<PAGE>
Putnam
Convertible
Income-Growth
Trust
SEMIANNUAL REPORT
April 30, 1994
[ARTWORK APPEARS HERE]
[LOGO APPEARS HERE]
Boston * London * Tokyo
<PAGE>
Performance highlights
"Conservative investors may appreciate this fund's cost-conscious investment
strategy, which adds an extra layer of downside safety without retarding
total returns."
--Morningstar Mutual Fund Values, 1/7/94
Performance should always be considered in light of a fund's investment
strategy. Putnam Convertible Income-Growth Trust is designed for investors
seeking current income and capital appreciation mainly through bonds and
preferred stocks convertible into common stock, with capital conservation as a
secondary objective.
SEMIANNUAL RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Total return: Class A Class B
Six months ended 4/30/94 NAV POP NAV CDSC
<S> <C> <C> <C> <C>
(change in value plus
reinvested earnings) -2.04% -7.66% -2.49% -7.09%
Current return: NAV POP NAV
(end of period)
Current dividend rate1 5.10% 4.80% 4.67%
Current 30-day SEC yield2 4.10 3.86 3.32
Share value: NAV POP NAV
10/31/93 $20.38 $21.62 $20.35
4/30/94 18.83 19.98 18.75
Distributions: Long-term
No. Income capital gain Total
Class A 2 $0.48 $0.68 $1.16
Class B 2 $0.442 $0.68 $1.122
</TABLE>
Performance data represent past results. For performance over longer periods,
see pages 8 and 9. POP assumes 5.75% maximum sales charge. CDSC assumes 5%
maximum contingent deferred sales charge. 1Income portion of most recent
distribution, annualized and divided by NAV or POP at end of period. 2Based only
on investment income, calculated per SEC guidelines.
2
<PAGE>
[PHOTOGRAPH OF
GEORGE PUTNAM
From the Chairman APPEARS HERE] [C] KARSH, OTTAWA
Dear Shareholder:
Many shareholders have been asking us whether we think the volatility that hit
the securities markets in February and March was a prelude to further decline
during the rest of 1994. We have been pointing out that the recent adjustments
in the markets are a natural occurrence at this stage of the economic recovery.
Some volatility will likely continue for a while as investors digest new
realities in areas such as interest rates, inflation, and the pace of the
recovery. But the economy is still strong, interest rates remain historically
low, and inflation appears under control. Overall prospects for the long term,
in our view, are still positive.
Seasoned investors know there will occasionally be periods of rough going. But
experience has also taught them that long-term investment programs should rarely
be altered in response to short-term events.
In the report that follows, fund managers Hugh Mullin and Charles Pohl discuss
the performance of Putnam Convertible Income-Growth Trust in this market
environment.
Respectfully yours,
/S/ George Putnam
George Putnam
June 15, 1994
[C] Copyright
3
<PAGE>
Report from the fund managers
Hugh H. Mullin, lead manager
Charles G. Pohl
Intensifying volatility in the financial markets over the six months ended April
30, 1994, presented some challenges for Putnam Convertible Income-Growth Trust.
Even so, the fund's strategy, which is to maintain a portfolio primarily of
bonds and preferred stocks convertible into common stock, helped to reduce the
impact of recent market volatility.
While the fund's total return for the six months ended April 30, 1994, was
negative, as were the returns of most other investments, the decline of net
asset value was in line with that of the S&P 500/(R)/ and less than that of the
Lehman Brothers Corporate Bond Index. (see table on page 8)
TWO-PART STRATEGY HELPED CUSHION THE FUND
Late in 1993, we recognized that the direction of short-term interest rates was
likely to reverse, and the spread between short- and long-term rates could be
expected to narrow. In anticipation of such a development, we employed a two-
part strategy to position the fund more conservatively.
We believed that many of the convertible securities issued during the second
half of 1993 were priced somewhat aggressively and, consequently, had little
potential for appreciation. For this reason, we avoided these overpriced issues,
instead selecting holdings that represented a better value in the market.
Also, we maintained a larger percentage of the fund's holdings in cash during
the period. About 8% of the fund's holdings were in short-term cash equivalents
at quarter's end. We believe this decision was to the fund's advantage, as it
helped cushion the value of the portfolio during the recent volatility.
CYCLICALS: EARLY VERSUS LATE
Since the beginning of the current economic upswing, we have emphasized cyclical
securities in the fund's portfolio. Cyclical
4
<PAGE>
securities tend to perform well when the economy improves, either in the earlier
or later stages of recovery. When selecting these securities, we identify them
from among the two types: early and late.
Early cyclicals, which are represented primarily by manufacturers of automobiles
and consumer durables such as large appliances have, we believe, already
provided their strongest performance. Therefore, we took profits on many of
these holdings during the period.
We believe that late cyclicals, however, have not yet appreciated fully in
value, since they tend to perform best later in an economic recovery. We intend
to hold these securities until we believe they are approaching peak valuations.
An example of a late-cyclical convertible stock holding that we favor is Alumax,
Inc. This aluminum producer operates low-cost smelting operations and stands to
benefit from increased construction activity.
HIGH-YIELDING CONVERTIBLES CONTINUE TO PERFORM WELL
While they did not escape the widespread volatility of the financial markets
during the last several months, high-yielding convertible bonds continued to
outperform other fixed-income investments. We believe several factors continue
to make these bonds attractive.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TOP FIVE INDUSTRY SECTORS*
<S> <C>
Insurance and finance................... 14.1%
Oil and gas............................. 9.2%
Consumer services....................... 6.7%
Consumer nondurables.................... 6.2%
Business equipment and services......... 5.7%
</TABLE>
* Based on net assets on 4/30/94.
5
<PAGE>
For example, the overall level of credit quality in the higher-yielding
corporate sector has been improving over the last several years. Companies have
routinely been trimming operating costs and increasing workplace efficiency.
Also, a growing U.S. economy has helped strengthen the earnings of many
companies. Improved earnings, in turn, have helped raise the quality ratings of
these companies debt securities.
A holding that we continue to favor is Fieldcrest Cannon, Inc., which
manufactures and markets a wide range of bath and bedding products. Not only has
the company improved its operating efficiency, it has also been able to
penetrate the mass merchandising market by winning new business through large
discount retail chains.
OUTLOOK
While the turmoil in the markets negatively affected fund performance during the
past six months, it has also produced some attractive buying opportunities.
We expect that many of the bank and insurance holdings we added to the portfolio
stand to benefit in coming months, since we believe they represent good value at
attractive prices. BankAmerica Corp., for example, represents a bank holding we
believe will benefit as economic conditions in California, where the bank is
based, continue to improve.
We expect to maintain a large weighting in heavy cyclical and industrial
holdings. If it appears likely that interest rates have peaked, we may consider
reducing the portfolio's cash position and shifting assets back into the
convertible market.
6
<PAGE>
----------------------------------------------------------------------
TOP 10 HOLDINGS (4/30/94)*
----------------------------------------------------------------------
SFP Pipeline Holdings, Inc.
Common carrier, gasoline pipelines
----------------------------------------------------------------------
ADT Inc.
Electronic security systems, vehicle auctions
----------------------------------------------------------------------
Cellular Communications, Inc.
Cellular telephone services
----------------------------------------------------------------------
Burlington Northern, Inc.
Railroad operator
----------------------------------------------------------------------
Westinghouse Electric Corp.
Power systems, electronic systems, broadcasting
----------------------------------------------------------------------
Federated Department Stores
Department store operator
----------------------------------------------------------------------
Albany International Corp.
Producer of fabrics for papermaking machines
----------------------------------------------------------------------
First Bank Systems, Inc.
Regional bank holding company
----------------------------------------------------------------------
Eastman Kodak Co.
Photography, information systems, health care
----------------------------------------------------------------------
Chrysler Corp.
Automobile production
----------------------------------------------------------------------
*These holdings represent 9.86% of the fund's assets. Portfolio holdings are
subject to change.
The fund invests in lower-rated higher-yielding securities, which pose a greater
risk to principal than higher-rated securities. High-yield securities are rated
lower than investment-grade securities because there is a greater possibility
that negative changes in the issuer's business condition, or in general economic
conditions, may hinder the issuer's ability to pay principal and interest on
securities.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. Although the described
holdings are viewed favorably as of April 30, 1994, there is no guarantee the
fund will continue to hold these securities in the future.
7
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: On a
cumulative long-term basis and how the fund might have grown each year, on
average, over varying periods (see the tables below). For comparative purposes,
we show how the fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDING 4/30/94
<TABLE>
<CAPTION>
Lehman Bros.
