-----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, I3qIJ25Q6VGSiNjecjQ0vn+Yh4L1nVk/qvgYms2LLAInZhRinLLlW8pPKOnjK9AJ 8kJozUvlGOyZMUpeUxynGQ== 0000928816-99-000206.txt : 19990624 0000928816-99-000206.hdr.sgml : 19990624 ACCESSION NUMBER: 0000928816-99-000206 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990623 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: SEC FILE NUMBER: 811-02280 FILM NUMBER: 99650759 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND DATE OF NAME CHANGE: 19841212 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND INC /PRED/ DATE OF NAME CHANGE: 19821109 N-30D 1 PUTNAM CONVERTIBLE INCOME-GROWTH TRUST Putnam Convertible Income-Growth Trust SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 4-30-99 [LOGO: BOSTON * LONDON * TOKYO] From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: One of the benefits of a broadly diversified portfolio such as that of Putnam Convertible Income-Growth Trust is that it can provide a smoother ride through the ups and downs of markets. This has been an appealing attribute in the volatile markets of the past two years. I am pleased to report that during the first half of your fund's current fiscal year, your fund delivered results comfortably above its long-term average. The fund's managers attribute this positive performance to its broad exposure to different types of companies, well-timed and carefully selected acquisitions of attractively priced securities, and the portfolio's one-third allocation to the common stocks of undervalued companies. In the following report, fund managers Charles Pohl and Forrest Fontana provide a detailed accounting both of the fund's performance and of their strategy during the six months ended April 30, 1999. Then they offer their views on prospects for the fiscal year's second half. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees June 16, 1999 Report from the Fund Managers Charles G. Pohl Forrest N. Fontana In the first six months of Putnam Convertible Income-Growth Trust's 1999 fiscal year, convertible bonds and stocks recovered following a difficult 1998. As you may recall, at the beginning of the period stocks and bonds were rebounding from the effects of the Russian debt crisis following the decision by the Federal Reserve Board to ease monetary policy and bolster market confidence. Large-capitalization stocks were the first to recover, and large-cap convertibles soon followed in their footsteps. The convertibles of smaller companies revived more gradually but have performed well during 1999. Our commitment to maintain both the fund's value discipline and its exposure to different types of companies proved rewarding over the period, generating returns well above the fund's long-term average. For complete performance information, including the fund's longer-term results, please turn to the tables that begin on page 6. Total return for 6 months ended 4/30/99 Class A Class B Class M NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------ 15.53% 8.90% 15.17% 10.17% 15.28% 11.25% - ------------------------------------------------------------------ Past performance is no indication of future results. Performance information for longer periods begins on page 6. * DIVERSIFICATION STEERS FUND TO STEADY RESULTS The fund's better-than-normal gains in 1999 can be attributed, we believe, to our consistent value strategy and rigid security selection. We invest approximately two thirds of the fund's assets in convertible securities from different types of companies, primarily large growth companies and a wide range of small companies that use convertibles to finance new ventures. We also allocate one third of our assets to undervalued large-company stocks. We believe this strategy gives the fund exposure to every sector and to nearly every domestic investment style. During the period, each style experienced at least one strong surge in performance. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Oil and gas 8.1% Insurance and finance 7.6% Retail 6.0% Electronics and electrical equipment 5.2% Pharmaceuticals and biotechnology 4.4% Footnote reads: *Based on net assets as of 4/30/99. Holdings will vary over time. As we have explained in previous reports, your fund's primary emphasis on convertible securities is intended to reduce risk. Convertibles combine qualities of stocks and bonds. They pay a regular coupon like a bond and have the right to convert into equity shares in the underlying company. The income stream provided by the convertible offsets part of the volatility a stock might experience. As a result, convertibles tend to perform well when either stocks or bonds perform well but are significantly less volatile than stocks. * BUYING OPPORTUNITIES OF 1998 EXCEL IN 1999 Much of the fund's gains in 1999 derived from the strong performance of securities we added when prices were weak during 1998. As we described in the last annual report, small-company convertibles became deeply discounted in 1998. Economic contraction in Asia and Latin America temporarily affected the profits of many small industrial and high-technology manufacturers and drove down the prices of both their stocks and their convertible issues. This downturn worsened when Russia's financial crisis in August unleashed a torrent of selling. Because we have a value investment style, we see heavy selling pressure as an opportunity. Short-term market volatility does not deter us because we are confident in our research and investment discipline. We do rigorous analysis of each company's financial statements to understand its earnings outlook. We buy convertibles that we conclude are priced below what the issuing company's earnings would justify, except for a small number of holdings (5%-10% of the fund) that have unusually high yields. Last year we added several companies in the energy sector that had been hurt by low oil prices, including Chevron and Unocal, as well as exploration companies such as Diamond Offshore Drilling and Pride International. Stock and convertible prices in this sector began to improve significantly in March and April of 1999 as oil prices jumped, thanks in part to a recent OPEC decision to reduce crude oil output. Given our outlook for firm energy prices over the longer term, we still consider these holdings undervalued. "Convertibles purists will probably avoid this fund and its atypical asset mix, but it has proved worthy of consideration by investors seeking a solid performer with the ability to stay out of trouble." -- Morningstar Mutual Funds, March 19, 1999 We also added to the fund's technology holdings in the course of 1998. The technology weighting, at 20% of the fund's convertible holdings, is our largest industry weighting and reflects the size of the technology sector in the convertibles market. Many of the top-performing fund holdings in 1999 have been in the telecommunications branch of technology and include QUALCOMM and Motorola. Among smaller tech holdings, such as Kent Electronics, Credence Systems, and Quantum Corp., performance has been more volatile, but we believe that these companies still have strong potential. Holdings in the cable television industry also have performed well, since it appears that many large companies are planning to integrate Internet and telephone access with cable services. Finally, in the capital goods sector, companies such as industrial-equipment manufacturer Ingersoll-Rand and construction-machinery maker Case Corporation have appreciated in response to improving earnings reports and a stronger outlook for world growth. While these holdings as well as others discussed in this report were viewed favorably at the end of the reporting period, all portfolio holdings are subject to review and adjustment in accordance with the fund's investment strategy and may vary in the future. * VALUE STOCKS SHOW NEW LIFE IN SEMIANNUAL PERIOD As we have already mentioned, your fund's allocation to value stocks provides important diversification. The convertible market is skewed in favor of growth companies, especially in the technology sector. The stock portion of the fund, by contrast, rarely has a large technology weighting because tech stocks tend to be priced expensively; instead it has large weightings in financials and utilities. In addition to providing diversification, value stocks also came to prominence during the period. After underperforming growth stocks for nearly two years, value stocks perked up and clearly outperformed in April. Within the value stock universe, your fund seeks companies that have qualities of both "cheapness and change," meaning a low stock price combined with positive internal change that can improve performance. Many companies in the portfolio have struggled with somewhat lower revenues during the past two years but have responded by increasing their efficiency. Now these companies are reporting somewhat stronger earnings and stand to benefit from stronger economic activity throughout the world in the coming year. According to Lipper Analytical Services, Putnam Convertible Income-Growth Trust's class A shares' total return ranked in the top 30%, or 5 out of 17 funds, in Lipper's convertible securities universe for 10-year performance as of April 30, 1999. Past performance is not indicative of future results. Lipper Analytical Services, an independent research organization, ranks funds according to total return performance. Its rankings vary over time and do not reflect the effects of sales charges. For the period ended 4/30/99, the fund's class A shares ranked in the top 47% (27 out of 57) and top 33% (9 out of 27) for 1- and 5-year returns, respectively. Performance of other share classes will vary. * FUND CAN BENEFIT FROM MARKET BROADENING As the fund enters the second half of the 1999 fiscal year, we can report encouraging signs that a wider range of securities is making gains in the market. While major market indexes reported by the news media have set many new records in the past couple of years, most of those gains derived from a small number of stocks. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS Credence Systems Corp. Convertible subordinated notes 5.25%, 2002 Semiconductors MediaOne Group, Inc. Series D $2.25 convertible preferred Cable television Monsanto Co. $2.60 convertible preferred Food and beverages Kent Electronics Corp. Convertible subordinated notes, 4.5%, 2004 Electronic components Citigroup, Inc. Common stock Insurance and finance QUALCOMM, Inc. $2.875 cumulative convertible preferred Telecommunications Bank of America Corp. Common stock Insurance and finance Wendy's Financing Series A $2.50 convertible preferred Restaurants Tower Automotive Capital Trust 144A $3.375 convertible preferred Automobiles Berkshire Hathaway, Inc. Convertible senior notes 1s, 2001 Insurance and finance Footnote reads: These holdings represent 7.7% of the fund's net assets as of 4/30/99. Portfolio holdings will vary over time. As 1998 illustrated, large numbers of companies were struggling to achieve earnings growth and investors were willing to bid up certain companies to extremely high valuations. In April, however, previously lagging value stocks and a wide array of small companies suddenly sprang to life. This broad advance benefited the fund because of its holdings across different areas of the market. We believe these broad gains could be sustainable, since we foresee solid growth in the United States and improving growth in the international markets where many companies held by the fund have operations. Interest rates have risen in recent months, but we believe they pose little risk because most convertibles remain significantly undervalued in the wake of 1998's downdraft. We believe the fund remains well diversified and is structured to provide low-risk exposure to some of the more attractive growth opportunities of the equity market. 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 4/30/99, there is no guarantee the fund will continue to hold these securities in the future. The lower credit ratings of high-yield bonds in the portfolio reflect a greater possibility that adverse changes in the economy or poor performance by the issuers of these bonds may affect the issuer's ability to pay principal and interest. 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 conservation of capital as a secondary objective. TOTAL RETURN FOR PERIODS ENDED 4/30/99 Class A Class B Class M (inception dates) (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - -------------------------------------------------------------------------- 6 months 15.53% 8.90% 15.17% 10.17% 15.28% 11.25% - -------------------------------------------------------------------------- 1 year 3.38 -2.57 2.67 -1.81 3.00 -0.62 - -------------------------------------------------------------------------- 5 years 98.09 86.67 90.93 88.93 93.14 86.33 Annual average 14.65 13.30 13.81 13.59 14.07 13.25 - -------------------------------------------------------------------------- 10 years 238.66 219.10 213.38 213.38 221.16 209.88 Annual average 12.97 12.30 12.10 12.10 12.38 11.97 - -------------------------------------------------------------------------- Annual average (life of fund) 12.50 12.25 11.47 11.47 11.75 11.60 - -------------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/99 Lehman Bros. S&P 500 Corporate Consumer Index Bond Index price index - --------------------------------------------------------------------- 6 months 22.32% 1.75% 1.47% - --------------------------------------------------------------------- 1 year 21.82 5.84 2.28 - --------------------------------------------------------------------- 5 years 228.92 51.34 12.75 Annual average 26.89 8.64 2.43 - --------------------------------------------------------------------- 10 years 461.10 147.13 35.01 Annual average 18.83 9.47 3.05 - --------------------------------------------------------------------- Annual average (life of fund) 14.03 --* 5.29 - --------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% respectively. Class B share returns for the 1-year and life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each class and in the case of class B and class M shares the higher operating expenses applicable to such shares. All returns assume reinvestment of distributions at NAV. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. * Inception date of index was 12/31/72. PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/99 Class A Class B Class M - ------------------------------------------------------------------------------ Distributions (number) 2 2 2 - ------------------------------------------------------------------------------ Income $0.480 $0.406 $0.428 - ------------------------------------------------------------------------------ Capital gains: Long-term 1.868 1.868 1.868 - ------------------------------------------------------------------------------ Short-term -- -- -- - ------------------------------------------------------------------------------ Total $2.348 $2.274 $2.296 - ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------------ 10/31/98 $20.04 $21.26 $19.83 $19.92 $20.64 - ------------------------------------------------------------------------------ 4/30/99 20.58 21.84 20.35 20.45 21.19 - ------------------------------------------------------------------------------ Current return (end of period) - ------------------------------------------------------------------------------ Current dividend rate1 4.94% 4.65% 4.22% 4.43% 4.27% - ------------------------------------------------------------------------------ Current 30-day SEC yield2 3.67 3.46 2.94 3.18 3.07 - ------------------------------------------------------------------------------ 1 Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2 Based on investment income, calculated using SEC guidelines. TOTAL RETURN FOR PERIODS ENDED 3/31/99 (most recent calendar quarter) Class A Class B Class M (inception dates) (6/29/72) (7/15/93) (3/13/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months 12.91% 6.43% 12.52% 7.52% 12.81% 8.85% - ------------------------------------------------------------------------------ 1 year -1.74 -7.39 -2.45 -6.71 -2.07 -5.50 - ------------------------------------------------------------------------------ 5 years 85.53 74.85 78.70 76.70 81.02 74.71 Annual average 13.16 11.82 12.31 12.06 12.60 11.81 - ------------------------------------------------------------------------------ 10 years 230.15 211.13 205.46 205.46 213.16 202.22 Annual average 12.69 12.02 11.81 11.81 12.09 11.69 - ------------------------------------------------------------------------------ Annual average (life of fund) 12.30 12.05 11.27 11.27 11.55 11.40 - ------------------------------------------------------------------------------ Past performance is no assurance of future results. More recent returns may be more or less than those shown. They do not take into account any adjustment for taxes payable on reinvested distributions. 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. See first page of performance summary for method of calculation. 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 charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of 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 5.75% maximum 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 class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. Comparative benchmarks Standard & Poor's 500 Composite Stock Price Index* is an index of common stocks frequently used as a general measure of stock market performance. The Lehman Brothers Corporate Bond Index* is an index of publicly issued, fixed-rate, non-convertible investment-grade domestic corporate debt securities frequently used as a general measure of the performance of fixed-income securities. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. * Securities indexes assume reinvestment of all distributions and interest payments and do not take 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. Welcome to www.putnaminv.com Now you can use your PC to get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and economic outlooks from Putnam. VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR: * the benefits of investing with Putnam * Putnam's money management philosophy * complete fund information, daily pricing and long-term performance * your current account value, portfolio value and transaction history * the latest on new funds and other Putnam news You can also read Putnam economist Dr. Robert Goodman's commentary and Putnam's Capital Markets outlook, search for a particular fund by name or objective, use our glossary to decode investment terms . . . 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 or Microsoft Internet Explorer, using an independent Internet service provider. New features will be added to the site regularly. So be sure to bookmark us at http://www.putnaminv.com A guide to the financial statements These sections of the report constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price is determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss for the reporting period. This is determined by adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses. This statement also lists any net gain or loss the fund realized on the sales of its holdings and -- for holdings that remain in the portfolio -- any change in unrealized gains or losses over the period. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the amounts listed in the Statement of Operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-ended funds, a separate table is provided for each share class.
