Putnam
Convertible
Income-Growth
Trust
SEMIANNUAL REPORT
April 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Convertible Income-Growth Trust's class A shares ranked 10 out
of 43 convertible securities funds tracked by Lipper Analytical Services
for the year ended April 30, 1997.*
* "Today's uncertain stock and bond markets have caused many investors
to give convertibles a closer look -- for their unique combination of
defensive attributes and growth potential."
-- Hugh Mullin, Fund Manager
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
27 Financial statements
* Lipper rankings are based on total return performance, vary over time,
and do not reflect the effects of sales charges. The fund's class A shares
ranked 5 out of 20 funds and 4 out of 12 funds for 5- and 10-year periods,
respectively. The fund's class B shares (inception 7/15/93) ranked 14 out
of 43 funds and 7 out of 30 funds for 1- and 3-year periods, respectively.
Class M shares (inception 3/13/95) ranked 13 out of 43 funds and 14 out of
37 funds for 1- and 2-year periods, respectively. Past performance is no
guarantee of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Here are three examples of the creative thinking that goes into the management
of Putnam Convertible Income-Growth Trust as it continues to deliver
competitive results among its peers.
Your fund's managers recently made two trips to Japan to check out a Toyota
convertible -- of the financial, not automotive, variety.
When Berkshire Hathaway, Warren Buffet's large holding company, offered a
five-year bond that is convertible into some of the company's shares of
Salomon Brothers, your fund's managers took notice.
Whenever a new Thermo Electron spinoff hits the market, the fund's management
is there to check it out.
The following midyear report provides details.
I am pleased to announce that Edward T. Shadek, Jr., has joined your fund's
management team, effective in May 1997. Ned recently returned to Putnam after
a five-year absence. During that time he was associated with the Michael
Steinhart hedge fund in New York City and Newbold's Asset Management in
Philadelphia. He has 10 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 18, 1997
Report from the Fund Managers
Hugh H. Mullin, lead manager
Charles G. Pohl
Edward T. Shadek, Jr.
The stock and bond markets gave investors a rough ride during the six months
ended April 30, 1997. In spite of the volatility -- and in some ways because
of it -- Putnam Convertible Income-Growth Trust remains a standout among the
convertible funds tracked by Lipper Analytical Services. The mutual fund
research organization has consistently ranked the fund in the top third of its
category, as shown in the fund highlight on page 2.
During the semiannual period, an investment in the fund's class A shares
increased in value by 7.06%, assuming reinvestment of all distributions and
calculated at net asset value. This result fell characteristically between the
14.71% total return of the Standard & Poor's 500 Index(registered trademark)
and the 1.22% return of the Lehman Brothers Corporate Bond Index. Taking the
maximum sales charge into account, the fund's performance for the period was
0.89%. For performance of the other share classes and over longer periods,
please see the tables beginning on page 9.
* STOCK SELECTION, MARKET DISLOCATIONS, TAKEOVERS CONTRIBUTED TO POSITIVE
RESULTS
Because convertible securities possess attributes similar to both stocks and
bonds, their performance typically falls somewhere between that of the two
asset classes. Investors seeking some of the growth potential of stocks and
some of the safety of capital represented by bonds will often invest in a
portfolio of convertibles. At times of market uncertainty, equity investors
may direct some assets toward convertibles as a defensive strategy. In the
currently volatile securities market environment, growing numbers of investors
have done just that. The resulting increase in demand may explain, at least in
part, why convertibles performed relatively well during the period.
In Putnam Management's view, however, careful investment selection made an
equally important contribution to your fund's positive performance. The fund
benefited from its large-company common stock holdings and by avoiding many of
the convertible securities that experienced sharp price declines. In addition,
we took advantage of opportunities arising out of market dislocations by
buying securities that were out of favor and selling those that had attained
lofty valuations.
Sensing that the technology sector may be approaching an upturn, we have
recently increased its weighting in the portfolio. We have also been gradually
rebuilding the fund's energy exposure to take advantage of favorable prices in
the wake of a drop in oil and gas stocks. We took profits in some financial
services issues, but the portfolio remains heavily overweighted in that
sector, especially in bank and insurance holdings.
We have also sought out companies that look disproportionately undervalued.