Class A Class B* S&P Corporate
NAV POP NAV CDSC 500 Index Bond Index
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 months -2.04% -7.66% -2.49% -7.09% -2.31% -5.07%
-------------------------------------------------------------------------------------------------------
1 year 6.82 0.67 -- -- 5.31 1.24
-------------------------------------------------------------------------------------------------------
5 years 70.97 61.10 -- -- 70.40 63.27
Annual average 11.32 10.01 -- -- 11.25 10.30
-------------------------------------------------------------------------------------------------------
10 years 219.61 201.27 -- -- 297.00 220.39
Annual average 12.32 11.66 -- -- 14.78 12.35
-------------------------------------------------------------------------------------------------------
Life of class B -- -- 2.81 -1.99 2.27 -1.27
-------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN FOR PERIODS ENDING 3/31/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B*
NAV POP NAV CDSC
===========================================================================================
<S> <C> <C> <C> <C>
6 months 0.87% -4.94% 0.48% -4.27%
-------------------------------------------------------------------------------------------
1 year 7.67 1.48 -- --
-------------------------------------------------------------------------------------------
5 years 77.95 67.70 -- --
Annual average 12.22 10.89 -- --
-------------------------------------------------------------------------------------------
10 years 225.08 206.29 -- --
Annual average 12.51 11.84 -- --
-------------------------------------------------------------------------------------------
Life of class B -- -- 3.85 -1.00
-------------------------------------------------------------------------------------------
</TABLE>
*Effective July 15, 1993, the fund began offering class B shares. Performance
of each share class will differ.
Performance data represent past results. Investment returns and net asset value
of the fund will fluctuate so an investor's shares, when sold, may be worth more
or less than their original cost. Fund performance data do not take into account
any adjustment for taxes payable on reinvested distributions.
8
<PAGE>
TERMS AND DEFINITIONS
Class A fund shares may be subject to an initial sales charge.
Class B fund shares may be subject to a sales charge on redemption.
Net asset value (NAV) is the value of all fund assets, minus liabilities,
divided by the number of outstanding shares. It does not include any initial or
contingent deferred sales charges.
Public offering price (POP) is the price of a fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume the maximum 5.75% sales charge.
Contingent deferred sales charge (CDSC) is applied on redemption of fund shares.
Your fund's CDSC declines from a 5% maximum during the first year to 1% during
the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of large-capitalization common
stocks and assumes reinvestment of all distributions. The index does not take
into account brokerage commissions or other costs. The fund's portfolio contains
securities that do not match those in the index.
Lehman Brothers Corporate Bond Index is an unmanaged list of corporate bonds.
The index reflects changes of market prices, assumes reinvestment of all
interest payments, and does not take into account brokerage commissions or other
costs. The index may include bonds different from those in the fund, and may
pose different risks than the fund.
9
<PAGE>
Life cycle investing
As we move through life, our investment needs change. As these needs change, so
does the way we allocate our assets. Here are some basic rules for setting up
and maintaining an investment program and some examples of how assets might be
allocated.
DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or retirement.
EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with longer timelines
and lower for older investors who may depend on their investment for current
income.
ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your investable
dollars should be allocated to each investment category.
CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam's free exchange privilege, you can adjust your own Putnam portfolio
of funds as your financial needs change -- without a service fee.*
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Fund Selector(TM) can help you make your choices.
*Putnam reserves the right to change or terminate the exchange privilege. In
some cases, a sales charge may apply. See prospectus for details.
10
<PAGE>
Four ways to allocate assets
--------------------------------------------------------------------------------
SEEKING MAXIMUM GROWTH
Risk tolerance: 30% - 40% Growth and Income [PIE CHART
Generally 40% - 50% Growth APPEARS HERE]
investors with a 5% - 20% Income or
higher risk tax-free income
tolerance (often
in their 20s and
early 30s)
--------------------------------------------------------------------------------
SEEKING GROWTH AND SOME INCOME
Risk tolerance: 40% - 50% Growth and Income [PIE CHART
Generally 30% - 40% Growth APPEARS HERE]
investors with a 10% - 30% Income or
high to moderate tax-free income
risk tolerance
(often in their late
30s and early 40s)
--------------------------------------------------------------------------------
SEEKING INCOME AND SOME GROWTH WITH
PROTECTION AGAINST INFLATION
Risk tolerance: 30% - 40% Growth and Income [PIE CHART
Generally 10% - 20% Growth APPEARS HERE]
investors with a 25% - 60% Income or
moderate risk tax-free income
tolerance (often
in their late 40s
and 50s)
--------------------------------------------------------------------------------
SEEKING HIGH CURRENT INCOME AND PROTECTION
AGAINST INFLATION
Risk tolerance: 20% - 30% Growth and Income [PIE CHART
Generally 5% - 10% Growth APPEARS HERE]
investors with a 40% - 70% Income or
moderate to low tax-free income
risk tolerance
(often over 60
and retired)
11
<PAGE>
The Putnam Fund Selector(TM)
The Putnam Fund Selector(TM) shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam Family
of Funds.
[PYRAMID GRAPHIC]
Risk/Reward
PUTNAM GROWTH FUNDS
PUTNAM GROWTH
AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE
INCOME FUNDS
MOST CONSERVATIVE INVESTMENTS
12
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Diversified Equity Trust
Energy-Resources Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH
AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGE(TM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS+
Putnam money market funds:
Daily Dividend Trust
Tax Exempt Money Market Fund
CDs and savings accounts++
* Not available in all states.
+ Relative to above.
++ Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam to obtain a prospectus for any
Putnam fund. It contains more complete information, including charges and
expenses. Read it carefully before you invest or send money.
13
<PAGE>
Portfolio of investments owned
April 30, 1994 (Unaudited)
CONVERTIBLE BONDS(40.8%) (a)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Consumer Services(6.0%)
--------------------------------------------------------------------------------------------------------------------
$ 9,500,000 Cellular Communications, Inc. cv. sub. $ 7,208,125
deb. zero %, 1999 (b)
1,680,000 Cellular Communications, Inc. of Puerto 2,541,000
Rico cv. deb. 8 1/4s, 2000
3,000,000 Comcast Corp. cv. deb. 3 3/8s, 2005 2,490,000
13,000,000 Hollinger, Inc. Liquid Yield Option Note 4,355,000
(LYON), zero %, 2013
2,050,000 National Education Corp. cv. sub. deb. 6 1,332,500
1/2s, 2011
5,500,000 News America Holdings Inc. cv. LYON zero 2,310,000
%, 2013 (b)
1,360,000 Pharmaceutical Marketing cv. deb. 6 1/4s, 1,258,000
2003 (b)
4,000,000 Rogers Communications Inc. LYON, zero %, 1,380,000
