------------------------------------------------------------------------------------------------------ 4,590,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 3,878,550 10,800,000 Softkey International, Inc. 144A cv. sr. notes 5 1/2s, 2000 8,032,500 2,500,000 Synoptics Communications Inc. 144A cv. sub. deb. 5 1/4s, 2003 2,184,375 -------------- 14,095,425 Computers (0.7%) - ------------------------------------------------------------------------------------------------------------ 750,000 MacNeal-Schwendler cv. sub. deb. 7 7/8s, 2004 725,625 8,575,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 6s, 2006 7,792,531 -------------- 8,518,156 Conglomerates (0.9%) - ------------------------------------------------------------------------------------------------------------ 1,400,000 Dart & Kraft Finance N.V. cv. company guaranty Ser. WW, 7 3/4s, 1998 4,872,000 3,750,000 Hexcel Corp. cv. sub. notes 7s, 2003 4,893,750 1,500,000 Samsung Heavy Industries cv. deb. 0 1/2s, 2009 1,593,750 -------------- 11,359,500 Consumer Non Durables (1.3%) - ------------------------------------------------------------------------------------------------------------ 1,625,000 BEC Group, Inc. cv. sub. notes 8s, 2002 [2 DBL. DAGGERS] 1,438,125 22,250,000 Coleman Worldwide Corp. cv. sr. sec. notes LYON zero %, 2013 6,730,625 2,000,000 Dixie Yarns, Inc. cv. deb. 7s, 2012 1,605,000 6,835,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 6,168,588 -------------- 15,942,338 Consumer Services (3.4%) - ------------------------------------------------------------------------------------------------------------ 4,040,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 4,373,300 13,350,000 Boston Chicken, Inc. cv. notes LYON zero %, 2015 3,287,438 17,950,000 Comcast Corp. cv. notes 1 1/8s, 2007 9,154,500 1,500,000 Comcast Corp. cv. sub. deb. 3 3/8s, (3 3/8s, (5 1/2s, 9/9/97)), 2005 ++ 1,365,000 20,150,000 Hollinger, Inc. cv. LYON zero %, 2013 7,354,750 280,000 Pharmaceutical Marketing Services Inc. cv. notes 6 1/4s, 2003 224,000 6,625,000 Pharmaceutical Marketing Services Inc. 144A cv. deb. 6 1/4s, 2003 5,432,500 4,925,000 Protection One, Inc. cv. sr. sub. notes 6 3/4s, 2003 4,684,906 4,930,000 WMS Industries, Inc. cv. deb. 5 3/4s, 2002 4,732,800 -------------- 40,609,194 Electronics and Electrical Equipment (3.3%) - ------------------------------------------------------------------------------------------------------------ 1,850,000 Diagnostic Retrieval System cv. sr. sub. deb. 9s, 2003 2,275,500 6,000,000 Magnetek, Inc. cv. deb. 8s, 2001 6,660,000 7,615,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 5,654,138 3,940,000 Richardson Electronics, Ltd. cv. sr. sub. deb 8 1/4s, 2006 3,610,025 475,000 Richardson Electronics Ltd. cv. sub. deb. 7 1/4s, 2006 369,906 6,020,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 4,981,550 730,000 Sanmina Corp. 144A cv. sub. notes 5 1/2s, 2002 1,339,550 5,015,000 SCI Systems, Inc. cv. sub. notes 5s, 2006 6,901,894 3,750,000 Texas Instruments cv. sub. deb. 2 3/4s, 2002 8,076,563 -------------- 39,869,126 Electronic Components and Instruments (2.8%) - ------------------------------------------------------------------------------------------------------------ 1,500,000 Cirrus Logic Inc. 144A cv. sub. notes 6s, 2003 995,625 2,035,000 Dovatron International cv. sub. notes 6s, 2002 2,131,663 7,750,000 HMT Technology Corp. 144A cv. sub. notes 5 3/4s, 2004 6,238,750 2,700,000 Lernout & Hauspie Speech Products N.V. 144A cv. sub. notes 8s, 2001(Belgium) 3,051,000 5,100,000 Solectron Corp. 144A cv. sub. notes 6s, 2006 5,590,875 5,200,000 Thermo Instruments Systems, Inc. 144A cv. deb. 4 1/2s, 2003 4,875,000 1,215,000 Thermo Instruments Systems, Inc. 144A cv. company guaranty 3 3/4s, 2000 2,226,488 3,425,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 3,459,250 275,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 277,750 4,425,000 Thermo Quest Corp. 144A cv. company guaranty 5s, 2000 4,425,000 -------------- 33,271,401 Environmental Control (1.2%) - ------------------------------------------------------------------------------------------------------------ 3,100,000 OHM Corp. cv. sub. deb. 8s, 2006 2,836,500 3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,467,200 1,060,000 U.S. Filter Corp. 144A cv. sub. notes 6s, 2005 1,780,800 2,600,000 USA Waste Services, Inc. cv. sub. notes 4s, 2002 2,567,500 4,878,000 WMX Technologies, Inc. cv. sub. notes 2s, 2005 4,219,470 -------------- 14,871,470 Food (0.4%) - ------------------------------------------------------------------------------------------------------------ 2,500,000 Chiquita Brands International cv. deb. 7s, 2001 2,275,000 2,400,000 Chiquita Brands International, Inc. 144A cv. sub. 7s, 2001 2,184,000 -------------- 4,459,000 Food and Beverages (0.5%) - ------------------------------------------------------------------------------------------------------------ 5,200,000 Grand Metropolitan PLC cv. unsub. deb. 6 1/2s, 2000 (United Kingdom) 6,396,000 Health Care (2.5%) - ------------------------------------------------------------------------------------------------------------ 2,740,000 Careline, Inc. cv. sr. sub. notes 8s, 2001 3,394,175 4,400,000 NovaCare, Inc. cv. sub. deb. 5 1/2s, 2000 3,987,500 500,000 Quantum Health Resources, Inc. cv. sub. deb. 4 3/4s, 2000 459,375 5,000,000 Renal Treatment Centers, Inc. cv. sub. notes 5 5/8s, 2006 4,525,000 3,235,000 Renal Treatment Centers, Inc. 144A cv. sub. notes 5 5/8s, 2006 2,927,675 2,350,000 Rotech Medical Corp. 144A cv. sub. deb. 5 1/4s, 2003 2,015,125 2,738,000 TheraTx, Inc. cv. sub. deb. 8s, 2002 2,724,310 6,500,000 TheraTx, Inc. 144A cv. sub. 8s, 2002 6,467,500 4,250,000 Vivra, Inc. 144A cv. sub. notes 5s, 2001 4,053,438 -------------- 30,554,098 Hospital Management and Medical Services (1.5%) - ------------------------------------------------------------------------------------------------------------ 4,270,000 Integrated Health Services, Inc. cv. sub. deb. 6s, 2003 4,547,550 4,500,000 PhyMatrix, Inc. cv. sub. deb. 6 3/4s, 2003 3,678,750 4,395,000 Sun Healthcare Group, Inc. 144A cv. sub. 6s, 2004 3,999,450 1,750,000 Tenet Health Care Corp. cv. sub. notes 6s, 2005 2,100,000 3,310,000 U.S. Diagnostic Laboratories, Inc. 144A cv. sub. deb. 9s, 2003 3,177,600 -------------- 17,503,350 Insurance and Finance (2.0%) - ------------------------------------------------------------------------------------------------------------ 5,800,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 5,560,750 5,000,000 NAC Re Corp. cv. deb. 5 1/4s, 2002 5,031,250 3,065,000 Pioneer Financial Services, Inc. cv. sub. notes 6 1/2s, 2003 