The fund's portfolio April 30, 1999 (Unaudited) CONVERTIBLE BONDS AND NOTES (34.9%) (a) PRINCIPAL AMOUNT VALUE Advertising (0.5%) - -------------------------------------------------------------------------------------------------------------------------- $ 5,000,000 Omnicom Group Inc. cv. sub. deb. 2 1/4s, 2013 $ 7,981,250 Aerospace and Defense (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 1,850,000 Diagnostic Retrieval Systems, Inc. cv. sr. sub. deb 9s, 2003 1,887,000 750,000 Kellstrom Industries, Inc. cv. sub. notes 5 1/2s, 2003 612,188 1,000,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 742,500 2,260,000 SPACEHAB, Inc. 144A cv. sub. notes 8s, 2007 1,678,050 -------------- 4,919,738 Airlines (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 489,000 Atlantic Coast Airlines, Inc. cv. sub. notes 7s, 2004 1,701,720 2,500,000 Continental Airlines, Inc. cv. sub. deb. 6 3/4s, 2006 3,621,875 2,319,000 World Airways, Inc. cv. sr. sub. deb 8s, 2004 463,800 -------------- 5,787,395 Automotive (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 5,000,000 DaimlerChrysler 144A cv. bank guaranteed zero %, 2017 (Germany) 2,812,500 1,500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 851,250 2,500,000 Magna International cv. sub. deb. 5s, 2002 2,837,500 3,000,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 2,437,500 2,000,000 Mark IV Industries, Inc. cv. sub. notes 4 3/4s, 2004 1,725,000 -------------- 10,663,750 Biotechnology (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 11,000,000 Elan Finance Corp. 144A cv. company guaranty zero %, 2018 5,321,250 3,500,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 4,051,250 -------------- 9,372,500 Broadcasting (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 13,000,000 Jacor Communications, Inc. cv. Liquid Yield Option Notes (LYON) zero %, 2018 7,263,750 2,125,000 Scandinavian Broadcasting System S.A. 144A cv. sub. notes 7s, 2004 (Luxembourg) 2,589,844 -------------- 9,853,594 Business Equipment and Services (1.5%) - -------------------------------------------------------------------------------------------------------------------------- 3,000,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 2,677,500 6,000,000 Interpublic Group Cos. cv. sub. notes 1.8s, 2004 6,787,500 6,600,000 Mail-Well, Inc. cv. sub. notes 5s, 2002 6,360,750 2,946,000 National Data Corp. cv. sub. notes 5s, 2003 3,196,410 2,150,000 Personnel Group of America, Inc. cv. sub. notes 5 3/4s, 2004 1,738,813 -------------- 20,760,973 Computer Services and Software (4.3%) - -------------------------------------------------------------------------------------------------------------------------- 5,000,000 Amazon.com, Inc. 144A cv. sub. deb. 4 3/4s, 2009 6,406,250 300,000 America Online, Inc. cv. sub. notes 4s, 2002 3,280,500 4,000,000 At Home Corp. 144A cv. sub. deb. .5426s, 2018 3,740,000 750,000 Arbor Software Corp. cv. sub. notes 4 1/2s, 2005 506,250 3,250,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 1,854,531 4,691,000 Aspen Technology, Inc. 144A cv. sub. deb. 5 1/4s, 2005 2,676,802 1,800,000 BEA Systems, Inc. cv. sub. notes 4s, 2005 1,418,625 1,200,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2005 943,500 9,000,000 Data General Corp. 144A cv. sub. notes 6s, 2004 7,425,000 883,000 Doubleclick, Inc. 144A cv. sub. notes 4 3/4s, 2006 1,589,400 1,600,000 EMC Corp. cv. sub. notes 3 1/4s, 2002 7,708,000 1,000,000 HNC Software, Inc. cv. sub. notes 4 3/4s, 2003 830,000 17,000,000 Network Associates, Inc. cv. sub deb. zero %, 2018 4,930,000 6,188,000 Platinum Technology International, Inc. cv. sub. notes 6 1/4s, 2002 5,770,310 2,385,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 1,803,656 1,500,000 Silicon Graphics Corp. cv. sr. notes 5 1/4s, 2004 1,263,750 10,620,000 System Software Associates, Inc. cv. sub. notes 7s, 2002 5,907,375 4,358,000 Vantive Corp. (The) cv. sub. notes 4 3/4s, 2002 2,936,203 -------------- 60,990,152 Computers (1.5%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 1,695,000 5,000,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 7,868,750 1,500,000 Intevac, Inc. cv. sub. notes 6 1/2s, 2004 888,750 5,090,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 3,015,825 1,267,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 6s, 2006 3,593,529 20,000,000 Western Digital Corp. cv. sub. deb. zero %, 2018 4,100,000 -------------- 21,161,854 Conglomerates (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 3,500,000 ADT Operations, Inc. cv. sub. notes zero %, 2010 7,835,625 Consumer Services (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 2,855,000 Protection One, Inc. cv. sr. sub. notes 6 3/4s, 2003 2,505,263 Electronic Components (1.1%) - -------------------------------------------------------------------------------------------------------------------------- 14,810,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 11,033,450 704,000 Level One Communications, Inc. cv. sub. notes 4s, 2004 1,425,600 1,108,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,209,105 2,000,000 Sanmina Corp. 144A cv. sub. notes 4 1/4s, 2004 2,000,000 -------------- 15,668,155 Electronics and Electrical Equipment (3.0%) - -------------------------------------------------------------------------------------------------------------------------- 4,600,000 Advanced Micro Devices, Inc. cv. sub. notes 6s, 2005 3,346,500 2,000,000 Checkpoint Systems, Inc. 144A cv. sub. deb. 5 1/4s, 2005 1,480,000 2,500,000 Cirrus Logic, Inc. cv. sub notes 6s, 2003 1,665,625 4,000,000 HMT Technology Corp. cv. sub. notes 5 3/4s, 2004 1,435,000 5,500,000 LSI Logic Corp. 144A cv. sub. notes 4 1/4s, 2004 7,150,000 5,000,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 4,700,000 11,210,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 9,584,550 11,000,000 Solectron Corp. 144A cv. notes zero %, 2019 5,403,750 1,993,000 Thermo Instrument Systems, Inc. 144A cv. deb. 4 1/2s, 2003 1,773,770 1,215,000 Thermo Instrument Systems, Inc. 144A cv. company guaranty 3 3/4s, 2000 1,331,944 275,000 Thermo Optek Corp. cv. bonds 5s, 2000 269,500 1,194,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 1,165,643 2,705,000 Thermo Quest Corp. cv. company guaranty 5s, 2000 2,630,613 -------------- 41,936,895 Entertainment (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Loews Corp. cv. sub. notes 3 1/8s, 2007 3,460,000 10,500,000 Rogers Communications cv. deb. 2s, 2005 7,927,500 -------------- 11,387,500 Environmental Control (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 3,100,000 OHM Corp. cv. sub. deb. 8s, 2006 2,782,250 1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 782,500 3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,398,250 3,000,000 Waste Management, Inc. cv. sub. notes 4s, 2002 4,061,250 -------------- 11,024,250 Food (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 1,500,000 Chiquita Brands International, Inc. cv. sub. deb. 7s, 2001 1,385,625 1,000,000 Chiquita Brands International, Inc. 144A cv. sub. deb 7s, 2001 925,000 -------------- 2,310,625 Health Care (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 Assisted Living Concepts, Inc. cv. sub. deb. 6s, 2002 1,030,000 1,847,000 Renal Treatment Centers, Inc. cv. sub. notes 5 5/8s, 2006 1,539,936 3,545,000 Sun Healthcare Group, Inc. 144A cv. sub. 6s, 2004 319,050 -------------- 2,888,986 Hospital Management and Medical Services (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 4,263,000 Integrated Health Services, Inc. cv. sr. sub. deb 5 3/4s, 2001 2,632,403 2,500,000 PhyMatrix, Inc. cv. sub. deb. 6 3/4s, 2003 1,187,500 -------------- 3,819,903 Information Systems (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 2,750,000 Quantum Corp. cv. sub. 7s, 2004 2,516,250 Insurance and Finance (1.3%) - -------------------------------------------------------------------------------------------------------------------------- 4,500,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 10,125,000 10,500,000 Mutual Risk Management cv. sub. deb. zero %, 2015 8,771,538 -------------- 18,896,538 Lodging (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 1,650,000 Machinery (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 3,000,000 Thermo Fibertek Inc. 144A cv. company guaranty 4 1/2s, 2004 2,553,750 Medical Supplies and Devices (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 3,800,000 Atrix Labs, Inc. 144A cv. sub. notes 7s, 2004 2,954,500 2,000,000 Phoenix Shannon 144A cv. sr. sub. notes 9 1/2s, 2000 (In default) (NON) 20,000 1,412,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty 4 3/4s, 2004 1,179,020 5,000,000 Thermo Instrument Systems, Inc. cv. company guaranty Ser. RG, 4s, 2005 4,056,250 -------------- 8,209,770 Metals and Mining (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 1,000,000 Homestake Mining Co. 144A cv. sub. 5 1/2s, 2000 972,500 2,741,000 Inco Ltd. cv. deb. 5 3/4s, 2004 (Canada) 2,521,720 5,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 5,169,500 -------------- 8,663,720 Oil and Gas (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Diamond Offshore Drilling, Inc. cv. sub. notes 3 3/4s, 2007 4,315,000 6,160,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 3,141,600 5,000,000 Nabors Industries, Inc. cv. sub. notes 5s, 2006 5,918,750 3,750,000 Parker Drilling Co. cv. sub. notes 5 1/2s, 2004 2,292,188 3,000,000 PennzEnergy Co. cv. deb. 4.95s, 2008 3,172,500 5,000,000 PennzEnergy Co. cv. deb. 4.9s, 2008 5,268,750 4,241,000 Pride International, Inc. cv. sub. deb. 6 1/4s, 2006 4,527,268 4,500,000 Pride International, Inc. cv. sub. deb. zero %, 2018 1,316,250 1,500,000 Southern Mineral Corp. cv. deb. 6 7/8s, 2007 570,000 6,910,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 5,415,713 -------------- 35,938,019 Paper and Forest Products (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 3,000,000 Smurfitt Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 2,576,250 Pharmaceuticals and Biotechnology (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 7,000,000 Alza Corp. cv. sub. LYON zero %, 2014 3,438,750 3,500,000 Centocor, Inc. cv. sub. deb. 4 3/4s, 2005 3,780,000 4,000,000 Chiron Corp. cv. sub. notes 1.9s, 2000 3,835,000 3,500,000 Duramed Pharmaceuticals, Inc. cv. sub. notes 3 1/2s, 2002 2,590,000 1,025,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 668,813 1,300,000 NeXstar Pharmaceuticals, Inc. cv. sub. deb. 6 1/4s, 2004 1,537,250 12,000,000 Roche Holdings, Inc. 144A cv. unsub. LYON zero %, 2010 (Switzerland) 7,320,000 3,005,000 Sandoz Capital BVI Ltd. 144A cv. company guaranty 2s, 2002 (Switzerland) 4,312,475 4,000,000 Sepracor, Inc. 144A cv. notes 7s, 2005 4,045,000 1,716,000 Sepracor, Inc. cv. sub. deb. 6 1/4s, 2005 3,232,515 -------------- 34,759,803 Publishing (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 6,000,000 News America Holdings, Inc. cv. LYON zero %, 2013 4,218,779 4,400,000 World Color Press, Inc. cv. sub. notes 6s, 2007 4,174,500 -------------- 