2013
5,500,000 Rogers Communications cv. deb. 2s, 2005 3,306,875
2,000,000 Service Corp. International cv. sub. deb. 2,507,500
6 1/2s, 2001
4,634,000 Time-Warner, Inc. cv. deb. 8 3/4s, 2015 4,703,510
9,500,000 Time-Warner, Inc. cv. deb. LYON zero %, 2,885,625
2012
12,000,000 Turner Broadcasting System, Inc. cv. deb. 4,620,000
LYON, zero %, 2007
1,530,000 WMS Industries, Inc. cv. deb. 5 3/4s, 2002 1,545,300
------------
42,443,435
Retail(4.7%)
--------------------------------------------------------------------------------------------------------------------
2,000,000 Baker (J.) Inc. cv. deb. 7s, 2002 2,680,000
1,680,000 CML Group, Inc. cv. deb. 5 1/2s, 2003 1,310,400
6,500,000 Federated Department Stores cv. deb. 6s, 5,947,500
2004
3,750,000 Food Lion, Inc. cv. deb. 5s, 2003 (c) 3,581,250
2,500,000 Ingles Markets, Inc. cv. sub. deb. 10s, 2,756,250
2008
3,000,000 Kroger Co. cv. deb. 8 1/4s, 2011 3,120,000
4,250,000 Kroger Co. cv. deb. 6 3/8s, 1999 5,312,500
3,875,000 Lowes Co. cv. deb. 3s, 2003 5,337,813
2,000,000 Perry Drug Stores Inc. cv. sub. deb. 8 1,820,000
1/2s, 2010
1,000,000 Waban, Inc. cv. deb. 6 1/2s, 2002 920,000
------------
32,785,713
Consumer Non Durables(4.2%)
--------------------------------------------------------------------------------------------------------------------
6,500,000 ADT Inc. cv. deb. 6s, 2002 8,840,000
3,300,000 American Brands, Inc. cv. sub. deb. Ser. 3,778,500
AMB, 5 3/4s, 2005
15,000,000 Coleman Worldwide Corp. cv. LYON, zero %, 2013 3,750,000
1,715,000 Dibrell Brothers, Inc. cv. sub. deb. 7 1,680,700
3/4s, 2006
2,000,000 Dixie Yarns, Inc. cv. deb. 7s, 2012 1,520,000
2,250,000 Fieldcrest Cannon, Inc. cv. sub. deb. 6s, 2012 2,002,500
800,000 Guilford Mills Inc. Sinking Fund cv. sub. 746,000
deb. 6s, 2012
2,450,000 Interface Inc. Sinking Fund cv. deb. 8s, 2013 2,450,000
1,500,000 L.A. Gear, Inc. cv. sub. deb. 7 3/4s, 2002 1,177,500
4,055,000 Standard Commercial Corp. cv. sub. deb. 7 3,436,613
1/4s, 2007
------------
29,381,813
Insurance and Finance(4.2%)
--------------------------------------------------------------------------------------------------------------------
2,500,000 Aegon NV ADR euro. cv. sub. deb. 7s, 2001 (d) 3,312,500
2,500,000 Alexander & Alexander Services, Inc. cv. 2,550,000
sub. deb. 11s, 2007
3,000,000 Banamex euro cv. deb. 7s, 1999 3,300,000
5,050,000 Chubb Corp. euro. cv. deb. 6s, 1998 5,176,250
1,200,000 Industrial Credit & Investor India cv. 990,000
deb. 2 1/2s, 2000 (b)
1,500,000 Midlantic Corp. Inc. cv. sub. deb. 8 1,488,750
1/4s, 2010
5,000,000 NAC Re Corp. cv. deb. 5 1/4s, 2002 4,393,750
5,000,000 Old Republic International Corp. cv. sub. 5,162,500
deb. 5 3/4s, 2002
1,335,000 Re Capital Inc. cv. deb. 5 1/2s, 2000 1,293,281
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Insurance and Finance(continued)
--------------------------------------------------------------------------------------------------------------------
$ 1,570,000 Trenwick Group, Inc. cv. deb. 6s, 1999 $ 1,546,450
------------
29,213,481
Business Equipment and Services(3.8%)
--------------------------------------------------------------------------------------------------------------------
5,250,000 Conner Peripherals Inc. cv. sub. deb. 4,613,437
6 1/2s, 2002
6,000,000 Data General Corp. cv. sub. deb. 7 3/4s, 2001 5,100,000
3,415,000 EMC Corp. cv. deb. 4 1/4s, 2001 3,585,750
6,000,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 3,615,000
1,500,000 Quantum Corp. cv. deb. 6 3/8s, 2002 1,650,000
2,000,000 Seagate Technology Inc. cv. sub. deb. 1,765,000
6 3/4s, 2012
1,200,000 Sterling Software, Inc. cv. deb. 5 3/4s, 2003 1,386,000
4,250,000 Unisys Corp. cv. sub. notes 8 1/4s, 2000 4,930,000
------------
26,645,187
Oil and Gas(3.5%)
--------------------------------------------------------------------------------------------------------------------
1,000,000 Cross Timbers Oil Co. cv. deb. 5 1/4s, 2003 870,000
4,000,000 Pennzoil cv. deb. 6 1/2s, 2003 4,540,000
3,000,000 Pennzoil cv. 4 3/4s, 2003 2,685,000
9,000,000 SFP Pipeline Holdings Inc. variable rate 11,250,000
exch. deb. 9.67s, 2010
1,000,000 Seacor Holdings cv. deb. 6s, 2003 1,000,000
4,500,000 Wainoco Oil Corp. cv. sub. deb. 7 3/4s, 2014 4,218,750
------------
24,563,750
Electronics and Electrical Equipment(3.0%)
--------------------------------------------------------------------------------------------------------------------
1,560,000 Computer Products, Inc. cv. sub. deb. 1,597,050
9 1/2s, 1997
1,500,000 M/A Com. Inc. cv. sub. deb. 9 1/4s, 2006 1,432,500
6,915,000 Motorola Inc. LYON, zero %, 2013 4,304,587
2,000,000 Network Equipment Technologies Inc. cv. 1,510,000
sub. deb. 7 1/4s, 2014
4,460,000 Richardsons Electronics Ltd. cv. sub. 3,545,700
deb. 7 1/4s, 2006
2,500,000 Siemens A.G. cv. units, ADR, 8s, 2002 (d) 3,525,000
3,285,000 Solectron Corp. cv. sub. LYON, zero %, 2012 1,995,638
1,000,000 Thermo Electron Corp. cv. deb. 6 3/4s, 2001 1,645,000
1,410,000 Thermo Instruments Corp. cv. deb. 3 3/4s, 2000 1,417,050
------------
20,972,525
Health Care(1.5%)
--------------------------------------------------------------------------------------------------------------------
1,495,000 Abbey Healthcare Group cv. deb. 6 1/2s, 1,474,444
2002 (b)
4,200,000 Cabot Medical Corp. cv. deb. 7 1/2s, 1999 3,937,500
1,000,000 Hillhaven Corp. (The) cv. sub. deb. 1,320,000
7 3/4s, 2002
1,775,000 Integrated Health Services, Inc. cv. sub. 1,994,656
deb. 6s, 2003
1,415,000 Quantum Health Resources Inc. cv. deb. 1,667,931
4 3/4s, 2000
------------
10,394,531
Environmental Control(1.4%)
--------------------------------------------------------------------------------------------------------------------
2,300,000 Enclean, Inc. cv. sub. deb. 7 1/2s, 2001 2,432,250
2,500,000 OHM Corp. cv. sub. deb. 8s, 2006 2,431,250
15,000,000 Waste Management Inc. cv. sub. LYON, zero %, 2012 5,193,750
------------
10,057,250
Real Estate(1.2%)
--------------------------------------------------------------------------------------------------------------------
1,400,000 Burnham Pacific Properties, Inc. cv. deb. 1,552,250
8 1/2s, 2002
1,795,000 Camden Property Trust cv. deb. 7.33s, 2002 1,821,925
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Real Estate(continued)
--------------------------------------------------------------------------------------------------------------------
$ 2,000,000 LTC Properties, Inc. cv. deb. 9 3/4s, 2004 $ 2,650,000
1,750,000 Southwestern Property Trust cv. deb. 8s, 2003 2,310,000
------------
8,334,175
Food and Beverages(1.1%)
--------------------------------------------------------------------------------------------------------------------
1,500,000 Chiquita Brands International cv. deb. 1,350,000
7s, 2001
3,300,000 Flagstar Corp. cv. jr. sub. deb. 10s, 2014 2,854,500
1,500,000 J. Seagram & Sons, Ltd. LYON, zero %, 2006 815,625
1,950,000 Wendy's International, Inc. cv. deb. 7s, 2006 3,003,000
------------
8,023,125
Basic Industrial Products(1.0%)
--------------------------------------------------------------------------------------------------------------------
6,500,000 Albany International Corp. Ser. US, cv. 5,833,750
deb. 5 1/4s, 2002
600,000 Dart & Kraft Inc. cv. deb. 7 3/4s, 1998 1,206,000
------------
7,039,750
Transportation(0.8%)
--------------------------------------------------------------------------------------------------------------------
4,000,000 Alaska Air Group, Inc. cv. deb. zero %, 2006 1,540,000
1,500,000 Delta Air Lines, Inc. cv. sub. notes 1,089,375
3.23s, 2003
2,000,000 Greyhound Lines, Inc. cv. deb. 8 1/2s, 2007 2,072,500
1,500,000 Hudson General Corp. cv. sub. deb. 7s, 2011 1,211,250
------------
5,913,125
Building and Construction(0.8%)