Such companies are often candidates for acquisition, a situation that can
result in substantial profits for holders of their securities. A good example
is the health maintenance organization, Healthsource, which at the time of its
takeover by Cigna, a large multiline insurance and managed-care company, was
one of the fund's largest positions. The resulting increase in the value of
the Cigna holdings measurably helped the fund's performance for the period.
* FUND INCREASES STAKE IN NON-U.S. CONVERTIBLES
We have not confined our search for attractive convertibles to the United
States. Although the core mission of the fund is to invest in domestic
securities, we are constantly on the lookout for select situations where we
think the fundamentals are exceptional for tactical global diversification.
In recent months, we have increased your fund's exposure to securities of
companies headquartered outside the United States. At period's end, the fund
was approaching the 10% cap allowed for such holdings.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banks 7.7%
Electronics and
electrical equipment 7.4%
Oil and gas 7.4%
Retail 6.7%
Insurance and
finance 5.7%
Footnote reads:
* Based on net assets as of 4/30/97. Sector allocations will vary over time.
Toyota provides an excellent example of our growing commitment to non-U.S.
investments. When a large convertible debenture issued by the Japanese-based
automobile manufacturer came to our attention, we decided to take a closer
look. The company has a triple-A balance sheet and, because of its large
export business, has a favorable sensitivity to a weakening yen. After two
visits to Japan for on-site investigations and management interviews, we
established a position in the fund's portfolio in December 1995. The
debenture's positive performance during the semiannual period confirmed our
confidence in the selection. While the Toyota issue, along with other
securities discussed in this report, was viewed favorably at the end of the
period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
* CAPTURING A NEW TREND: BONDS OF ONE COMPANY CONVERTIBLE INTO STOCK OF
ANOTHER
Another trend that has developed over the past two years is the practice of
companies issuing securities that are convertible into the common stock of
another company. As a means of monetizing some of its Salomon Brothers
holdings, Berkshire Hathaway, another triple-A issuer, recently offered a
five-year bond convertible into Salomon Brothers' common stock.
We were attracted to the security because we concluded that, by virtue of its
short maturity and Berkshire Hathaway's strong balance sheet, the convertible
was reasonably valued with very little downside risk. More importantly,
Salomon Brothers management, in our opinion, is moving the company in the
right direction in terms of improving returns and rationalizing the business
mix.
Examples of more typical convertibles held by your fund are those of Thermo
Electron and several of its successful small to midsize spinoffs. You'll find
them listed in various industry categories in the portfolio, all with the
"Thermo" prefix. Over the past two decades, the parent company has pursued the
strategy of developing certain technologies in-house, then spinning off
minority portions of new subsidiaries to the public while retaining majority
positions. Since the spinoffs carry the parent company's excellent credit
rating, they are able to finance expansion economically and efficiently.
During the period, we added significantly to these holdings as the decline in
the small and mid-cap markets made their prices attractive.
[GRAPHIC OMITTED: TOP TEN HOLDINGS]
TOP TEN HOLDINGS
Rogers Communications, convertible debentures, 2s of '05
Telecommunications
Comcast Corp., convertible notes 11/8s of '07
Consumer services
Banc One Corp., Series C, $3.50 convertible preferreds
Banking
Magna International, convertible subordinated notes, 5s of '02
Automotive equipment
USF&G Corp., convertible subordinated notes 0% of '09
Insurance and finance
American General Delaware Corp., $3.00 convertible preferreds
Insurance and finance
K mart Financing I, $3.875 convertible preferreds
Retailing
Texas Instruments, convertible subordinated debentures, 23/4s of '02
Electronics and electrical equipment
Softkey International, Inc., 144A convertible senior notes, 51/2s of '00
Computer equipment
J. Baker, Inc., convertible debentures, 7s of '02
Retailing
Footnote reads:
Top 10 holdings represented 7.3% of the fund's net assets. Portfolio holdings
will vary over time.
* OUTLOOK: SLOWER GROWTH, CONTINUED LOW INFLATION, MODERATELY HIGHER INTEREST
RATES
The economy is now showing some signs of slowing a bit from the vigorous pace
reported in the March quarter. On this basis, we continue to look for moderate
economic growth over the remainder of fiscal 1997. Similarly, we expect
inflation to remain under control in the months ahead.