4,425,094 13,550,000 USF&G Corp. cv. sub. notes zero %, 2009 8,875,250 -------------- 23,892,344 Medical Supplies and Devices (0.4%) - ------------------------------------------------------------------------------------------------------------ 2,000,000 Phoenix Shannon 144A cv. sr. sub. notes 9 1/2s, 2000 + 600,000 5,615,000 Uromed Corp. 144A cv. sub. notes 6s, 2003 3,376,019 1,000,000 Ventritex, Inc. cv. sub. notes 5 3/4s, 2001 1,118,750 -------------- 5,094,769 Metals and Mining (0.4%) - ------------------------------------------------------------------------------------------------------------ 4,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 4,232,043 Oil and Gas (1.3%) - ------------------------------------------------------------------------------------------------------------ 2,500,000 Apache Corp. 144A cv. sub. deb. 6s, 2002 2,996,875 4,380,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 4,949,400 2,750,000 Pennzoil Co. cv. sub. deb. 6 1/2s, 2003 4,403,438 1,075,000 Pride Petroleum Services, Inc. cv. sub. deb. 6 1/4s, 2006 1,562,781 2,160,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 2,003,400 -------------- 15,915,894 Oil and Gas Pipelines (0.2%) - ------------------------------------------------------------------------------------------------------------ 2,250,000 SFP Pipeline Holdings, Inc. cv. variable rate exch. deb. 10.42s, 2010 [2 DBL. DAGGERS] 2,722,500 Paper and Forest Products (0.7%) - ------------------------------------------------------------------------------------------------------------ 6,750,000 Stone Container Corp. cv. sr. sub. notes 8 7/8s, 2000 7,171,875 1,800,000 Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 1,323,000 -------------- 8,494,875 Pharmaceuticals (2.3%) - ------------------------------------------------------------------------------------------------------------ 14,065,000 Alza Corp. cv. sub. notes. LYON zero %, 2014 6,171,019 990,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 779,625 3,890,000 Nabi, Inc. 144A cv. sub. notes 6 1/2s, 2003 3,063,375 4,190,000 North American Vaccine, Inc. 144A cv. sub notes 6 1/2s, 2003 4,038,113 10,730,000 Roche Holdings, Inc. cv. unsub. LYON zero %, 2010 (Switzerland) 4,935,800 5,425,000 Sandoz Capital BVI Ltd. 144A cv. company guaranty 2s, 2002 (Switzerland) 6,794,813 2,000,000 Sepracor, Inc. 144A cv. sub. deb. 7s, 2002 2,370,000 -------------- 28,152,745 Publishing (0.3%) - ------------------------------------------------------------------------------------------------------------ 4,850,000 Thomas Nelson, Inc. 144A cv. sub. notes 5 3/4s, 1999 4,425,625 Real Estate (0.7%) - ------------------------------------------------------------------------------------------------------------ 1,200,000 Alexander Haagen Properties cv. sub. deb. Ser. A, 7 1/2s, 2001 (R) 1,122,000 1,985,000 Camden Property Trust cv. sub. deb. 7.33s, 2001 (R) 2,243,050 1,410,000 LTC Properties, Inc. cv. sub. deb. 7 3/4s, 2002 (R) 1,461,113 3,750,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 (R) 3,801,563 -------------- 8,627,726 Recreation (0.3%) - ------------------------------------------------------------------------------------------------------------ 4,211,000 Speedway Motorsports, Inc. 144A cv. sub. notes 5 3/4s, 2003 3,958,340 Retail (4.0%) - ------------------------------------------------------------------------------------------------------------ 9,510,000 Baker (J.), Inc. cv. deb. 7s, 2002 8,012,175 6,600,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 6,740,250 8,385,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 7,305,431 4,325,000 Pier 1 Imports, Inc. cv. sub. notes 5 3/4s, 2003 5,260,281 4,000,000 Proffitt's, Inc. cv. sub. deb. 4 3/4s, 2003 4,035,000 9,000,000 Rite Aid Corp. cv. deb. zero %, 2006 6,615,000 1,000,000 Staples, Inc. cv. sub. deb. 4 1/2s, 2000 1,035,000 6,350,000 Staples, Inc. 144A cv. sub. deb. 4 1/2s, 2000 6,572,250 2,850,000 Sunglass Hut Inernational, Inc. 144A cv. sub. notes 5 1/4s, 2003 2,183,813 -------------- 47,759,200 Semiconductors (1.4%) - ------------------------------------------------------------------------------------------------------------ 7,550,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 6,370,313 3,600,000 National Semiconductor Corp. cv. deb. 6 1/2s, 2002 3,510,000 3,980,000 Plasma & Materials Technologies, Inc. 144A cv. notes 7 1/8s, 2001 2,706,400 4,500,000 Xilinx, Inc. 144A cv. sub. notes 5 1/4s, 2002 5,152,500 -------------- 17,739,213 Telecommunications (1.3%) - ------------------------------------------------------------------------------------------------------------ 5,025,000 MIDCOM Communications, Inc. 144A cv. sub. deb. 8 1/4s, 2003 4,170,750 22,500,000 Rogers Communications cv. deb. 2s, 2005(Canada) 12,037,500 -------------- 16,208,250 Transportation (0.7%) - ------------------------------------------------------------------------------------------------------------ GBP 3,300,000 British Airport Authority 144A cv. bonds 5 3/4s, 2006(United Kingdom) 5,488,445 $ 2,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 2,373,500 -------------- 7,861,945 -------------- Total Convertible Bonds and Notes (cost $523,846,791) $ 533,418,053 COMMON STOCKS (28.4%) * NUMBER OF SHARES VALUE Aerospace and Defense (0.2%) - ------------------------------------------------------------------------------------------------------------ 28,000 Lockheed Martin Corp. $ 2,506,000 Automotive (0.8%) - ------------------------------------------------------------------------------------------------------------ 1,400 Bayerische Motoren Werke (BMW) AG (Germany) + 1,148,045 72,780 Chrysler Corp. 2,183,400 80,000 Ford Motor Co. 2,780,000 70,000 General Motors Corp. 4,051,250 -------------- 10,162,695 Automotive Parts (0.1%) - ------------------------------------------------------------------------------------------------------------ 71,000 Titan Wheel International, Inc. 1,029,500 Banks (3.3%) - ------------------------------------------------------------------------------------------------------------ 74,000 Banc One Corp. 3,135,750 29,000 BankAmerica Corp. 3,389,375 5,900 BankBoston Corp. 429,225 41,500 Bankers Trust New York Corp. 3,377,063 40,000 Comerica, Inc. 2,340,000 6,300 CoreStates Financial Corp. 318,938 19,000 First of America Bank Corp. 1,263,500 100,000 Fleet Financial Group, Inc. 6,100,000 63,000 KeyCorp 3,283,875 50,000 Morgan (J.P.) & Co., Inc. 5,093,750 60,000 National City Corp. 2,925,000 54,000 NationsBank Corp. 3,260,250 85,000 PNC Bank Corp. 3,495,625 30,000 Summit Bancorp 1,395,000 -------------- 39,807,351 Basic Industrial Products (0.5%) - ------------------------------------------------------------------------------------------------------------ 70,000 Deere (John) & Co. 3,220,000 60,000 General Signal Corp. 2,355,000 -------------- 5,575,000 Building and Construction (0.2%) - ------------------------------------------------------------------------------------------------------------ 31,000 Armstrong World Industries, Inc. 2,038,250 Business Services and Equipment (0.9%) - ------------------------------------------------------------------------------------------------------------ 36,000 IBM Corp. 5,787,000 76,000 Xerox Corp. 4,674,000 -------------- 10,461,000 Chemicals (1.2%) - ------------------------------------------------------------------------------------------------------------ 30,000 Bayer AG ADR (Germany) 1,193,649 32,000 Dow Chemical Co. 2,716,000 30,000 du Pont (E.I.) de Nemours & Co., Ltd. 3,183,750 58,000 Eastman Chemical Co. 2,958,000 50,000 Hercules, Inc. 1,968,750 65,000 Witco Chemical Corp. 2,429,375 -------------- 14,449,524 Computer Services (0.2%) - ------------------------------------------------------------------------------------------------------------ 85,000 NCR Corp. + 2,465,000 Computer Software (0.2%) - ------------------------------------------------------------------------------------------------------------ 55,000 Computer Associates Intl., Inc. 2,860,000 Conglomerates (1.4%) - ------------------------------------------------------------------------------------------------------------ 58,000 Cooper Industries, Inc. 2,668,000 45,000 General Motors Corp. Class H 2,418,750 54,000 Minnesota Mining & Manufacturing Co. 4,698,000 76,000 TRW, Inc. 3,961,500 33,000 United Technologies Corp. 2,495,625 20,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) + 1,031,691 -------------- 17,273,566 Consumer Durable Goods (0.2%) - ------------------------------------------------------------------------------------------------------------ 53,000 Whirlpool Corp. 2,477,750 Consumer Non Durables (1.9%) - ------------------------------------------------------------------------------------------------------------ 58,000 American Brands, Inc. 3,117,500 50,000 Avon Products, Inc. 3,081,250 20,000 Clorox Co. 2,547,500 92,000 Kimberly-Clark Corp. 4,715,000 140,000 Philip Morris Cos., Inc. 5,512,500 60,000 RJR Nabisco Holdings Corp. 1,785,000 80,000 Universal Corp. 2,240,000 -------------- 22,998,750 Electric Utilities (0.3%) - ------------------------------------------------------------------------------------------------------------ 50,000 Carolina Power & Light Co. 1,700,000 82,000 Central & South West Corp. 1,650,250 -------------- 3,350,250 Electronics and Electrical Equipment (1.3%) - ------------------------------------------------------------------------------------------------------------ 53,000 Emerson Electric Co. 2,689,750 16,000 General Electric Co. 1,774,000 62,000 Hewlett-Packard Co. 3,255,000 53,000 Motorola, Inc. 3,034,250 35,000 Siemens AG (Germany) 1,898,566 34,000 Texas Instruments, Inc. 3,034,500 -------------- 15,686,066 Environmental Control (0.1%) - ------------------------------------------------------------------------------------------------------------ 56,000 WMX Technologies, Inc. 1,645,000 Farm Equipment (0.2%) - ------------------------------------------------------------------------------------------------------------ 90,000 New Holland N.V. (Netherlands) 1,991,250 Food and Beverages (1.1%) - ------------------------------------------------------------------------------------------------------------ 68,000 Anheuser-Busch Cos., Inc. 2,915,500 47,000 General Mills, Inc. 2,914,000 65,000 Heinz (H.J.) Co. 2,697,500 70,000 Sara Lee Corp. 2,940,000 98,000 Whitman Corp. 2,266,250 -------------- 13,733,250 Health Care (0.4%) - ------------------------------------------------------------------------------------------------------------ 110,000 Baxter International, Inc. 5,266,250 Household Products (0.2%) - ------------------------------------------------------------------------------------------------------------ 63,000 Tupperware Corp. 2,094,750 Insurance and Finance (1.8%) - ------------------------------------------------------------------------------------------------------------ 61,000 American General Corp. 2,661,125 94,492 AON Corp. 6,283,718 50,000 Beneficial Corp. 3,200,000 18,000 CIGNA Corp. 2,706,750 55,000 Federal National Mortgage Association 2,261,875 50,000 Norwest Corp. 2,493,750 105,000 USF&G Corp. 2,100,000 -------------- 21,707,218 Metals and Mining (0.3%) - ------------------------------------------------------------------------------------------------------------ 108,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 3,024,000 35,086 Freeport-McMoRan Copper & Gold Co., Inc. Class B 1,021,880 -------------- 4,045,880 Oil and Gas (2.9%) - ------------------------------------------------------------------------------------------------------------ 77,857 Amoco Corp. 6,510,792 22,000 British Petroleum PLC ADR (United Kingdom) 3,027,750 87,000 Elf Aquitane ADR (France) 4,230,375 100,000 Exxon Corp. 5,662,500 30,000 Mobil Corp. 3,900,000 100,000 Occidental Petroleum Corp. 2,212,500 55,000 PanEnergy Corp. 2,433,750 18,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 3,244,500 60,000 Total Corp. ADR (France) 2,497,500 65,000 YPF S.A. ADR (Argentina) 1,795,625 -------------- 35,515,292 Packaging and Containers (0.2%) - ------------------------------------------------------------------------------------------------------------ 40,000 Crown Cork & Seal Co., Inc. 2,190,000 Paper and Forest Products (0.6%) - ------------------------------------------------------------------------------------------------------------ 46,000 Temple Inland, Inc. 2,553,000 94,000 Weyerhaeuser Co. 4,300,500 -------------- 6,853,500 Pharmaceuticals and Biotechnology (1.1%) - ------------------------------------------------------------------------------------------------------------ 51,000 American Home Products Corp. 3,378,750 54,000 Bristol-Myers Squibb Co. 3,537,000 134,000 Pharmacia & Upjohn, Inc. 3,969,750 30,000 Warner-Lambert Co. 2,940,000 -------------- 13,825,500 Photography (0.7%) - ------------------------------------------------------------------------------------------------------------ 70,844 Eastman Kodak Co. 5,915,474 55,000 Polaroid Corp. 2,667,500 -------------- 8,582,974 Pipelines (0.1%) - ------------------------------------------------------------------------------------------------------------ 41,000 Enron Corp. 1,542,625 Publishing (0.4%) - ------------------------------------------------------------------------------------------------------------ 82,000 Deluxe Corp. 2,511,250 