--------------------------------------------------------------------------------------------------------------------
2,000,000 Empresas ICA Sociedad cv. deb. 5s, 2004 1,740,000
1,200,000 Medusa Corp. cv. deb. 6s, 2003 1,170,000
1,800,000 Nortek, Inc. sr. cv. deb. 7 1/2s, 2006 1,424,250
1,805,000 U.S. Home Corp. cv. deb. 4 7/8s, 2005 1,441,743
------------
5,775,993
Forest Products(0.7%)
--------------------------------------------------------------------------------------------------------------------
5,000,000 International Paper Co. cv. euro. deb. 5 5,187,500
3/4s, 2002
Aerospace and Defense(0.7%)
--------------------------------------------------------------------------------------------------------------------
4,500,000 GenCorp Inc. cv. deb. 8s, 2002 4,770,000
150,000 UNC Inc. cv. sub. deb. 7 1/2s, 2006 141,000
------------
4,911,000
Consumer Durable Goods(0.5%)
--------------------------------------------------------------------------------------------------------------------
8,000,000 Whirpool Corp. cv. LYON, zero %, 2011 3,400,000
Metals and Mining(0.4%)
--------------------------------------------------------------------------------------------------------------------
750,000 Essar Gujarat Ltd. cv. bonds 5 1/2s, 1998 (b) 990,000
5,000,000 Freeport-McMoran, Inc. cv. deb. zero %, 2006 1,681,250
------------
2,671,250
Automotive(0.4%)
--------------------------------------------------------------------------------------------------------------------
1,000,000 Arvin Industries, Inc. cv. deb. 7 1/2s, 2014 1,066,250
1,590,000 Titan Wheel International Inc. cv. sub. 1,534,350
deb. 4 3/4s, 2000 ------------
2,600,600
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Chemicals(0.3%)
--------------------------------------------------------------------------------------------------------------------
$ 2,000,000 Quantum Chemical Corp. cv. exch. sub. $ 2,023,750
deb. 6s, 2011
Conglomerates(0.3%)
--------------------------------------------------------------------------------------------------------------------
1,500,000 Fuqua Industries, Inc. cv. deb. 6 1/2s, 2002 1,065,000
1,000,000 WorldCorp, Inc. cv. deb. 7s, 2004 785,000
------------
1,850,000
Utilities(0.2%)
--------------------------------------------------------------------------------------------------------------------
1,000,000 Century Telephone Inc. cv. deb. 6s, 2007 (b) 1,065,000
Telephone Utilities(0.1%)
--------------------------------------------------------------------------------------------------------------------
400,000 Compania de Telefono de Chile cv. bonds, 502,000
4 1/2s, 2003
------------
Total Convertible Bonds (cost $272,943,776) $285,754,953
CONVERTIBLE PREFERRED STOCKS(26.2%) (a)
NUMBER OF SHARES VALUE
Insurance and Finance(6.8%)
--------------------------------------------------------------------------------------------------------------------
50,000 Banc One Corp. Ser. C, $7.00 cv. pfd. $ 3,000,000
90,000 BankAmerica Corp. Ser. G, $3.25 cv. pfd. 4,837,500
38,000 Chemical Banking Corp. $5.00 cv. pfd. 2,660,000
40,000 Citicorp Ser. 13, $5.375, cv. pfd. 4,220,000
91,000 First Bank System, Inc. Ser. 91-A, 5,824,000
$3.5625, cv. pfd.
100,000 First USA, Inc. $6.25, cv. pfd. 3,912,500
30,000 Peoples Bank Ser. A, $4.25 cv. pfd. 1,987,500
75,000 Republic New York Corp. $3.375 cv. pfd. 4,153,125
26,100 Roosevelt Financial Group $3.25 cv. pfd. 1,657,350
57,400 Southern National Corp. Ser A, $1.6875 1,722,000
cv. pfd.
135,000 SunAmerica Inc. Ser. D, $2.78 cv. pfd. 5,197,500
86,500 USF&G Corp. Ser. C, $5.00 cv. pfd. 5,071,063
41,400 USF&G Corp. Ser. A, $4.10 cv. pfd. 2,044,125
33,500 Union Planters Corp. Ser. E, $2.00 cv. pfd. 1,214,375
------------
47,501,038
Metals and Mining(3.9%)
--------------------------------------------------------------------------------------------------------------------
36,666 Alumax, Inc. Ser. A, $4.00 cv. pfd. 3,923,262
65,000 Armco, Inc. $3.625 cv. pfd. 3,055,000
39,600 Bethlehem Steel Corp. $5.00 cum. cv. pfd. 2,143,350
13,333 Cyprus Amax Minerals Ser. A, $4.00 cv. pfd. 866,645
160,000 Freeport-McMoran Copper Co., Inc. 3,800,000
stepped-coupon $1.25 cv. pfd.
80,000 Freeport-McMoran, Inc. $8.75 cv. pfd. (b) 3,860,000
71,050 Kaiser Aluminum Corp. Prides $0.97 cv. pfd. 666,094
60,750 Pittston Corp. $6.25 cv. pfd. 2,475,563
55,000 Quanex Corp. $1.72 cv. pfd. 1,278,750
35,000 Reynolds Metals Co. $3.31 cv. pfd. 1,614,375
60,000 Wheeling-Pittsburgh Corp. $3.25 cv. pfd. 3,600,000
------------
27,283,039
Oil and Gas(2.9%)
--------------------------------------------------------------------------------------------------------------------
85,500 Chiles Offshore Corp. $1.50 ARP cv. pfd. 1,945,125
62,560 Energy Services, Inc. $1.50 cum. cv. pfd. 1,814,240
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Oil and Gas(continued)
--------------------------------------------------------------------------------------------------------------------
65,000 Grant Geophysical, Inc. $2.4375 $ 715,000
cv. pfd.
105,085 McDermott International, Inc. 4,282,213
Ser. C, $2.875 cum. cv. pfd. (b)
33,500 Reading & Bates Corp. $1.625 837,500
cv. pfd.
75,520 Santa Fe Energy Resources, Inc. 1,406,560
$1.40 cv. pfd.
35,400 Tejas Gas Corp. $2.65 cv. pfd. 1,654,950
77,000 Unocal Corp. $3.50 cv. pfd. 4,109,875
71,000 Western Gas Resources $2.625 cv. pfd. 3,301,500
------------
20,066,963
Transportation(2.4%)
--------------------------------------------------------------------------------------------------------------------
73,725 AMR Corp. Ser. A, $3.00 cv. 3,391,350
pfd. (c)
36,700 Arkansas Best Corp. Ser. A, 1,559,750
$2.875 cv. pfd.
105,500 Burlington Northern, Inc. Ser. 6,936,625
A, $3.125 cv. pfd.
55,000 Delta Air Lines, Inc. Ser. C, 2,695,000
$3.50 cv. pfd.
20,000 Sea Containers Ltd. $4.00 cv. pfd. 970,000
12,000 UAL Corp. Ser. A, $6.25 cv. 1,012,500
pfd., 2000 (b) ------------
16,565,225
Real Estate(1.7%)
--------------------------------------------------------------------------------------------------------------------
15,000 Catellus Development Corp. Ser. 701,250
A, $3.75 cv. pfd.
195,000 Property Trust America Ser. A, 5,313,750
$1.75 cv. pfd.
67,950 Rouse Co. ser. A, $3.25 cv. pfd. 3,567,375
72,090 Tanger Factory Outlet Centers 2,090,610
$1.575 cv. pfd. , 2000 ------------
11,672,985
Automotive(1.5%)
--------------------------------------------------------------------------------------------------------------------
40,250 Chrysler Corp. Ser. A, $4.625 5,383,437
dep. shs. cv. pfd. (b)
52,500 Ford Motor Co. Ser. A, $4.20 cv. pfd. 5,066,250
------------
10,449,687
Business Equipment and Services(1.2%)
--------------------------------------------------------------------------------------------------------------------
75,000 Alco Standard Corp. Ser. AA, 4,687,500
$2.375 cv. pfd.
95,000 Unisys Corp. Ser. A, $3.75 cv. pfd. 3,788,125
------------
8,475,625
Forest Products(1.2%)
--------------------------------------------------------------------------------------------------------------------
245,000 Boise Cascade Corp. Ser. G, 5,022,500
$1.58 cv. pfd.
150,000 Bowater, Inc. Prides $1.645 cv. pfd. 3,375,000
------------
8,397,500
Food and Beverages(1.1%)
--------------------------------------------------------------------------------------------------------------------
80,000 Chiquita Brands International 3,660,000
$5.75 cv. pfd.
133,100 ConAgra, Inc. $1.6875 cv. pfd. 4,092,825
------------
7,752,825
Electronics and Electrical
Equipment(0.9%)
--------------------------------------------------------------------------------------------------------------------
517,000 Westinghouse Electric Ser. C, 6,397,875
$1.30 cv. pfd.
Health Care(0.8%)
--------------------------------------------------------------------------------------------------------------------
70,000 Beverly Enterprises, Inc. $2.75 4,077,500
cv. pfd.