8,393,279 REITs (Real Estate Investment Trust) (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 3,750,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 3,679,688 Recreation (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 2,211,000 Speedway Motorsports, Inc. 144A cv. sub. notes 5 3/4s, 2003 3,355,193 Restaurants (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 5,540,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 (In default) (NON) 277,000 31,650,000 Boston Chicken, Inc. cv. notes LYON zero %, 2015 (In default) (NON) 158,250 4,850,000 CKE Restaurants, Inc. cv. sub. notes 4 1/4s, 2004 3,679,938 -------------- 4,115,188 Retail (2.7%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,520,000 8,500,000 Costco Cos, Inc. cv. sub. notes zero %, 2017 8,096,250 3,000,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 7,792,500 5,525,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 5,069,188 6,000,000 Office Depot, Inc. cv. LYON zero %, 2007 5,895,000 5,037,000 Pier 1 Imports, Inc. cv. sub. notes 5 3/4s, 2003 5,408,479 3,000,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 3,000,000 2,000,000 Sunglass Hut International, Inc. cv. sub. notes 5 1/4s, 2003 1,605,000 -------------- 38,386,417 Satellite Services (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,084,000 Gilat Satellite Networks Ltd. cv. sub. notes 6 1/2s, 2004 (Israel) 1,475,595 Semiconductors (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 15,569,000 Credence Systems Corp. cv. sub. notes 5 1/4s, 2002 12,844,425 12,549,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 9,050,966 3,030,000 Integrated Process Equipment Corp. 144A cv. sub. notes 6 1/4s, 2004 2,276,288 3,400,000 Lam Research Corp. cv. sub. notes 5s, 2002 2,915,500 6,000,000 Micron Technology, Inc. cv. sub. notes 7s, 2004 5,962,500 500,000 National Semiconductor Corp. cv. sub. deb. 6 1/2s, 2002 423,125 3,000,000 National Semiconductor Corp. 144A cv. deb. 6 1/2s, 2002 2,538,750 -------------- 36,011,554 Supermarkets (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 11,600,000 Whole Foods Market, Inc. cv. sub. deb. zero %, 2018 4,016,500 Telecommunications (1.2%) - -------------------------------------------------------------------------------------------------------------------------- 3,500,000 Global TeleSystems Group, Inc. cv. sr. sub. notes 5 3/4s, 2010 4,663,750 5,845,000 Inacom Corp. cv. sub. deb. 4 1/2s, 2004 5,348,175 4,000,000 NTL, Inc. 144A cv. sub. notes 7s, 2008 (United Kingdom) 5,670,000 1,750,000 World Access, Inc. cv. sub. notes 4 1/2s, 2002 1,082,813 -------------- 16,764,738 Telephone Services (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,000,000 MIDCOM Communications, Inc. cv. sub. notes 8 1/4s, 2003 (In default) (NON) 175,000 3,775,000 MIDCOM Communications, Inc. 144A cv. sub. deb. 8 1/4s, 2003 (In default) (NON) 660,625 -------------- 835,625 Textiles (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,000,000 Dixie Group, Inc. (The) cv. deb. 7s, 2012 795,000 Tobacco (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 7,485,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 4,154,175 Transportation (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 3,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 2,960,563 Wireless Communications (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 1,750,000 Cellstar Corp. cv. sub notes 5s, 2002 1,144,063 1,600,000 Telxon Corp. cv. sub. notes 5 3/4s, 2003 1,096,000 -------------- 2,240,063 -------------- Total Convertible Bonds and Notes (cost $521,826,862) $ 493,816,086 COMMON STOCKS (32.4%) (a) NUMBER OF SHARES VALUE Aerospace and Defense (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 96,277 Boeing Co. $ 3,911,253 32,683 Raytheon Co. Class A 2,261,255 14,581 Raytheon Co. Class B 1,024,315 -------------- 7,196,823 Airlines (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 33,000 Delta Air Lines, Inc. 2,093,438 52,331 UAL Corp. (NON) 4,225,728 -------------- 6,319,166 Alcoholic Beverages (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 41,406 Anheuser-Busch Cos., Inc. 3,027,814 Automotive (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 52,600 Delphi Automotive Systems Corp. (NON) 1,022,413 84,140 Ford Motor Co. 5,379,701 72,385 General Motors Corp. 6,437,741 -------------- 12,839,855 Banks (2.8%) - -------------------------------------------------------------------------------------------------------------------------- 112,914 Bank One Corp. 6,661,926 68,249 BankBoston Corp. 3,344,201 76,195 Chase Manhattan Corp. 6,305,136 33,778 First Union Corp. 1,870,457 95,212 Fleet Financial Group, Inc. 4,100,067 97,300 Greenpoint Financial Corp. 3,405,500 4,434 M & T Bank Corp. 2,478,606 45,000 Mercantile Bancorporation, Inc. 2,565,000 25,000 Summit Bancorp 1,059,375 45,814 SunTrust Banks, Inc. 3,275,701 93,500 Washington Mutual, Inc. 3,845,188 -------------- 38,911,157 Building and Construction (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 74,155 Beazer Homes USA, Inc. (NON) 1,710,200 Business Services (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 79,100 Avery Dennison Corp. 5,398,575 67,596 Xerox Corp. 3,971,265 -------------- 9,369,840 Cable Television (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 20,219 MediaOne Group, Inc. (NON) 1,649,112 Chemicals (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 28,736 Dow Chemical Co. 3,769,804 83,300 (E.I.) du Pont de Nemours & Co., Ltd. 5,883,063 48,916 Rohm & Haas Co. 2,192,048 -------------- 11,844,915 Computers (1.2%) - -------------------------------------------------------------------------------------------------------------------------- 76,081 Apple Computer, Inc. (NON) 3,499,726 65,013 Computer Associates International, Inc. 2,775,242 38,481 IBM Corp. 8,049,744 63,006 NCR Corp. 2,583,246 -------------- 16,907,958 Conglomerates (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 76,000 Allied-Signal, Inc. 4,465,000 58,707 Minnesota Mining & Manufacturing Co. 5,224,923 28,436 United Technologies Corp. 4,119,666 -------------- 13,809,589 Consumer Non Durables (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 36,118 Colgate-Palmolive Co. 3,699,838 63,131 Kimberly-Clark Corp. 3,870,719 -------------- 7,570,557 Consumer Services (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 222,390 Service Corp. International 4,614,593 Electric Utilities (1.3%) - -------------------------------------------------------------------------------------------------------------------------- 22,100 Dominion Resources, Inc. 908,863 181,000 DPL, Inc. 3,235,375 72,661 Duke Energy Corp. 4,069,016 107,700 Entergy Corp. 3,365,625 116,344 Potomac Electric Power Co. 3,403,062 104,344 Southern Co. 2,823,810 -------------- 17,805,751 Electronics and Electrical Equipment (1.9%) - -------------------------------------------------------------------------------------------------------------------------- 45,998 Cooper Industries, Inc. 2,225,153 53,641 Emerson Electric Co. 3,459,845 55,534 General Electric Co. 5,858,837 17,357 Lernout & Hauspie Speech Products N.V. (Belgium) 679,093 60,133 Motorola, Inc. 4,818,157 71,256 Rockwell International Corp. 3,678,591 95,000 SCI Systems, Inc. (NON) 3,615,938 90,722 Seagate Technology, Inc. (NON) 2,528,876 16,455 Sensormatic Electronics Corp. (NON) 197,460 1,632 Trikon Technologies, Inc. (NON) 285,665 -------------- 27,347,615 Entertainment (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 99,239 Disney (Walt) Productions, Inc. 3,150,838 Environmental Control (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 118,900 Republic Services, Inc. (NON) 2,444,881 Financial Services (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 29,855 Lehman Brothers Holding, Inc. 1,658,818 38,410 Merrill Lynch & Co., Inc. 3,224,039 34,372 Morgan (J.P.) & Co., Inc. 4,631,627 -------------- 9,514,484 Food (1.2%) - -------------------------------------------------------------------------------------------------------------------------- 111,000 ConAgra, Inc. 2,761,125 30,000 General Mills, Inc. 2,193,750 70,278 Heinz (H.J.) Co. 3,281,104 93,001 Kellogg Co. 3,441,037 70,000 Nabisco Holdings Corp. Class A 2,646,875 41,000 The Quaker Oats Co. 2,647,063 -------------- 16,970,954 Food and Beverages (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 154,525 Pepsi Bottling Group, Inc. (The) (NON) 3,254,683 137,774 Sara Lee Corp. 3,065,472 20,000 SYSCO Corp. 593,750 -------------- 6,913,905 Hospital Management (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 163,403 Tenet Healthcare Corp. (NON) 3,860,396 Insurance and Finance (3.1%) - -------------------------------------------------------------------------------------------------------------------------- 61,600 Allstate Corp. 2,240,700 70,500 American General Corp. 5,217,000 145,948 Bank of America Corp. 10,508,256 52,046 Chubb Corp. (The) 3,083,726 50,180 CIGNA Corp. 4,375,069 142,993 Citigroup, Inc. 10,760,223 27,083 Equitable Companies, Inc. 1,823,024 55,300 Fannie Mae 3,922,844 33,900 Hartford Financial Services Group 1,997,981 -------------- 43,928,823 Leisure (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 9,293 Hasbro, Inc. 317,124 98,863 Mattel, Inc. 2,558,080 -------------- 2,875,204 Medical Supplies and Devices (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 44,925 Baxter International, Inc. 2,830,275 Metals and Mining (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 54,651 Alcoa, Inc. 3,402,025 Oil and Gas (3.7%) - -------------------------------------------------------------------------------------------------------------------------- 41,103 Atlantic Richfield Co. 3,450,083 44,400 BP Amoco PLC ADR (United Kingdom) 5,025,525 35,276 Chevron, Inc. 3,518,781 167,950 Conoco, Inc. 4,555,644 109,000 Exxon Corp. 9,053,813 118,400 Halliburton Co. 5,046,800 82,000 Mobil Corp. 8,589,500 202,415 Occidental Petroleum Corp. 4,086,253 43,992 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 2,581,781 87,330 Unocal Corp. 3,629,653 71,149 Williams Cos., Inc. 3,361,790 -------------- 52,899,623 Packaging and Containers (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 78,000 Owens-Illinois, Inc. (NON) 2,262,000 100,082 