41,000 McGraw-Hill, Inc. 2,085,875 -------------- 4,597,125 Railroad (0.4%) - ------------------------------------------------------------------------------------------------------------ 26,000 Norfolk Southern Corp. 2,336,750 36,000 Union Pacific Corp. 2,295,000 -------------- 4,631,750 Real Estate (0.1%) - ------------------------------------------------------------------------------------------------------------ 100,000 LTC Properties, Inc. (R) 1,675,000 Retail (1.3%) - ------------------------------------------------------------------------------------------------------------ 63,000 Dayton Hudson Corp. 2,835,000 270,000 K mart Corp. 3,678,750 60,000 Lowe's Cos., Inc. 2,280,000 47,000 Penney (J.C.) Co., Inc. 2,244,250 63,000 Rite Aid Corp. 2,898,000 50,000 Sears, Roebuck & Co. 2,400,000 -------------- 16,336,000 Savings and Loans (0.4%) - ------------------------------------------------------------------------------------------------------------ 79,000 Ahmanson (H.F.) & Co. 3,011,875 40,000 Great Western Financial Corp. 1,680,000 -------------- 4,691,875 Telephone Utilities (1.8%) - ------------------------------------------------------------------------------------------------------------ 96,000 American Telephone & Telegraph Co. 3,216,000 46,000 Bell Atlantic Corp. 3,116,500 38,000 BellSouth Corp. 1,691,000 47,000 GTE Corp. 2,156,125 50,000 NYNEX Corp. 2,587,500 74,452 SBC Communications, Inc. 4,132,086 100,000 Sprint Corp. 4,387,500 -------------- 21,286,711 Transportation (0.6%) - ------------------------------------------------------------------------------------------------------------ 28,000 Burlington Northern Santa Fe Corp. 2,205,000 31,000 Delta Air Lines, Inc. 2,855,875 80,000 Ryder System, Inc. 2,490,000 -------------- 7,550,875 Utilities (0.8%) - ------------------------------------------------------------------------------------------------------------ 50,000 Cinergy Corp. 1,662,500 81,000 Edison International 1,701,000 40,000 Potomac Electric Power Co. 900,000 35,000 Public Service Co. of Colorado 1,356,250 38,000 Union Electric Co. 1,353,750 70,000 US West, Inc. 2,458,750 -------------- 9,432,250 -------------- Total Common Stocks (cost $262,394,351) $ 342,335,777 CONVERTIBLE PREFERRED STOCKS (20.9%) * NUMBER OF SHARES VALUE Aerospace and Defense (0.3%) - ------------------------------------------------------------------------------------------------------------ $ 70,000 Kaman Corp. $3.25 cv. pfd. $ 3,846,719 Automotive (0.9%) - ------------------------------------------------------------------------------------------------------------ 63,950 Federal Mogul Corp. $3.875 cv. pfd. 4,908,163 53,900 Ford Motor Co. Ser. A, $4.20 dep. shs. cv. pfd. 6,036,800 -------------- 10,944,963 Banks (2.1%) - ------------------------------------------------------------------------------------------------------------ 109,500 Banc One Corp. Ser. C, $3.50 cv. pfd. 9,115,875 31,500 Matewan Bancshares, Inc. Ser. A, $1.875 cv. pfd. 763,875 56,100 Roosevelt Financial Group $3.25 cv. pfd. 4,782,525 83,550 Sovereign Bancorp Inc. $3.13 cv. pfd. 6,182,700 81,350 Union Planters Corp. Ser. E, $2.00 cv. pfd. 4,453,913 -------------- 25,298,888 Basic Industrial Products (0.8%) - ------------------------------------------------------------------------------------------------------------ 40,000 Case Corp. Ser. A, $4.50 cv. pfd. 5,370,000 88,450 Greenfield Industries, Inc. 144A $3.00 cv. pfd. 3,737,013 -------------- 9,107,013 Broadcasting (0.8%) - ------------------------------------------------------------------------------------------------------------ 82,000 Chancellor Broadcasting Corp. 144A $3.50 cv. pfd. 4,366,500 82,720 SFX Broadcasting, Inc. Ser. D, $3.25 cv. pfd. 3,722,400 276,000 Triathlon Broadcasting Co. $0.945 cv. pfd. 2,139,000 -------------- 10,227,900 Building and Construction (0.3%) - ------------------------------------------------------------------------------------------------------------ 53,800 Southdown, Inc. $2.875 cv. pfd. 3,241,450 Business Services (0.3%) - ------------------------------------------------------------------------------------------------------------ 47,000 Ikon Office Solutions, Inc. Ser. BB, $5.03 cv. pfd. 3,196,000 Computer Services (0.3%) - ------------------------------------------------------------------------------------------------------------ 79,457 Wang Laboratories, Inc. Ser. B, $3.25 cv. pfd. 3,615,294 Computers (0.3%) - ------------------------------------------------------------------------------------------------------------ 128,000 Vanstar Corp. 144A $3.375 cv. pfd. 3,920,000 Conglomerates (0.3%) - ------------------------------------------------------------------------------------------------------------ 185,000 Cooper Industries, Inc. $0.81 cv. pfd. 3,491,875 Consumer Non Durables (0.3%) - ------------------------------------------------------------------------------------------------------------ 96,075 Fieldcrest Cannon Ser. A, $3.00 cv. pfd. 4,179,263 Consumer Products (0.4%) - ------------------------------------------------------------------------------------------------------------ 68,250 Corning, Inc. $3.00 cv. pfd. 5,187,000 Consumer Services (0.6%) - ------------------------------------------------------------------------------------------------------------ 67,800 Service Corp. $3.125 cv. pfd. 7,771,575 Entertainment (0.3%) - ------------------------------------------------------------------------------------------------------------ 87,670 Station Casinos, Inc. $3.50 cv. pfd. 3,813,645 Financial Services (1.3%) - ------------------------------------------------------------------------------------------------------------ 77,000 Devon Financing Trust $3.25 cv. pfd. 4,908,750 136,643 Finova Finance Trust $2.75 cv. pfd. 7,276,240 70,000 Timet Capital Trust I 144A $3.3125 cv. pfd. 3,290,000 -------------- 15,474,990 Food (0.4%) - ------------------------------------------------------------------------------------------------------------ 90,000 Chiquita Brands International, Inc. Ser. B, $3.75 cv. pfd. 5,265,000 Insurance and Finance (1.9%) - ------------------------------------------------------------------------------------------------------------ 52,849 American Bankers Insurance Group, Inc. Ser. B, $3.125 cv. pfd. 3,322,881 140,500 American General Delaware Corp. $3.00 cv. pfd. 8,201,688 83,700 Penncorp Financial Group, Inc. 144A $3.50 cv.pfd. 4,875,525 110,400 St. Paul Capital LLC $3.00 cv. pfd. 6,789,600 -------------- 23,189,694 Metals and Mining (1.2%) - ------------------------------------------------------------------------------------------------------------ 70,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. 