60,000 Maxicare Health Plans, Inc. 1,830,000
Ser. A, $2.25 cv. pfd. , 2000 (b) ------------
5,907,500
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Basic Industrial Products(0.8%)
--------------------------------------------------------------------------------------------------------------------
43,000 AGCO Corp. $1.625 cv. pfd. $ 2,553,125
130,000 Cooper Industries Inc. $1.60 3,103,750
cv. pfd. ------------
5,656,875
Consumer Non-Durables(0.4%)
--------------------------------------------------------------------------------------------------------------------
34,900 Fieldcrest Cannon, Inc. Ser. A, 2,233,600
$3.00 cv. pfd. (b)
54,200 Galoob (Lewis) Toys, Inc. $1.70 643,625
cv. pfd. (c) ------------
2,877,225
Retail(0.2%)
--------------------------------------------------------------------------------------------------------------------
32,000 Sears, Roebuck & Co. $3.75 cv. pfd. 1,740,000
Energy-Related(0.2%)
--------------------------------------------------------------------------------------------------------------------
13,000 Maxus Energy Corp. $4.00 cv. pfd. 531,375
20,000 Offshore Pipelines, Inc. $2.25 795,000
cum. cv. pfd. ------------
1,326,375
Building and Construction(0.2%)
--------------------------------------------------------------------------------------------------------------------
24,800 Southdown, Inc. $2.875 cv. 1,190,400
pfd., 2000 ------------
Total Convertible Preferred Stocks
(cost $184,072,827) $183,261,137
COMMON STOCKS(22.6%) (a)
NUMBER OF SHARES VALUE
Insurance and Finance(3.1%)
--------------------------------------------------------------------------------------------------------------------
20,000 AON Corp. $ 927,500
30,000 Aetna Life & Casualty Co. 1,560,000
11,000 American Express Co. 325,875
36,300 Banc One Corp. 1,197,900
25,000 BankAmerica Corp. 1,081,250
13,000 Bankers Trust New York Corp. 869,375
20,000 Beneficial Corp. 760,000
22,800 CIGNA Corp. 1,333,800
20,000 Chase Manhattan Corp. 680,000
50,000 Comerica Inc. 1,400,000
44,000 CoreStates Financial Corp. 1,166,000
35,000 First Bank Systems, Inc. 1,211,875
20,000 First Fidelity Bancorp 927,500
9,800 First Interstate Bancorp 781,550
63,000 Great Western Financial Corp. 1,023,750
35,000 Household International, Inc. 1,098,125
27,000 Lincoln National Corp. 1,029,375
35,000 MBNA Corp. 875,000
18,000 Morgan (J.P.) & Co., Inc. 1,107,000
60,000 National City Corp. 1,605,000
9,700 St. Paul Cos., Inc. 769,937
------------
21,730,812
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Oil and Gas(2.8%)
--------------------------------------------------------------------------------------------------------------------
26,000 British Petroleum Co. PLC ADR (d) $ 1,820,000
25,000 Chevron Corp. 2,225,000
45,000 Exxon Corp. 2,829,375
21,000 Imperial Oil Ltd. 664,125
40,000 McDermott International, Inc. 850,000
22,000 Mobil Corp. 1,721,500
30,000 Phillips Petroleum Co. 937,500
26,300 Royal Dutch Petroleum Co. ADR (d) 2,866,700
40,000 Sonat, Inc. 1,215,000
25,300 Tenneco Inc. 1,296,625
23,400 Texaco Inc. 1,506,375
40,000 Unocal Corp. 1,105,000
35,000 Williams Cos., Inc. 901,250
------------
19,938,450
Utilities(2.3%)
--------------------------------------------------------------------------------------------------------------------
30,000 American Telephone & Telegraph Co. 1,533,750
26,000 Ameritech Corp. 1,023,750
18,000 BellSouth Corp. 1,095,750
10,000 Detroit Edison Co. 270,000
22,000 Entergy Corp. 673,750
66,300 GTE Corp. 2,096,737
34,000 NYNEX Corp. 1,236,750
39,900 Northeast Utilities 992,513
25,000 PSI Resources, Inc. 559,375
25,000 Pacific Telesis Group 800,000
20,000 SCE Corp. 320,000
31,600 Southwestern Bell Corp. 1,311,400
40,000 Sprint Corp. 1,470,000
20,000 Telefonos de Mexico S.A., Ser. 1,177,500
L, ADR (d)
10,000 Texas Utilities Co. 352,500
24,000 US WEST, Inc. 978,000
------------
15,891,775
Health Care(1.8%)
--------------------------------------------------------------------------------------------------------------------
20,000 American Cyanamid Co. 940,000
30,000 American Home Products Corp. 1,732,500
49,700 Baxter International, Inc. 1,136,887
20,000 Bristol-Myers Squibb Co. 1,077,500
25,000 Lilly (Eli) & Co. 1,231,250
10,800 McKesson Corp. 718,200
27,500 Merck & Co., Inc. 814,687
15,550 Pfizer, Inc. 917,450
35,000 SmithKline Beecham PLC ADS (d) 953,750
51,000 Syntex Corp. 771,375
35,000 Upjohn Co. 936,250
21,000 Warner-Lambert Co. 1,425,375
------------
12,655,224
Consumer Non-Durables(1.6%)
--------------------------------------------------------------------------------------------------------------------
28,000 American Brands, Inc. 948,500
23,300 Avon Products, Inc. 1,383,437
20,000 Clorox Co. 1,010,000
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Consumer Non-Durables(continued)
--------------------------------------------------------------------------------------------------------------------
20,000 Dial Corp. (The) $ 940,000
25,200 Kimberly-Clark Corp. 1,382,850
80,000 Philip Morris Cos., Inc. 4,360,000
1,100 Tambrands Inc. 40,563
45,000 Universal Corp. 826,875
------------
10,892,225
Chemicals(1.4%)
--------------------------------------------------------------------------------------------------------------------
27,550 Dow Chemical Co. 1,728,763
20,000 du Pont (E.I.) de Nemours & 1,142,500
Co., Ltd.