Smurfit-Stone Container Corp. (NON) 2,339,417 -------------- 4,601,417 Paper and Forest Products (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 73,661 Boise Cascade Corp. 2,964,855 35,237 Fort James Corp. 1,339,006 81,050 Weyerhaeuser Co. 5,440,481 -------------- 9,744,342 Pharmaceuticals and Biotechnology (1.9%) - -------------------------------------------------------------------------------------------------------------------------- 141,500 American Home Products Corp. 8,631,500 111,790 Bristol-Myers Squibb Co. 7,105,652 73,276 Merck & Co., Inc. 5,147,639 113,434 Pharmacia & Upjohn, Inc. 6,352,304 -------------- 27,237,095 Photography (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 31,600 Eastman Kodak Co. 2,358,150 Publishing (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 61,500 Times Mirror Co. Class A 3,597,750 27,577 Tribune Co. 2,300,956 -------------- 5,898,706 Railroads (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 107,400 Burlington Northern Santa Fe Corp. 3,933,525 REITs (Real Estate Investment Trust) (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 29,000 Equity Residential Properties Trust 1,341,250 Retail (2.1%) - -------------------------------------------------------------------------------------------------------------------------- 56,774 Albertsons, Inc. 2,923,861 50,000 Dayton Hudson Corp. 3,365,625 92,802 Federated Department Stores, Inc. (NON) 4,332,693 249,822 K mart Corp. (NON) 3,716,102 2,571 Kroger Co. (NON) 139,637 67,214 Penney (J.C.) Co., Inc. 3,066,639 179,646 Rite Aid Corp. 4,187,997 92,136 Saks, Inc. (NON) 2,608,601 105,307 Sears, Roebuck & Co. 4,844,122 -------------- 29,185,277 Savings and Loans (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 188,432 Charter One Financial, Inc. 5,888,500 Telecommunications (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 54,314 ALLTEL Corp. 3,662,800 Telephone Services (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 22,342 Sprint Corp. 2,291,451 75,655 U S West, Inc. 3,957,702 -------------- 6,249,153 Telephone Utilities (1.5%) - -------------------------------------------------------------------------------------------------------------------------- 68,596 Ameritech Corp. 4,694,539 82,767 AT&T Corp. 4,179,734 99,086 Bell Atlantic Corp. 5,709,831 120,904 SBC Communications, Inc. 6,770,624 -------------- 21,354,728 Tobacco (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 86,014 Philip Morris Cos., Inc. 3,015,866 Utilities (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 122,585 Sempra Energy 2,543,639 51,000 Western Resources, Inc. 1,386,563 -------------- 3,930,202 -------------- Total Common Stocks (cost $382,084,607) $ 458,117,364 CONVERTIBLE PREFERRED STOCKS (31.7%) (a) NUMBER OF SHARES VALUE Apparel (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 45,000 Designer Finance $3.00 cv. cum. pfd. $ 1,614,375 Automobiles (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 50,000 Federal-Mogul Financial Trust $3.50 cum. cv. pfd. 2,693,750 210,600 Tower Automotive Capital Trust 144A $3.375 cv. pfd. 10,161,450 -------------- 12,855,200 Banks (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 224,472 CNB Capital Trust I $1.50 cum. cv. pfd. 5,667,918 69,350 Union Planters Corp. Ser. E, $2.00 cv. cum. pfd. 3,675,550 -------------- 9,343,468 Broadcasting (1.1%) - -------------------------------------------------------------------------------------------------------------------------- 65,000 Chancellor Media Corp. $3.00 cv. cum. pfd. 7,166,250 134,500 Sinclair Broadcast Group, Inc. $3.00 cv. pfd. 5,346,375 276,000 Triathlon Broadcasting Co. $.945 cv. pfd. 3,001,500 -------------- 15,514,125 Building and Construction (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 63,000 Txi Capital Trust I $2.75 cv. pfd. 2,220,750 Building Products (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 85,000 Owens Corning Capital LLC $3.25 cv. pfd. 3,995,000 Cable Television (1.9%) - -------------------------------------------------------------------------------------------------------------------------- 30,000 Adelphia Communications Corp. Ser. D, $5.50 cv. pfd. 6,105,000 40,000 Comcast Corp. $3.35 cv. pfd. 3,015,000 50,000 CSC Holdings, Inc. Ser. I, $8.50 cv. pfd. 5,725,000 75,000 MediaOne Group, Inc. Ser. D, $2.25 cv. pfd. 12,159,375 -------------- 27,004,375 Computer Services (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 41,467 Wang Laboratories, Inc. Ser. B, $3.25 cv. pfd. 2,156,284 Consumer Products (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 60,000 Newell Financial Trust I $2.625 cv. cum. pfd. 3,412,500 Cosmetics (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 82,333 Estee Lauder Automatic Common Exchange Security Trust II $5.41 cv. pfd. 7,862,802 60,000 Estee Lauder Co. $3.805 cv. pfd. 5,250,000 -------------- 13,112,802 Electric Utilities (2.0%) - -------------------------------------------------------------------------------------------------------------------------- 130,000 CalEnergy Capital Trust $3.125 cv. cum. pfd. 7,247,500 110,000 El Paso Energy Capital Trust $2.375 cv. pfd. 5,513,750 65,000 Houston Industries, Inc. $3.22 cv. pfd 7,653,750 100,000 Texas Utilities Co. $4.625 cv. pfd. 5,137,500 50,000 Texas Utilities Co. $0.205 cv. pfd. 2,181,250 -------------- 27,733,750 Electronics and Electrical Equipment (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 50,952 Lernout & Hauspie Speech Products N.V. 144A $2.375 cv. pfd. (Belgium) 1,757,844 118,300 Sensormatic Electronics Corp. 144A $1.625 cv. pfd. 2,351,213 -------------- 4,109,057 Electronic Components (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 74,378 Coltec Capital Trust $2.625 cv. pfd. 3,532,955 125,000 Loral Space & Comm. $3.00 cv. pfd. 6,843,750 102,100 Pioneer Standard Electronics, Inc. 144A $3.375 cv. pfd. 3,930,850 -------------- 14,307,555 Engineering (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 200,000 Evi, Inc. $2.50 cum. cv. pfd. 7,250,000 Entertainment (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 179,100 Metromedia International Group, Inc. $3.625 cv. cum. pfd. 4,678,988 Financial Services (2.0%) - -------------------------------------------------------------------------------------------------------------------------- 107,000 Devon Financing Trust $3.25 cv. pfd. 6,272,875 65,869 Finova Finance Trust $2.75 cv. cum. pfd. 4,380,289 56,000 Mandatory Common Exchange Trust (The) $3.625 cv. pfd. 252,000 70,000 Matewan Bancshares, Inc. Ser. A, $3.75 cv. cum. pfd. 2,187,500 150,000 Merrill Lynch & Co., Inc. Ser. IGL, 6.25% cv. pfd. 4,012,500 80,000 Salomon, Smith, Barney Inc. 6.25% cv. pfd. 5,600,000 70,000 USX Capital Trust I $3.375 cum. cv. pfd. 3,027,500 90,000 Walbro Captial Trust $2.00 cv. pfd. 2,306,250 -------------- 28,038,914 Food (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 85,300 Chiquita Brands International, Inc. Ser. B, $3.75 cv. cum. pfd. 3,763,863 65,000 Dole Food Co., Inc. $2.75 cv. pfd. 1,998,750 -------------- 5,762,613 Food and Beverages (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 250,000 Monsanto Co. $2.60 cv. pfd. 11,093,750 65,000 Ralston Purina Co. $4.336 cv. pfd. 2,851,875 -------------- 13,945,625 Information Systems (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 115,000 Vanstar Financial Trust Corp. $3.375 cv. pfd. 2,228,125 Insurance and Finance (3.2%) - -------------------------------------------------------------------------------------------------------------------------- 40,000 Aetna Inc. $6.25 cv. pfd. 3,060,000 66,433 American Bankers Insurance Group, Inc. Ser. B, $3.125 cv. pfd. 6,992,073 110,000 American General Delaware Corp. $3.00 cv. cum. pfd. 10,078,750 96,000 American Heritage Life Investment Corp. $4.25 cv. pfd. 6,156,000 80,000 Lincoln National Corp. $7.75 cv. pfd. 1,960,000 167,200 Lincoln National Corp. $0.463 cv. cum. pfd. 4,305,400 211,885 Philadelphia Consolidated Holding Corp. $0.534 cv. pfd. 2,012,908 121,100 Protective Life Corp. $3.25 cv. cum. pfd. 7,750,400 60,000 St. Paul Capital LLC $3.00 cv. cum. pfd. 3,232,500 -------------- 45,548,031 Investment Companies (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 100,000 Suiza Capital Trust II $2.75 cv. pfd. 3,650,000 Machinery (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 97,040 Case Corp. $4.50 cv. cum. pfd. 7,690,420 230,000 Ingersoll-Rand Co. $0.195 cv. pfd. 6,785,000 -------------- 14,475,420 Medical Supplies and Devices (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 9,860 Mckesson Corp. $2.50 cv. pfd. 549,695 164,604 Owens & Minor Trust I 144A Ser. A, $2.688 cv. cum. pfd. 5,740,565 -------------- 6,290,260 Metals and Mining (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 15,000 Cyprus Amax Minerals Co. Ser. A, $4.00 cv. pfd. 654,375 75,000 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 1,415,625 70,000 Kinam Gold, Inc. Ser. B, $3.75 cv. cum. pfd. 2,423,750 90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 2,169,600 40,000 Titanium Metals Corp. $3.313 cv. pfd. 830,000 -------------- 7,493,350 Oil and Gas (1.9%) - -------------------------------------------------------------------------------------------------------------------------- 58,500 KN Energy Inc. $3.55 cv. pfd. 1,864,688 125,000 Lomak Financing Trust $2.875 cv. pfd. 2,828,125 30,000 Lomak Petroleum Ser. C., $2.03 cv. cum. pfd. 491,250 93,085 Neuvo Energy Ser. A, $2.875 cv. pfd. 3,036,898 130,000 Tosco Financing Trust $2.875 cv. pfd. 6,565,000 125,000 Unocal Capital Trust $3.125 cv. cum. pfd. 7,218,750 20,000 Williams Companies, Inc. $1.25 cum. cv. pfd. 4,407,500 -------------- 26,412,211 Packaging and Containers (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 90,000 Owens-Illinois, Inc. $2.375 cv.pfd. 3,600,000 152,000 Sealed Air Corp. Ser. A, $2.00 cv.pfd. 8,835,000 -------------- 12,435,000 Paper and Forest Products (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 140,000 International Paper Co. $2.625 cv. pfd. 7,140,000 Publishing (1.6%) - -------------------------------------------------------------------------------------------------------------------------- 60,000 Golden Books Family Entertainment, Inc. $4.375 cv. cum. pfd. 412,500 50,000 Houghton