3,631,250 292,300 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 7,892,100 90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 3,435,200 -------------- 14,958,550 Oil and Gas (3.0%) - ------------------------------------------------------------------------------------------------------------ 310,181 Atlantic Richfield Co. $2.23 cv. pfd. 6,358,711 65,000 Grant Geophysical, Inc. $2.4375 cv. pfd. 56,875 30,000 Lomak Petroleum, Inc. 144A $2.03 cv. pfd. 1,398,750 100,580 Neuvo Energy Corp. Ser. A, $2.875 cv. pfd. 4,588,963 116,800 Occidental Petroleum Corp. 144A $3.875 cv. pfd. 6,394,800 75,505 Tejas Gas Corp. $2.65 cv. pfd. 4,039,518 124,500 Tosco Financing Trust 144A $2.875 cv. pfd. 6,878,625 109,900 Unocal Capital Trust $3.125 cv. pfd. 6,181,875 -------------- 35,898,117 Packaging and Containers (0.5%) - ------------------------------------------------------------------------------------------------------------ 129,900 Crown Cork & Seal Co., Inc. $4.50 cv. pfd. 6,641,138 Paper and Forest Products (0.4%) - ------------------------------------------------------------------------------------------------------------ 104,400 International Paper Co. $2.63 cv. pfd. 4,945,950 Real Estate (1.3%) - ------------------------------------------------------------------------------------------------------------ 92,000 Insignia Financial Group, Inc. 144A $3.25 cv. pfd. 4,094,000 53,500 Oasis Residential, Inc. Ser. A, $2.25 cv. pfd. (R) 1,377,625 65,000 Rouse Co. Ser. B, $3.00 cv. pfd. (R) 2,957,500 195,000 Security Capital Pacific Trust Ser. A, $1.75 cv. pfd. 5,923,125 74,490 Tanger Factory Outlet Centers $1.575 cv. pfd. (R) 1,750,515 -------------- 16,102,765 Retail (1.4%) - ------------------------------------------------------------------------------------------------------------ 80,000 Ann Taylor Finance Trust $4.25 cv. pfd. 5,420,000 153,000 Boise Cascade Corp. Ser. G, $1.58 cv. pfd. 4,092,750 140,600 K mart Financing I $3.875 cv. pfd. 8,102,058 -------------- 17,614,808 Savings and Loans (0.5%) - ------------------------------------------------------------------------------------------------------------ 82,000 Ahmanson (H.F.) & Co. $3.00 cv. pfd. 6,478,000 Telecommunications (0.6%) - ------------------------------------------------------------------------------------------------------------ 169,000 AirTouch Communications, Inc. Ser. C, $2.125 cv. pfd. 7,689,500 -------------- Total Convertible Preferred Stocks (cost $237,922,540) $ 252,100,097 FOREIGN GOVERNMENT BONDS AND NOTES (cost $5,088,000) (0.4%) * PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ $ 5,100,000 Italy (Government of) cv. bonds 5s, 2001 (Italy) $ 5,036,250 CORPORATE BONDS AND NOTES (cost $3,210,625) (0.3%) * PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ $ 2,500,000 Siemens Capital Corp. company guaranty 8s, 2002 (Germany) $ 3,650,000 SHORT-TERM INVESTMENTS (cost $68,220,288) (5.7%) * PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ $68,210,000 Interest in $492,645,000 joint repurchase agreement dated April 30, 1997 with Morgan (J.P.) & Co., Inc. due May 1, 1997 with respect to various U.S. Treasury obligations -- maturity value of $68,220,288 for an effective yield of 5.43% $ 68,220,288 - ------------------------------------------------------------------------------------------------------------ Total Investments (cost $1,100,682,595) *** $1,204,760,465 - ------------------------------------------------------------------------------------------------------------ * Percentages indicated are based on net assets of $1,205,519,944. *** The aggregate identified cost on a tax basis is $1,100,650,733, resulting in gross unrealized appreciation and depreciation of $147,648,705 and $43,538,973, respectively, or net unrealized appreciation of $104,109,732. + Non-income-producing security. ++ The interest or dividend rate and date shown parenthetically represent the new interest or dividend rate to be paid and the date the fund will begin receiving interest or dividend income at this rate. [2 DBL. DAGGERS] Income may be received in cash or additional securities at the discretion of the issuer. (R) Real Estate Investment Trust. 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. ADR after the name of a foreign holding stands for American Depository Receipts Shares, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
- ------------------------------------------------------------------------------------------ Forward Currency Contracts to Sell at April 30, 1997 (aggregate face value $13,746,649) Market Aggregate Face Delivery Unrealized Value Value Date Appreciation - ------------------------------------------------------------------------------------------- Japanese Yen $ 24,618 $ 30,151 6/02/97 $ 5,533 Japanese Yen 38,296 46,962 7/28/97 8,666 Japanese Yen 25,288 30,847 12/1/97 5,559 Japanese Yen 3,317,760 4,042,341 1/28/98 724,581 Japanese Yen 26,692 32,171 11/30/98 5,479 Japanese Yen 25,987 31,538 6/01/98 5,551 Japanese Yen 27,421 32,798 6/01/99 5,377 Japanese Yen 28,089 33,432 11/30/99 5,343 Japanese Yen 28,801 34,054 5/31/00 5,253 Japanese Yen 29,466 34,583 11/30/00 5,117 Japanese Yen 8,070,452 9,397,772 5/31/01 1,327,320 - ------------------------------------------------------------------------------------------- $2,103,779 - ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities April 30, 1997 (Unaudited) Assets - --------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $1,100,682,595) (Note 1) $1,204,760,465 - --------------------------------------------------------------------------------------------------- Cash 8,166,526 - --------------------------------------------------------------------------------------------------- Dividends, interest and other receivables 9,141,914 - --------------------------------------------------------------------------------------------------- Receivable for securities sold 11,543,890 - --------------------------------------------------------------------------------------------------- Receivable for open forward currency contracts 2,103,779 - --------------------------------------------------------------------------------------------------- Total assets 1,235,716,574 Liabilities - --------------------------------------------------------------------------------------------------- Payable for securities purchased 26,131,718 - --------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 1,657,135 - --------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 1,684,035 - --------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 202,557 - --------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 