7,500 Eastman Chemical Co. 333,750
30,000 Grace (W.R.) & Co. 1,222,500
34,175 Lubrizol Corp. 1,234,572
31,000 Olin Corp. 1,584,875
10,000 PPG Industries Inc. 757,500
40,000 Union Carbide Corp. 1,055,000
30,000 Witco Chemical Corp. 877,500
------------
9,936,960
Automotive(1.1%)
--------------------------------------------------------------------------------------------------------------------
30,000 Chrysler Corp. 1,436,250
14,025 Daimler Benz AKT-ADR (d) 767,869
25,000 Ford Motor Co. 1,459,375
35,000 General Motors Corp. 1,986,250
25,000 Genuine Parts Co. 890,625
25,000 Johnson Controls Inc. 1,231,250
------------
7,771,619
Conglomerates(0.9%)
--------------------------------------------------------------------------------------------------------------------
16,000 ITT Corp. 1,436,000
35,000 Ogden Corp. 743,750
25,100 TRW, Inc. 1,637,775
25,000 Textron, Inc. 1,318,750
15,000 United Technologies Corp. 956,250
------------
6,092,525
Electronics and Electrical Equipment(0.8%)
--------------------------------------------------------------------------------------------------------------------
15,000 Emerson Electric Co. 873,750
26,000 General Electric Co. 2,473,250
14,900 Harris Corp. 653,737
31,500 Vishay Intertechnology, Inc. 1,114,313
63,000 Westinghouse Electric Corp. 732,375
------------
5,847,425
Retail(0.8%)
--------------------------------------------------------------------------------------------------------------------
90,000 K Mart Corp. 1,485,000
30,000 Limited Inc. (The) 577,500
18,300 Penney (J.C.) Co., Inc. 992,775
35,000 Sears, Roebuck & Co. 1,645,000
60,000 Woolworth Corp. 997,500
------------
5,697,775
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
Photography(0.8%)
--------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
133,744 Eastman Kodak Co. $ 5,550,376
Consumer Services(0.7%)
--------------------------------------------------------------------------------------------------------------------
24,600 Block (H & R), Inc. 1,045,500
15,000 Dun & Bradstreet Corp. 881,250
18,000 McGraw-Hill, Inc. 1,172,250
40,000 Times Mirror Co. Class A 1,265,000
14,000 Tribune Co. 889,000
------------
5,253,000
Business Equipment and Services(0.7%)
--------------------------------------------------------------------------------------------------------------------
33,000 IBM Corp. 1,889,250
33,000 Xerox Corp. 3,262,875
------------
5,152,125
Forest Products(0.6%)
--------------------------------------------------------------------------------------------------------------------
35,000 Boise Cascade Corp. 752,500
12,000 International Paper Co. 783,000
25,000 Mead Corporation 1,053,125
25,000 Potlatch Corp. 1,018,750
4,000 Rayonier, Inc. 113,000
10,300 Union Camp Corp. 457,063
------------
4,177,438
Transportation(0.5%)
--------------------------------------------------------------------------------------------------------------------
16,000 Burlington Northern, Inc. 906,000
6,000 CSX Corp. 467,250
20,000 Illinois Central Corp. 687,500
15,000 Norfolk Southern Corp. 958,125
10,000 Union Pacific Corp. 590,000
------------
3,608,875
Metals and Mining(0.5%)
--------------------------------------------------------------------------------------------------------------------
15,000 Aluminum Co. of America 1,020,000
50,000 Freeport-McMoran, Inc. 956,250
40,000 Freeport-McMoran, Inc. Class A 950,000
20,000 Lukens, Inc. (Delaware) 620,000
------------
3,546,250
Food and Beverages(0.5%)
--------------------------------------------------------------------------------------------------------------------
10,000 Anheuser-Busch Cos., Inc. 541,250
19,300 CPC International Inc. 931,225
18,000 Quaker Oats Co. (The) 1,158,750
30,000 Seagram Co. Ltd. 881,250
------------
3,512,475
Aerospace and Defense(0.5%)
--------------------------------------------------------------------------------------------------------------------
60,000 GenCorp Inc. 840,000
25,000 Northrop Corp. 956,250
35,350 Rockwell International Corp. 1,378,650
------------
3,174,900
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
Basic Industrial Products(0.4%)
--------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
30,000 Ball Corp. $ 806,250
30,000 General Signal Corp. 982,500
20,000 Sundstrand Corp. 950,000
------------
2,738,750
Real Estate(0.4%)
--------------------------------------------------------------------------------------------------------------------
15,800 Federal Realty Investment Trust 389,075
55,000 National Health Investors, Inc. 1,526,250
10,000 Nationwide Health Properties, Inc. 395,000
25,000 Webb (Del.) Corp. 393,750
------------
2,704,075
Telecommunications(0.2%)
--------------------------------------------------------------------------------------------------------------------
25,000 Airtouch Communications 615,625
50,000 Comsat Corp. 1,062,500
------------
1,678,125
Environmental Control(0.1%)
--------------------------------------------------------------------------------------------------------------------
33,700 Browning-Ferris Industries, Inc. 985,725
Energy-Related(0.1%)
--------------------------------------------------------------------------------------------------------------------
40,000 Westcoast Energy, Inc. 690,000
------------
Total Common Stocks (cost $154,204,598) $159,226,904
FOREIGN BONDS AND NOTES(0.3%)(a)(d) (cost $2,030,770)
PRINCIPAL AMOUNT VALUE
$ 3,700,000 SKF Corp. cv. LYON, zero %, 2002 $ 2,354,125
------------
SHORT-TERM INVESTMENTS(8.1%)(a)
PRINCIPAL AMOUNT Value
$10,000,000 American Telephone & Telegraph
3.78s, May 27, 1994 $ 9,972,700
5,000,000 Ciesco 3.72s, May 5, 1994 4,997,934
10,000,000 Corporate Receivables Corp.
3.75s, May 5, 1994 9,995,833
10,000,000 Household Finance Corp., 3.73s,
May 19, 1994 9,981,350
21,971,000 Interest in $504,971,000
repurchase agreement dated
April 29, 1994 with Kidder Peabody &
Co., Inc., due May 2, 1994 with respect
to various U.S. Treasury obligations--maturity
value of $21,977,500 for an
effective yield of 3.55% 21,975,334
------------
Total Short-Term Investments (cost $56,923,151) $ 56,923,151
------------
Total Investments (cost $670,175,122)(e) $687,520,270
============
</TABLE>
23
<PAGE>
Notes
--------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $701,827,115, which
correspond to a net asset value per class A and class B share of $18.83 and
$18.75, respectively.
(b) Securities 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. At April 30, 1994
these securities were valued at $26,679,194 or 3.8% of net assets.
(c) Non-income-producing security.
(d) Securities whose values are determined or significantly influenced by
trading on exchanges not in the United States or Canada. ADR or ADS after
the name of a foreign holding stands for American Depository Receipt or
American Depository Shares, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
(e) The aggregate identified cost on a tax basis is $670,223,684, resulting in
gross unrealized appreciation and depreciation of $63,759,895 and
$46,463,309, respectively, or net unrealized appreciation of $17,296,586.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Statement of assets and liabilities
April 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
Assets
--------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $670,175,122) (Note 1) $687,520,270
--------------------------------------------------------------------------------
Cash 21,697
--------------------------------------------------------------------------------
Dividends, interest and other receivables 5,579,624
--------------------------------------------------------------------------------
Receivable for shares of the Fund sold 816,701
--------------------------------------------------------------------------------
Receivable for securities sold 12,267,311
--------------------------------------------------------------------------------
Total assets $706,205,603
Liabilities
--------------------------------------------------------------------------------
Payable for shares of the Fund
repurchased $ 893,417
--------------------------------------------------------------------------------
Payable for securities purchased 2,022,359
--------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 930,777
--------------------------------------------------------------------------------
Payable for administrative services (Note 2) 6,571
--------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 247
--------------------------------------------------------------------------------
Payable for investor servicing and
custodian fees (Note 2) 221,837
--------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 159,005
--------------------------------------------------------------------------------
Other accrued expenses 144,275
--------------------------------------------------------------------------------
Total liabilities 4,378,488
--------------------------------------------------------------------------------
Net assets $701,827,115
--------------------------------------------------------------------------------
Represented by
Paid-in capital (Notes 1, 4 and 5) $639,574,891
Undistributed net investment income 6,016,438
Accumulated net realized gain on investment transactions 38,890,638
Unrealized appreciation of investments 17,345,148
--------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $701,827,115
--------------------------------------------------------------------------------
Computation of net asset value and offering price
Net asset value and redemption price per class A share
($681,622,800 divided by 36,190,724 shares) $18.83
Offering price per class A share
(100/94.25 of $18.83)* $19.98
----------
Net asset value and offering price per class B share
($20,204,314 divided by 1,077,551 shares)** $18.75
--------------------------------------------------------------------------------
</TABLE>
* 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.
25
<PAGE>
Statement of operations
Six months ended April 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
Investment income:
<S> <C>
-------------------------------------------------------------------
Interest $ 9,406,161
-------------------------------------------------------------------
Dividends (net of foreign tax of $13,202) 7,290,080
-------------------------------------------------------------------
Total investment income 16,696,241
Expenses:
-------------------------------------------------------------------
Compensation of Manager (Note 2) $ 1,876,993
-------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 507,951
-------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,860
-------------------------------------------------------------------
Reports to shareholders 87,082
-------------------------------------------------------------------
Auditing 9,724
-------------------------------------------------------------------
Legal 6,175
-------------------------------------------------------------------
Postage 112,957
-------------------------------------------------------------------
Distribution fees -- class A (Note 2) 871,817
-------------------------------------------------------------------
Distribution fees -- class B (Note 2) 66,592
-------------------------------------------------------------------
Administrative services (Note 2) 9,672
-------------------------------------------------------------------
Other expenses 35,487
-------------------------------------------------------------------
Total expenses 3,597,310
-------------------------------------------------------------------
Net investment income 13,098,931
-------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 31,107,926
-------------------------------------------------------------------
Net unrealized depreciation of investments
during the period (59,309,438)
-------------------------------------------------------------------
Net loss on investments (28,201,512)
-------------------------------------------------------------------
Net decrease in net assets resulting from operations (15,102,581)
-------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Statement of changes of net assets
<TABLE>
<CAPTION>
Six months ended Year ended
April 30 October 31
------------------------------------------------------------------------
1994* 1993
<S> <C> <C>
Increase (decrease ) in net assets
------------------------------------------------------------------------
Operations:
------------------------------------------------------------------------
Net investment income $ 13,098,931 $ 30,096,658
------------------------------------------------------------------------
Net realized gain on investments 31,107,926 64,470,361
------------------------------------------------------------------------
Net realized loss on options -- (467,794)
------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
and options (59,309,438) 35,257,250
------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (15,102,581) 129,356,475
------------------------------------------------------------------------
Undistributed net investment
income included in price of shares
sold and repurchased, net -- (7,565)
Distributions to shareholders from:
------------------------------------------------------------------------
Net investment income--class A (16,890,089) (33,011,424)
------------------------------------------------------------------------
Net investment income--class B (317,630) (20,738)
------------------------------------------------------------------------
Net realized gain on investments--class A (23,377,526) --
------------------------------------------------------------------------
Net realized gain on investments--class B (302,116) --
------------------------------------------------------------------------
Increase from capital share
transactions (Note 4) 45,409,187 16,225,598
------------------------------------------------------------------------
Total increase (decrease) in net assets (10,580,755) 112,542,346
Net assets
------------------------------------------------------------------------
Beginning of period 712,407,870 599,865,524
------------------------------------------------------------------------
End of period (including undistributed
net investment income of $6,016,438
and $3,825,900, respectively) $701,827,115 $712,407,870
------------------------------------------------------------------------
</TABLE>
* Unaudited.