Mifflin Co. $4.08 cv. pfd. 737,500 125,000 Readers Digest $0.453 cv. pfd. 4,078,125 65,000 Tribune Co. $2.00 cv. pfd. 9,685,000 278,180 Tribune Co. $1.75 cv. pfd. 7,928,130 -------------- 22,841,255 Railroads (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 170,000 Union Pacific Capital Trust 144A $3.125 cum. cv. pfd. 9,031,250 Recreation (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 18,871 Royal Caribbean Cruises Ltd. Ser. A, $3.625 cum. cv. pfd. 2,167,806 142,870 Station Casinos, Inc. $3.50 cv. pfd. 7,947,144 -------------- 10,114,950 REITs (Real Estate Investment Trust) (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 140,000 Archstone Communities Trust Ser. A, $1.75 cv. cum. pfd. 4,252,500 146,300 Equity Residential Property Ser. E, $1.75 cv. pfd. 3,748,938 74,490 Tanger Factory Outlet Centers Ser. A, $1.802 cv. cum. pfd. 1,769,138 20,000 Vornado Realty Trust Ser. A, $3.25 cv. cum. pfd. 1,095,000 -------------- 10,865,576 Restaurants (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 178,299 Wendy's Financing Ser. A, $2.50 cv. pfd. 10,207,618 Retail (1.2%) - -------------------------------------------------------------------------------------------------------------------------- 4,195 Ann Taylor Finance Trust $4.25 cv. cum. pfd. 505,498 45,000 CVS Auto Exchange 6.00% cv. pfd. 3,808,125 130,000 Dollar General Strypes Trust $3.352 cv. pfd. 5,265,000 140,000 K mart Financing I $3.875 cum. cv. pfd. 7,595,000 -------------- 17,173,623 Telecommunications (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 75,000 QUALCOMM, Inc. $2.875 cum. cv. pfd. 10,687,500 5,000 TCI Pacific Comm $5.00 cv. pfd. 1,602,500 15,000 WinStar Communications. Inc. $3.50 cv. pfd. 845,625 -------------- 13,135,625 Telephone Services (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 170,000 Intermedia Communications, Inc. Ser. F, $7.00 cv. pfd. 4,143,750 60,000 Nextlink Communications $3.25 cv. pfd. 5,250,000 60,000 Qwest Trends Trust 144A 5.75% cv. pfd. 4,417,500 -------------- 13,811,250 Tobacco (--%) - -------------------------------------------------------------------------------------------------------------------------- 57,517 DIMON, Inc. $2.00 cv. pfd. 323,533 Transportation (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 120,500 CNF Trust I Ser. A, $2.50 cv. cum. pfd. 7,305,313 Wireless Communications (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 70,000 AirTouch Communications, Inc. Ser. C, $2.125 cv. cum. pfd. 9,056,250 50,000 Omnipoint Corp. $3.50 cv. pfd. 1,931,250 -------------- 10,987,500 -------------- Total Convertible Preferred Stocks (cost $441,284,699) $ 448,525,271 PREFERRED STOCKS (--%) (a) (cost $1,163,237) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- 159,304 Trikon Technologies, Inc. Ser. H, 8.125% pfd. (PIK) $ 159,304 SHORT-TERM INVESTMENTS (1.4%) (a) (cost $19,370,000) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- $19,370,000 Interest in $600,000,000 joint repurchase agreement dated April 30, 1999 with Salomon, Smith Barney, Inc. due May 3, 1999 with respect to various U.S. Treasury obligations -- maturity value of $19,377,861 for an effective yield of 4.87% $ 19,370,000 - -------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $1,365,729,405) (b) $1,419,988,025 - -------------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $1,414,936,639. (b) The aggregate identified cost on a tax basis is $1,370,263,647, resulting in gross unrealized appreciation and depreciation of $181,660,455 and $131,936,077, respectively, or net unrealized appreciation of $49,724,378. (NON) Non-income-producing security. (PIK) Income may be received in cash or additional securities at the discretion of the issuer. 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 representing ownership of foreign securities on deposit with a domestic custodian bank. The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities April 30, 1999 (Unaudited) Assets - ----------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $1,365,729,405) (Note 1) $1,419,988,025 - ----------------------------------------------------------------------------------------------- Cash 2,047,319 - ----------------------------------------------------------------------------------------------- Dividends and interest receivable 6,459,233 - ----------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 1,101,454 - ----------------------------------------------------------------------------------------------- Receivable for securities sold 11,772,985 - ----------------------------------------------------------------------------------------------- Receivable for closed forward currency contracts 466,832 - ----------------------------------------------------------------------------------------------- Total assets 1,441,835,848 Liabilities - ----------------------------------------------------------------------------------------------- Payable for securities purchased 22,718,994 - ----------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 1,584,525 - ----------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 1,923,872 - ----------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 123,555 - ----------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 21,217 - ----------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 5,954 - ----------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 467,641 - ----------------------------------------------------------------------------------------------- Other accrued expenses 53,451 - ----------------------------------------------------------------------------------------------- Total liabilities 26,899,209 - ----------------------------------------------------------------------------------------------- Net assets $1,414,936,639 Represented by - ----------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $1,277,371,481 - ----------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (8,293,854) - ----------------------------------------------------------------------------------------------- Accumulated net realized gain on investments (Note 1) 91,600,392 - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 54,258,620 - ----------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $1,414,936,639 Computation of net asset value and offering price - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($1,061,555,360 divided by 51,581,523 shares) $20.58 - ----------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $20.58)* $21.84 - ----------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($300,101,078 divided by 14,749,038 shares)** $20.35 - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($17,536,979 divided by 857,385 shares) $20.45 - ----------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $20.45)* $21.19 - ----------------------------------------------------------------------------------------------- Net asset value and offering price per class Y share ($35,743,222 divided by 1,736,527 shares) $20.58 - ----------------------------------------------------------------------------------------------- * On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended April 30, 1999 (Unaudited) Investment income: - ----------------------------------------------------------------------------------------------- Interest $ 16,709,816 - ----------------------------------------------------------------------------------------------- Dividends 14,522,310 - ----------------------------------------------------------------------------------------------- Total investment income 31,232,126 Expenses: - ----------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 3,947,565 - ----------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 934,207 - ----------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 9,678 - ----------------------------------------------------------------------------------------------- Administrative services (Note 2) 8,860 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,307,576 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 1,472,201 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 67,444 - ----------------------------------------------------------------------------------------------- Reports to shareholders 49,535 - ----------------------------------------------------------------------------------------------- Auditing 14,000 - ----------------------------------------------------------------------------------------------- Legal 5,594 - ----------------------------------------------------------------------------------------------- Postage 56,307 - ----------------------------------------------------------------------------------------------- Total expenses 7,872,967 - ----------------------------------------------------------------------------------------------- Expense reduction (Note 2) (143,270) - ----------------------------------------------------------------------------------------------- Net expenses 7,729,697 - ----------------------------------------------------------------------------------------------- Net investment income 23,502,429 - ----------------------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 87,876,986 - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 88,435,674 - ----------------------------------------------------------------------------------------------- Net gain on investments 176,312,660 - ----------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $199,815,089 - ----------------------------------------------------------------------------------------------- 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 1999* 1998 - --------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets - --------------------------------------------------------------------------------------------------------------- Operations: - --------------------------------------------------------------------------------------------------------------- Net investment income $ 23,502,429 $ 48,902,430 - --------------------------------------------------------------------------------------------------------------- Net realized gain on investments 87,876,986 133,278,759 - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments 88,435,674 (203,859,332) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 199,815,089 (21,678,143) - --------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - --------------------------------------------------------------------------------------------------------------- From net investment income Class A (24,777,149) (39,874,535) - --------------------------------------------------------------------------------------------------------------- Class B (5,949,061) (8,456,841) - --------------------------------------------------------------------------------------------------------------- Class M (383,013) (571,054) - --------------------------------------------------------------------------------------------------------------- Class Y (446,520) -- - --------------------------------------------------------------------------------------------------------------- In excess of net investment income Class A -- (1,430,151) - --------------------------------------------------------------------------------------------------------------- Class B -- (303,316) - --------------------------------------------------------------------------------------------------------------- Class M -- (20,482) - --------------------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (95,643,215) (108,409,463) - --------------------------------------------------------------------------------------------------------------- Class B (26,827,275) (24,372,023) - --------------------------------------------------------------------------------------------------------------- Class M (1,669,288) (1,435,189) - --------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 6,391,286 130,624,709 - --------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 50,510,854 (75,926,488) Net assets - --------------------------------------------------------------------------------------------------------------- Beginning of period 1,364,425,785 1,440,352,273 - --------------------------------------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income of $8,293,854 and $240,540, respectively) $1,414,936,639 $1,364,425,785 - --------------------------------------------------------------------------------------------------------------- * 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 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $20.04 $23.22 $21.24 $19.42 $19.09 $20.38 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .35(c) .76(c) .78(c) .81(c) .85 .81 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 2.54 (1.02) 3.70 2.70 1.60 (.46) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.89 (.26) 4.48 3.51 2.45 .35 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.48) (.76) (.87) (.98) (.96) (.74) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- (.03) (.06) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.87) (2.13) (1.57) (.71) (1.16) (.90) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (2.35) (2.92) (2.50) (1.69) (2.12) (1.64) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.58 $20.04 $23.22 $21.24 $19.42 $19.09 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 15.53* (1.37) 22.86 18.99 14.38 1.84 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,061,555 $1,056,693 $1,168,470 $898,486 $756,645 $697,946 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .48* .97 1.03 1.06 1.16 .96 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.77* 3.50 3.56 3.99 4.64 4.16 - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52 48.37 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total 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) 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 Per-share April 30 operating performance (Unaudited) Year ended October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.83 $23.01 $21.09 $19.30 $19.00 $20.35 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .28(c) .59(c) .63(c) .66(c) .69 .74 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 2.51 (1.01) 3.64 2.68 1.61 (.55) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.79 (.42) 4.27 3.34 2.30 .19 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.40) (.61) (.73) (.84) (.84) (.66) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- (.02) (.05) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.87) (2.13) (1.57) (.71) (1.16) (.88) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (2.27) (2.76) (2.35) (1.55) (2.00) (1.54) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.35 $19.83 $23.01 $21.09 $19.30 $19.00 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 15.17* (2.11) 21.89 18.14 13.54 1.00 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $300,101 $289,652 $257,163 $146,127 $75,309 $31,432 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .86* 1.72 1.78 1.81 1.91 1.71 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.40* 2.74 2.78 3.26 3.92 3.58 - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52 48.37 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total 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) 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 March 13, 1995+ operating performance (Unaudited) Year ended October 31 to October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.92 $23.08 $21.14 $19.37 $17.79 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .30(c) .65(c) .67(c) .73(c) .64 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 2.53 (1.00) 3.67 2.65 1.64 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.83 (.35) 4.34 3.38 2.28 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.43) (.66) (.78) (.90) (.70) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- (.02) (.05) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.87) (2.13) (1.57) (.71) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (2.30) (2.81) (2.40) (1.61) (.70) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.45 $19.92 $23.08 $21.14 $19.37 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 15.28* (1.75) 22.24 18.30 12.99* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $17,537 $18,081 $14,719 $7,128 $1,753 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .73* 1.47 1.53 1.54 1.04* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.53* 2.99 3.04 3.55 2.89* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total 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) 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 Y - ------------------------------------------------------------------------------------------------------------------------------------ For the period Dec 30, 1998+ Per-share to April 30 operating performance (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.32 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .31(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 1.20 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.51 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.25) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.25) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $20.58 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 7.90* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $35,743 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .24* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 1.24* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 46.77* - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total 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) 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, 1999 (Unaudited) Note 1 Significant accounting policies Putnam Convertible Income-Growth Trust (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 conservation as a secondary objective. The fund offers class A, class B, class M and class Y 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. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, and class M shares but do not bear a distribution fee. Class Y shares are sold to defined contribution plans that invest at least $150 million in a combination of Putnam Funds and other accounts managed by affiliates of Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. 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. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are 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 and payment in kind bonds are accreted according to the yield-to-maturity basis. E) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended April 30, 1999, the fund had no borrowings against the line of credit. F) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, 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. G) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid 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 of average net assets, 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% thereafter. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended April 30, 1999, fund expenses were reduced by $143,270 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. Each Trustee of the fund receives an annual Trustee fee, of which $1,160 has been allocated to the fund 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 has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain in the fund and are invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets attributable to class A, class B and class M shares, respectively. The Trustees have approved payment by the fund to an annual rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to class A, class B and class M shares, respectively. For the six months ended April 30, 1999, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $74,704 and $3,950 from the sale of class A and class M shares, respectively and $361,489 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended April 30, 1999, Putnam Mutual Funds Corp., acting as underwriter received $4,668 on class A redemptions. Note 3 Purchase and sales of securities During the six months ended April 30, 1999, purchases and sales of investment securities other than short-term investments aggregated $639,722,728 and $740,732,730, 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, 1999, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended April 30, 1999 - ----------------------------------------------------------------------------- Class A Shares Amount - ----------------------------------------------------------------------------- Shares sold 2,446,419 $ 48,673,087 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,577,463 105,909,719 - ----------------------------------------------------------------------------- 8,023,882 154,582,806 Shares repurchased (9,171,146) (183,034,903) - ----------------------------------------------------------------------------- Net decrease (1,147,264) $(28,452,097) - ----------------------------------------------------------------------------- Year ended October 31, 1998 - ----------------------------------------------------------------------------- Class A Shares Amount - ----------------------------------------------------------------------------- Shares sold 9,382,467 $205,168,706 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,911,967 124,147,866 - ----------------------------------------------------------------------------- 15,294,434 329,316,572 Shares repurchased (12,883,335) (278,877,249) - ----------------------------------------------------------------------------- Net increase 2,411,099 $ 50,439,323 - ----------------------------------------------------------------------------- Six months ended April 30, 1999 - ----------------------------------------------------------------------------- Class B Shares Amount - ----------------------------------------------------------------------------- Shares sold 1,344,406 $26,394,622 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,393,495 26,173,663 - ----------------------------------------------------------------------------- 2,737,901 52,568,285 Shares repurchased (2,592,647) (51,084,111) - ----------------------------------------------------------------------------- Net increase 145,254 $ 1,484,174 - ----------------------------------------------------------------------------- Year ended October 31, 1998 - ----------------------------------------------------------------------------- Class B Shares Amount - ----------------------------------------------------------------------------- Shares sold 4,687,780 $101,436,908 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,255,855 26,103,869 - ----------------------------------------------------------------------------- 5,943,635 127,540,777 Shares repurchased (2,515,435) (53,200,565) - ----------------------------------------------------------------------------- Net increase 3,428,200 $ 74,340,212 - ----------------------------------------------------------------------------- Six months ended April 30, 1999 - ----------------------------------------------------------------------------- Class M Shares Amount - ----------------------------------------------------------------------------- Shares sold 73,066 $ 1,463,125 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 93,790 1,770,246 - ----------------------------------------------------------------------------- 166,856 3,233,371 Shares repurchased (216,978) (4,308,278) - ----------------------------------------------------------------------------- Net decrease (50,122) $(1,074,907) - ----------------------------------------------------------------------------- Year ended October 31, 1998 - ----------------------------------------------------------------------------- Class M Shares Amount - ----------------------------------------------------------------------------- Shares sold 618,070 $13,595,951 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 82,403 1,719,717 - ----------------------------------------------------------------------------- 700,473 15,315,668 Shares repurchased (430,655) (9,470,494) - ----------------------------------------------------------------------------- Net increase 269,818 $ 5,845,174 - ----------------------------------------------------------------------------- For the period December 30, 1998 (commencement of operations) to April 30,1999 - ----------------------------------------------------------------------------- Class Y Shares Amount - ----------------------------------------------------------------------------- Shares sold 1,851,218 $36,701,560 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 22,683 446,520 - ----------------------------------------------------------------------------- 1,873,901 37,148,080 Shares repurchased (137,374) (2,713,964) - ----------------------------------------------------------------------------- Net increase 1,736,527 $34,434,116 - ----------------------------------------------------------------------------- Our commitment to quality service * CHOOSE AWARD-WINNING SERVICE Putnam Investments has won the DALBAR Service Award 8 times in the past 9 years. In 1997 and 1998, Putnam was the only company to win all three DALBAR awards: for service to investors, to financial advisors, and to variable annuity contract holders.* * HELP YOUR INVESTMENTS GROW Set up a systematic program for investing with as little as $25 a month from a Putnam money market fund or from your checking or savings account.+ * SWITCH FUNDS EASILY Within the same class of shares, you can move money from one account to another without a service charge. (This privilege is subject to change or termination.) * ACCESS YOUR MONEY QUICKLY You can get checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. For details about any of these or other services, contact your financial advisor or call the toll-free number shown below and speak with a helpful Putnam representative. To learn more about Putnam, visit our Web site. www.putnaminv.com To make an additional investment in this or any other Putnam fund, contact your financial advisor or call our toll-free number. 1-800-225-1581 *DALBAR, Inc., an independent research firm, presents the awards to financial services firms that provide consistently excellent service. + Regular investing, of course, does not guarantee a profit or protect against a loss in a declining market. The Putnam family of funds The following is a complete list of Putnam's open-end mutual funds. 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. GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund [DBL. DAGGER] Capital Opportunities Fund Diversified Equity Trust Europe Growth Fund Global Growth Fund Global Natural Resources Fund Growth Opportunities Fund Health Sciences Trust International Growth Fund International New Opportunities Fund Investors Fund New Opportunities Fund [DBL. DAGGER] OTC & Emerging Growth Fund Research Fund Vista Fund Voyager Fund Voyager Fund II GROWTH AND INCOME FUNDS Balanced Retirement Fund Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston Global Growth and Income Fund 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 INCOME FUNDS American Government Income Fund Diversified Income Trust Global Governmental Income Trust High Quality Bond Fund + [DBL. DAGGER] High Yield Advantage Fund [DBL. DAGGER] High Yield Total Return Fund High Yield Trust [DBL. DAGGER] High Yield Trust II Income Fund Intermediate U.S. Government Income Fund Money Market Fund ** Preferred Income Fund Strategic Income Fund * U.S. Government Income Trust TAX-FREE INCOME FUNDS Municipal Income Fund Tax Exempt Income Fund Tax Exempt Money Market 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 State tax-free money market funds [SECTION MARK] ** California, New York ASSET ALLOCATION 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 * Formerly Putnam Diversified Income Trust II + Formerly Putnam Federal Income Trust [DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact Putnam for details. [SECTION MARK] Not available in all states. ** An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund. Check your account balances and current performance at www.putnaminv.com. Fund information WEB SITE www.putnaminv.com 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 John A. Hill, Vice Chairman Jameson Adkins Baxter Hans H. Estin Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Thomas Stephens 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 Ian C. Ferguson Vice President Brett C. Browchuk Vice President Thomas V. Reilly Vice President Edward T. Shadek, Jr. Vice President Charles G. Pohl Vice President and Fund Manager Forrest N. Fontana Vice President and Fund Manager Richard A. Monaghan Vice President John R. Verani 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' Web site: 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 the 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 - --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminv.com SA019-52502 6/99 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - ---------------------------------------------------------------------------- Putnam Convertible Income-Growth Trust Supplement to Semiannual Report dated April 30, 1999 The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to defined contribution plans investing $150 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A, B, and M shares, which are discussed more extensively in the annual report. ANNUAL RESULTS AT A GLANCE - ---------------------------------------------------------------------------- Total return for periods ended 4/30/99 NAV 6 months 15.61% 1 year 3.45 5 years 98.21 Annual average 14.67 10 years 238.87 Annual average 12.98 Life of fund, annual average (since class A inception, 6/29/72) 12.50 Share value: NAV 10/31/98 $20.04 4/30/99 $20.58 - ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 2 $0.493 1.868 $2.361 - ---------------------------------------------------------------------------- Please note that past performance does not indicate future results. Returns shown for class Y shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect the initial sales charge currently applicable to class A shares. These returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, are lower than the operating expenses applicable to class A shares. All returns assume reinvestment of distributions at net asset value. Performance data reflects an expense limitation previously in effect. Without the expense limitation, total returns would have been lower. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. -----END PRIVACY-ENHANCED MESSAGE-----