6,194 - --------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 1,769 - --------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 360,027 - --------------------------------------------------------------------------------------------------- Other accrued expenses 153,195 - --------------------------------------------------------------------------------------------------- Total liabilities 30,196,630 - --------------------------------------------------------------------------------------------------- Net assets $1,205,519,944 Represented by - --------------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $1,055,583,208 - --------------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 1,867,809 - --------------------------------------------------------------------------------------------------- Accumulated net realized gain on investment and foriegn currency transactions (Note 1) 41,887,397 - --------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 106,181,530 - --------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $1,205,519,944 Computation of net asset value and offering price - --------------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($1,002,849,844 divided by 48,546,910 shares) $20.66 - --------------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $20.66)* $21.92 - --------------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($191,743,680 divided by 9,361,564 shares)** $20.48 - --------------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($10,926,420 divided by 531,960 shares) $20.54 - --------------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $20.54)* $21.28 - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended April 30,1997 (Unaudited) Investment income: - -------------------------------------------------------------------------------------------------- Interest $17,863,297 - -------------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $6,493) 10,587,649 - -------------------------------------------------------------------------------------------------- Total investment income 28,450,946 - -------------------------------------------------------------------------------------------------- Expenses: Compensation of Manager (Note 2) 3,332,205 - -------------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 929,486 - -------------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 14,496 - -------------------------------------------------------------------------------------------------- Administrative services (Note 2) 13,180 - -------------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,194,264 - -------------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 844,248 - -------------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 36,842 - -------------------------------------------------------------------------------------------------- Reports to shareholders 66,225 - -------------------------------------------------------------------------------------------------- Registration fees 15,078 - -------------------------------------------------------------------------------------------------- Auditing 13,520 - -------------------------------------------------------------------------------------------------- Legal 6,793 - -------------------------------------------------------------------------------------------------- Postage 14,998 - -------------------------------------------------------------------------------------------------- Other 68,281 - -------------------------------------------------------------------------------------------------- Total expenses 6,549,616 - -------------------------------------------------------------------------------------------------- Expense reduction (Note 2) (331,698) - -------------------------------------------------------------------------------------------------- Net expenses 6,217,918 - -------------------------------------------------------------------------------------------------- Net investment income 22,233,028 - -------------------------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 41,617,980 - -------------------------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies 1,377,067 - -------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 8,842,113 - -------------------------------------------------------------------------------------------------- Net gain on investments 51,837,160 - -------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $74,070,188 - -------------------------------------------------------------------------------------------------- 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 1997* 1996 - ---------------------------------------------------------------------------------------------------------------------- Increase in net assets - ---------------------------------------------------------------------------------------------------------------------- Operations: - ---------------------------------------------------------------------------------------------------------------------- Net investment income $ 22,233,028 $ 37,114,720 - ---------------------------------------------------------------------------------------------------------------------- Net realized gain on investments 41,617,980 79,062,109 - ---------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 10,219,180 45,277,440 - ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 74,070,188 161,454,269 - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - ---------------------------------------------------------------------------------------------------------------------- From net investment income Class A (21,584,195) (39,696,713) - ---------------------------------------------------------------------------------------------------------------------- Class B (3,308,595) (4,495,021) - ---------------------------------------------------------------------------------------------------------------------- Class M (209,346) (207,655) - ---------------------------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (65,659,146) (27,754,648) - ---------------------------------------------------------------------------------------------------------------------- Class B (11,191,470) (3,021,352) - ---------------------------------------------------------------------------------------------------------------------- Class M (688,054) (80,667) - ---------------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 182,349,934 131,834,466 - ---------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 153,779,316 218,032,679 Net assets - ---------------------------------------------------------------------------------------------------------------------- Beginning of period 1,051,740,628 833,707,949 - ---------------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $1,867,809 and $4,736,917, respectively) $1,205,519,944 $1,051,740,628 - ---------------------------------------------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended Per-share April 30 operating performance (Unaudited) Year ended October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $21.24 $19.42 $19.09 $20.38 $17.60 $15.78 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .43 (d) .81 (d) .85 .81 .87 .89 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 1.01 2.70 1.60 (.46) 2.87 1.89 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.44 3.51 2.45 .35 3.74 2.78 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.48) (.98) (.96) (.74) (.96) (.96) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.54) (.71) (1.16) (.90) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (2.02) (1.69) (2.12) (1.64) (.96) (.96) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.66 $21.24 $19.42 $19.09 $20.38 $17.60 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 7.06* 18.99 14.38 1.84 21.74 18.16 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,002,850 $898,486 $756,645 $697,946 $707,969 $599,866 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .52* 1.06 1.16 .96 .96 1.11 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.99* 3.99 4.64 4.16 4.55 5.32 - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 30.93* 61.43 69.52 48.37 66.63 59.89 - ------------------------------------------------------------------------------------------------------------------------------------ Average commission rate paid (c) $.0514 $.0508 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2). (c) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995. (d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. Financial highlights (For a share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended For the period Per-share April 30 July 15, 1993+ operating performance (Unaudited) Year ended October 31 to October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $21.09 $19.30 $19.00 $20.35 $19.53 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .35 (d) .66 (d) .69 .74 .23 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments .99 2.68 1.61 (.55) .82 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.34 3.34 2.30 .19 1.05 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.41) (.84) (.84) (.66) (.23) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.54) (.71) (1.16) (.88) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.95) (1.55) (2.00) (1.54) (.23) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.48 $21.09 $19.30 $19.00 $20.35 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 6.59* 18.14 13.54 1.00 5.43* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $191,744 $146,127 $75,309 $31,432 $4,439 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .89* 1.81 1.91 1.71 .52* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.63* 3.26 3.92 3.58 .91* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 30.93* 61.43 69.52 48.37 66.63 - ------------------------------------------------------------------------------------------------------------------------------------ Average commission rate paid (c) $.0514 $.0508 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2). (c) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995. (d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. Financial highlights (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended For the period Per-share April 30 Year ended March 13, 1995+ operating performance (Unaudited) October 31 to October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $21.14 $19.37 $17.79 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .39 (d) 0.73 (d) .64 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments .99 2.65 1.64 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.38 3.38 2.28 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.44) (.90) (.70) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.54) (.71) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.98) (1.61) (.70) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.54 $21.14 $19.37 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 6.78* 18.30 12.99* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $10,926 $7,128 $1,753 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .77* 1.54 1.04* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.76* 3.55 2.89* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 30.93* 61.43 69.52 - ------------------------------------------------------------------------------------------------------------------------------------ Average commission rate paid (c) $.0514 $.0508 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2). (c) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995. (d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
Notes to financial statements April 30, 1997 (Unaudited) Note 1 Significant accounting policies Putnam Convertible Income-Growth Fund (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, which convert to class A shares after approximately eight years, do not pay a front-end sales charge, but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class 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 preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, 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 Management. 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. 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. Discounts on zero coupon bonds are 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, 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 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. F) Forward currency contracts The fund may engage in forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date, to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short-term investments). The U.S. dollar value of forward currency contracts is determined using forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is "marked to market" daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. G) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986 as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. H) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.65% of the first $500 million, 0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and 0.38% of any excess thereafter. Prior to February 20, 1997, any amount over $1.5 billion was based on 0.45%. 