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Financial Highlights*
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
July 15, 1993
Six (commencement
months ended of operations) to
April 30 October 31
--------------------------------------------------------------------------------
1994** 1993
--------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 20.35 $19.53
--------------------------------------------------------------------------------
Investment Operations
Net Investment Income .31 .23
--------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments (.79) .82
--------------------------------------------------------------------------------
Total from Investment Operations (.48) 1.05
--------------------------------------------------------------------------------
Less Distributions from:
Net Investment Income (a) (.44) (.23)
--------------------------------------------------------------------------------
Net Realized Gain on Investments (.68) --
--------------------------------------------------------------------------------
Total Distributions (1.12) (.23)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $ 18.75 $20.35
--------------------------------------------------------------------------------
Total Investment Return at
Net Asset Value (%) (b) (4.98)(c) 18.72(c)
--------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $22,204 $4,439
================================================================================
Ratio of Expenses to Average
Net Assets (%) 1.96(c) 1.76(c)
--------------------------------------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets (%) 2.84(c) 3.08(c)
--------------------------------------------------------------------------------
Portfolio Turnover (%)*** 26.83(d) 66.63(d)
--------------------------------------------------------------------------------
</TABLE>
See page 29 for notes to Financial Highlights.
28
<PAGE>
<TABLE>
<CAPTION>
Eleven
months
Six ended
months ended Year ended October
April 30 October 31 31
--------------------------------------------------------------------------------------------------------
1994** 1993 1992 1991 1990 1989 1988 1987 1986 1985
--------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.38 $17.60 $15.78 $12.12 $ 15.56 $14.42 $ 14.24 $16.44 $14.43 $12.73
--------------------------------------------------------------------------------------------------------
.37 .87 .89 .88 .95 .97 .88 .86 .93 .89
--------------------------------------------------------------------------------------------------------
(.76) 2.87 1.89 3.74 (3.35) 1.13 .87 (1.83) 2.47 1.68
--------------------------------------------------------------------------------------------------------
(.39) 3.74 2.78 4.62 (2.40) 2.10 1.75 (.97) 3.40 2.57
--------------------------------------------------------------------------------------------------------
(.48) (.96) (.96) (.96) (1.04) (.96) (.96) (.96) (.95) (.68)
--------------------------------------------------------------------------------------------------------
(.68) -- -- -- -- -- (.61) (.27) (.44) (.19)
--------------------------------------------------------------------------------------------------------
(1.16) (.96) (.96) (.96) (1.04) (.96) (1.57) (1.23) (1.39) (.87)
--------------------------------------------------------------------------------------------------------
$18.83 $20.38 $17.60 $15.78 $ 12.12 $15.56 $ 14.42 $14.24 $16.44 $14.43
--------------------------------------------------------------------------------------------------------
(4.08)(c) 21.74 18.16 39.05 (16.46) 14.90 13.40 (7.00) 24.55 22.36(c)
--------------------------------------------------------------------------------------------------------
---- -- -- -- -- -- -- -- -- --
========================================================================================================
.99(c) .96 1.11 1.15 1.12 .93 .92 .84 .83 .88(c)
--------------------------------------------------------------------------------------------------------
3.69(c) 4.55 5.32 6.07 6.37 6.32 6.12 4.91 5.54 6.21(c)
--------------------------------------------------------------------------------------------------------
26.83(d) 66.63 59.89 78.72 60.03 49.44 115.87 87.45 77.51 119.78(d)
--------------------------------------------------------------------------------------------------------
</TABLE>
* Financial highlights for periods ended through October 31, 1992 have been
restated to conform with requirements issued by the SEC in April, 1993. As
of November 1, 1993, the Fund discontinued the use of equalization
accounting (see Note 1 of Notes to financial statements).
** Unaudited.
*** Portfolio turnover calculation for fiscal 1985 and thereafter includes
transactions in U.S. government securities with maturities greater than one
year. Prior period portfolio turnover calculations excluded all U.S.
government securities.
(a) $0.017 of distributions from net investment income for the year ended
October 31, 1990 represents return of capital for federal income tax
purposes.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Annualized.
(d) Not annualized.
29
<PAGE>
Notes to financial statements
April 30, 1994 (Unaudited)
Note 1
Significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Fund seeks current
income and capital appreciation by investing primarily in bonds and preferred
stocks convertible into common stock with capital preservation as a secondary
objective.
The Fund offers both class A and class B shares. The Fund commenced its public
offering of class B shares on July 15, 1993. Class A shares are sold with a
maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares, and
may be subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. In addition, the Trustees declare
separate dividends on each class of shares. Expenses of the Fund are borne pro-
rata by the shareholders of both classes of shares, except that each class bears
expenses unique to that class including the distribution fees applicable to such
class. Each class votes as a class only with respect to its own distribution
plan or other matters on which a class vote is required by law or determined by
the Trustees. Shares of each class would receive their pro-rata share of the net
assets of the Fund, if the Fund were liquidated. In addition, the Trustees
declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price, except that
U.S. government obligations are stated at the mean between the last reported bid
and asked prices. Securities quoted in foreign currencies are translated into
U.S. dollars at the current exchange rate. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at fair value
following procedures approved by the Trustees.
B Joint trading account Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the Fund may transfer uninvested cash balances into a
joint trading account, along with the cash of other registered investment
companies managed by Putnam Investment Management, Inc. (Putnam Management), the
Fund's Manager, a wholly-owned subsidiary of Putnam Investment Inc., and certain
other accounts. 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. The Fund's Manager 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.
30
<PAGE>
D Security transactions and related investment income Security transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Interest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the Fund is informed of the ex-dividend date.
Discount on zero coupon bonds and stepped-coupon bonds is accreted according to
the effective yield method. Certain securities held by the Fund pay interest in
the form of additional securities; interest on such securities is recorded on
the accrual basis at the lower of the coupon rate or market value of the
securities to be received, and is allocated to the cost of the securities
received on the payment date.
E Option accounting principles When the Fund writes a call or put option, an
amount equal to the premium received by the Fund is included in the Fund's
"Statement of assets and liabilities" as an asset and an equivalent liability.
The amount of the liability is subsequently "marked-to-market" to reflect the
current market value of the option written. The current market value of an
option is the last sale price or, in the absence of a sale, the last offering
price. If an option expires on its stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or loss if
the cost of a closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a written call option is exercised, the Fund realizes a gain or loss from the
sale of the underlying security and the proceeds of the sale are increased by
the premium originally received. If a written put option is exercised, the
amount of the premium originally received reduces the cost of the security or
currency the Fund purchases upon exercise of the option.
The Fund writes covered call options; that is, options for which it holds the
underlying security or its equivalent. Accordingly, the risk in writing a call
option is that the Fund relinquishes the opportunity to profit if the market
price of the underlying security increases and the option is exercised. In
writing a put option, the Fund assumes the risk of incurring a loss if the
market price of the underlying security decreases and the option is exercised.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of assets and liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option the Fund has purchased expires on the stipulated expiration
date, the Fund realizes a loss in the amount of the cost of the option. If the
Fund enters into a closing sale transaction, the Fund realizes a gain or loss,
depending on whether the proceeds from the closing sale transaction are greater
or less than the cost of the option. If the Fund exercises a call option, the
cost of the securities or currencies acquired by exercising the call is
increased by the premium paid to buy the call. If the Fund exercises a put
option, it realizes a gain or loss from the sale of the underlying security or
currency and the proceeds from such sale are decreased by the premium originally
paid.
Stock index options are similar to options on individual securities in that the
purchaser of an index option acquires the right to buy, and the writer
undertakes the obligation to sell, an index at a stated exercise price during
31
<PAGE>
the term of the option. Instead of giving the right to take or make actual
delivery of securities, the holder of a stock index option has the right to
receive a cash "exercise settlement amount." This amount is equal to the amount
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index multiplier."
The Fund writes options on stock indices only to the extent that it holds in its
portfolio underlying securities, which, in the judgment of Putnam Management,
correlate closely with the stock index.
F Federal taxes It is the policy of the Fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the Fund to distribute an amount sufficient to avoid imposition
of any excise tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held and excise tax on income and
capital gains.
G Distributions to shareholders Distributions to shareholders are recorded by
the Fund on the ex-dividend date.
H Equalization Prior to November 1, 1993, the Fund used the accounting practice
known as equalization to keep a continuing shareholder's per share interest in
undistributed net investment income unaffected by sales or repurchases of Fund
shares. This was accomplished by allocating a per share portion of the proceeds
from sales and the costs of repurchases of shares to undistributed net
investment income.
As of November 1, 1993, the Fund discontinued using equalization. This change
has no effect on the Fund's total net assets, net asset value per share, or its
net increase (decrease) in net assets from operations and did not have a
material effect on the per share amounts shown in the financial highlights. In
Management's opinion, discontinuing the use of equalization will result in less
distortion of undistributed net investment income as compared to income
available for distribution for federal income tax purposes. The cumulative
effect of this change was to decrease undistributed net investment income and
increase paid-in-capital previously reported through October 31, 1993 by
$20,838,803.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, the Fund's Manager, for management and
investment advisory services is paid quarterly based on the average net assets
of the Fund for the quarter. Such fee is based on the following annual rates:
0.7% of the first $100 million of average net assets, 0.6% of the next $100
million, 0.5% of the next $300 million, 0.45% of the next $500 million, and
0.425% of any amount over $1 billion, subject, under current law, to reduction
in any year to the extent that expenses (exclusive of distribution fees
brokerage, interest and taxes) of the Fund exceed 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million and 1.5% of any amount over
$100 million and by the amount of certain brokerage commissions and fees (less
expenses) received by affiliates of the Manager on the Fund's portfolio
transactions.
The Fund also reimburses the Manager 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
32
<PAGE>
reimbursements is determined annually by the Trustees. For the six months ended
April 30, 1994, the Fund paid $9,672 for these services.
Trustees of the Fund receive an annual Trustee's fee of $1,550 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested persons
of the Manager and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
Custodial functions for the Fund 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. Fees
paid for these investor servicing and custodial functions for the six months
ended April 30, 1994, amounted to $507,951. Investor servicing and custodian
fees reported in the statement of operations for the six months ended April 30,
1994 have been reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to its class A shares (the
"Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The purpose of Class A Plan 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 class A shares. The Trustees have
approved payment by the Fund to Putnam Mutual Funds Corp. at an annual rate of
0.25% of the Fund's average net assets attributable to class A shares. For the
six months ended April 30, 1994, the Fund paid Putnam Mutual Funds Corp.
distribution fees of $871,817 for class A shares.
For the six months ended April 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received net commissions of $104,394 from the sale of shares of the
Fund.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of
shares purchased as part of an investment of $1 million or more. For the six
months ended April 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received $512 on such redemptions.
The Fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Class B Plan is to compensate Putnam Mutual
Funds Corp. for services provided and expenses incurred by it in distributing
class B shares. The Class B Plan provides for payments by the Fund to Putnam
Mutual Funds Corp. at an annual rate of up to 1.00% of the Fund's average net
assets attributable to class B shares. Currently, the Trustees have limited
payments by the Fund to .85% of such net assets. For the six months ended April
30, 1994, the Fund incurred fees of $66,592 for distribution of class B shares.
Putnam Mutual Funds Corp. also receives the proceeds of contingent deferred
sales charges levied on class B share redemptions within four years of purchase.
The charge is based on declining rates, which begin at 3.0% of the net asset
value of the redeemed shares. Putnam Mutual Funds Corp. received contingent
deferred sales charges of $6,134 from such redemptions for the six months ended
April 30, 1994.
Note 3
Purchases and sales of securities
During the six months ended April 30, 1994, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $183,203,183 and $171,132,611, respectively. There were no purchases
or sales of U.S.
33
<PAGE>
government obligations during the period. 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, 1994, there was an unlimited number of shares of beneficial
interest authorized divided into two classes, designated Class A and Class B
capital stock. Transactions in capital shares were as follows:
Six months ended April 30, 1994
<TABLE>
<CAPTION>
Class A Shares Amount
------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 2,591,108 $ 51,299,365
------------------------------------------------------------------------------
Shares issued in connection with reinvestment of
distributions 1,770,539 34,454,010
------------------------------------------------------------------------------
4,361,647 85,753,375
------------------------------------------------------------------------------
Shares repurchased (2,902,940) (57,422,791)
------------------------------------------------------------------------------
Portion represented by undistributed net
investment income -- --
------------------------------------------------------------------------------
Net increase 1,458,707 $ 28,330,584
------------------------------------------------------------------------------
Year ended October 31, 1993
Class A Shares Amount
------------------------------------------------------------------------------
Shares sold 5,344,659 $ 101,965,330
------------------------------------------------------------------------------
Shares issued in connection with reinvestment of
distributions 1,431,110 27,251,181
------------------------------------------------------------------------------
6,775,769 129,216,511
------------------------------------------------------------------------------
Shares repurchased (6,135,647) (117,365,026)
------------------------------------------------------------------------------
Portion represented by undistributed net
investment income -- 13,470
------------------------------------------------------------------------------
Net increase 640,122 $ 11,864,955
------------------------------------------------------------------------------
Six months ended April 30, 1994
Class B Shares Amount
------------------------------------------------------------------------------
Shares sold 1,030,716 $ 20,357,457
------------------------------------------------------------------------------
Shares issued in connection with reinvestment of
distributions 25,240 490,792
------------------------------------------------------------------------------
1,055,956 20,848,249
------------------------------------------------------------------------------
Shares repurchased (196,555) (3,769,646)
------------------------------------------------------------------------------
Portion represented by undistributed net
investment income -- --
------------------------------------------------------------------------------
Net increase 859,401 $ 17,078,603
------------------------------------------------------------------------------
Year ended October 31, 1993
Class B Shares Amount
------------------------------------------------------------------------------
Shares sold 219,805 $4,400,196
------------------------------------------------------------------------------
Shares issued in connection with reinvestment of
distributions 920 18,213
------------------------------------------------------------------------------
220,725 4,418,409
------------------------------------------------------------------------------
Shares repurchased (2,575) (51,861)
------------------------------------------------------------------------------
Portion represented by undistributed net investment
income -- (5,905)
------------------------------------------------------------------------------
Net increase 218,150 $4,360,643
------------------------------------------------------------------------------
</TABLE>
Note 5
Reclassification of Capital Accounts
Effective November 1, 1993, Putnam Convertible Income-Growth Trust has adopted
the provisions of Statement of Position 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
distributions by Investment Companies (SOP). The SOP requires the Fund to report
the undistributed net investment income (accumulated loss) and accumulated net
realized gain (loss) accounts in such a manner as to approximate amounts
available for future tax distributions (or to offset future realized capital
gains). In implementing the SOP the Fund has reclassified $11,414,687 to
decrease accumulated net realized gain, $27,138,129, to increase undistributed
net investment income, with a decrease of $15,723,448 to additional paid-in-
capital. These adjustments represent the cumulative amounts necessary to report
these balances on a tax basis through October 31, 1993. These reclassifications
which have no impact on the total net asset value of the Fund are primarily
attributable to tax equalization which is treated differently in the computation
of distributable income and capital gains under federal income tax rules and
regulations versus generally accepted accounting principles.
34
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Donald S. Perkins
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C.Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Hugh H. Mullin
Vice President
and Fund Manager
Charles G. Pohl
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant
Treasurer
This report is for the information of shareholders of Putnam Convertible Income-
Growth Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund.
35
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage Paid
Boston, MA
Permit No. 53749
008/223-12456
<PAGE>
GRAPHICS APPENDIX LIST
----------------------
Page Where Description of Graphic or Cross -
Graphic Appears Reference
--------------- ---------------------------------
pg 11 4 Pie charts with slices corresponding to
listed percentages.
pg 12 Pyramid image listing categories of Funds
Risk vs Reward with most conservative at
Base.