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. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended April 30, 1997, fund expenses were reduced by $331,698 under expense offset arrangements with PFTC and brokerage service arrangements. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Trustees of the fund receive an annual Trustees fee of $1,360 and an additional fee for each Trustee's 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. 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 certain Putnam funds until distribution in accordance with the Plan. The Fund has adopted an unfunded noncontributory defined benefit pension plan covering all Trustees of the Fund who have served as Trustee for at least five years. Benefits under the 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 fees in the Statement of operations for the six months ended April 30, 1997. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. Note 3 Purchase and sales of securities During the six months ended April 30, 1997, purchases and sales of investment securities other than short-term investments aggregated $430,136,219 and $330,955,342, respectively. There were no purchases and sales of U.S. government obligations. 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 April 30, 1997, there was an unlimited number of shares of beneficial interest authorized. Six months ended April 30, 1997 - ------------------------------------------------------------ Class A Shares Amount - ------------------------------------------------------------ Shares sold 6,757,504 $141,585,416 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 3,759,864 76,375,012 - ------------------------------------------------------------ 10,517,368 217,960,428 Shares repurchased (4,263,080) (89,908,143) - ------------------------------------------------------------ Net increase 6,254,288 $128,052,285 - ------------------------------------------------------------ Year ended October 31, 1996 - ------------------------------------------------------------ Class A Shares Amount - ------------------------------------------------------------ Shares sold 6,225,633 $126,621,311 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 2,946,646 58,192,170 - ------------------------------------------------------------ 9,172,279 184,813,481 Shares repurchased (5,850,929) (119,160,209) - ------------------------------------------------------------ Net increase 3,321,350 $ 65,653,272 - ------------------------------------------------------------ Six months ended April 30, 1997 - ------------------------------------------------------------ Class B Shares Amount - ------------------------------------------------------------ Shares sold 2,538,872 $ 52,766,446 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 583,863 11,772,190 - ------------------------------------------------------------ 3,122,735 64,538,636 Shares repurchased (691,226) (14,367,313) - ------------------------------------------------------------ Net increase 2,431,509 $ 50,171,323 - ------------------------------------------------------------ Year ended October 31, 1996 - ------------------------------------------------------------ Class B Shares Amount - ------------------------------------------------------------ Shares sold 3,655,578 $ 74,061,724 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 303,647 5,977,026 - ------------------------------------------------------------ 3,959,225 80,038,750 Shares repurchased (931,979) (18,858,855) - ------------------------------------------------------------ Net increase 3,027,246 $ 61,179,895 - ------------------------------------------------------------ Six months ended April 30, 1997 - ------------------------------------------------------------ Class M Shares Amount - ------------------------------------------------------------ Shares sold 315,345 $ 6,634,641 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 39,497 797,879 - ------------------------------------------------------------ 354,842 7,432,520 Shares repurchased (160,044) (3,306,194) - ------------------------------------------------------------ Net increase 194,798 $ 4,126,326 - ------------------------------------------------------------ Year ended October 31, 1996 - ------------------------------------------------------------ Class M Shares Amount - ------------------------------------------------------------ Shares sold 330,113 $ 6,691,625 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 12,651 252,193 - ------------------------------------------------------------ 342,764 6,943,818 - ------------------------------------------------------------ Shares repurchased (96,145) (1,942,519) - ------------------------------------------------------------ Net increase 246,619 $ 5,001,299 - ------------------------------------------------------------ WELCOME TO www.putnaminv.com Now you can get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and an economic outlook from Putnam experts -- with just a few clicks of the mouse! Visit Putnam's new site on the World Wide Web to find out: * the benefits of investing with Putnam * Putnam's money management philosophy * daily fund pricing and long-term fund performance * how to tell if your retirement savings plan is on track * how quickly money can accumulate in a tax-deferred investment You can also read Dr. Robert Goodman's economic commentary and Putnam's Capital Markets Forum outlook, search for a particular Putnam fund by name or objective . . . and much more. The site can be accessed through any of the major online services (America Online, CompuServe, Prodigy) that offer web access. Of course, you can also access it via Netscape and an independent Internet service provider. New features will be added to the site on an ongoing basis. So, visit us at http://www.putnaminv.com -- often! 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 TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Ronald J. Jackson Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Peter Carman Vice President Thomas V. Reilly Vice President Hugh H. Mullin Vice President and Fund Manager Charles G. Pohl Vice President and Fund Manager Edward T. Shadek, Jr. Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President 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. You can also learn more at Putnam Investments' website: http://www.putnaminv.com. 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 OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - -------------------- Bulk Rate U.S. Postage PAID Putnam Investments - -------------------- 33893-008/223/920 6/97 -----END PRIVACY-ENHANCED MESSAGE-----