We are also closely monitoring the interest-rate outlook, because interest
rates, particularly short-term rates, historically have exerted significant
influence over the convertible market. The Fed's decision to leave rates
unchanged at its May meeting is no assurance against future increases.
Historically the Fed has shifted monetary policy by engineering a series of
small rate changes, seldom just one.
In the current environment, we believe convertibles generally are fairly
valued and we are still finding quite a few opportunities overall. In the
main, we are optimistic about your fund's prospects during the latter half of
fiscal 1997.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 4/30/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Convertible Income-Growth Trust is designed for investors seeking current
income and capital appreciation mainly through bonds and preferred stocks
convertible into common stock, with capital conservation as a secondary
objective.
TOTAL RETURN FOR PERIODS ENDED 4/30/97
Class A Class B Class M
(inception date) (6/29/72) (7/15/93) (3/13/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 7.06% 0.89% 6.59% 1.74% 6.78% 3.03%
- ------------------------------------------------------------------------------
1 year 12.47 6.01 11.58 6.60 11.91 7.98
- ------------------------------------------------------------------------------
5 years 92.39 81.30 -- -- -- --
Annual average 13.98 12.64 -- -- -- --
- ------------------------------------------------------------------------------
10 years 172.37 156.69 -- -- -- --
Annual average 10.54 9.89 -- -- -- --
- ------------------------------------------------------------------------------
Life of class -- -- 52.25 49.25 42.72 37.69
Annual average -- -- 11.73 11.14 18.08 16.12
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/97
Lehman Bros.
S&P 500 Corporate
Index Bond Index
- ------------------------------------------------------------------------------
6 months 14.71% 1.22%
- ------------------------------------------------------------------------------
1 year 25.12 7.44
- ------------------------------------------------------------------------------
5 years 119.75 48.95
Annual average 17.06 8.30
- ------------------------------------------------------------------------------
10 years 274.55 143.30
Annual average 14.12 9.30
- ------------------------------------------------------------------------------
Life of class B 95.97 25.95
Annual average 19.41 6.20
- ------------------------------------------------------------------------------
Life of class M 71.69 20.77
Annual average 28.84 9.09
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or,
for class A shares, distribution fees prior to implementation of the class
A distribution plan in 1990. Investment returns and principal value will
fluctuate so that an investor's shares, when sold, may be worth more or
less than their original cost. POP assumes 5.75% maximum sales charge for
class A shares and 3.50% for class M shares. CDSC for class B shares
assumes the applicable sales charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 4/30/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number): 2 2 2
- ------------------------------------------------------------------------------
Income $0.480 $0.407 $0.437
- ------------------------------------------------------------------------------
Capital gains:
- ------------------------------------------------------------------------------
Long-term 0.906768 0.906768 0.906768
- ------------------------------------------------------------------------------
Short-term 0.637232 0.637232 0.637232
- ------------------------------------------------------------------------------
Total $2.024 $1.951 $1.981
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/96 $21.24 $22.54 $21.09 $21.14 $21.91
- ------------------------------------------------------------------------------
4/30/97 20.66 21.92 20.48 20.54 21.28
- ------------------------------------------------------------------------------
Current return: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
(end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 4.65% 4.38% 4.00% 4.19% 4.04%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 5.04 4.75 4.30 4.55 4.39
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (6/29/72) (7/15/93) (3/13/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 6.25% 0.13% 5.83% 1.01% 5.98% 2.27%
- ------------------------------------------------------------------------------
1 year 12.96 6.46 12.13 7.13 12.40 8.48
- ------------------------------------------------------------------------------
5 years 92.11 81.09 -- -- -- --
Annual average 13.95 12.61 -- -- -- --
- ------------------------------------------------------------------------------
10 years 163.44 148.24 -- -- -- --
Annual average 10.17 9.52 -- -- -- --
- ------------------------------------------------------------------------------
Life of class -- -- 50.10 47.10 40.64 35.68
Annual average -- -- 11.57 10.96 18.10 16.05
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index* is an unmanaged list of large-capitalization
common stocks and is frequently used as a general gauge of stock market
performance.
Lehman Brothers Corporate Bond Index* is an unmanaged list of corporate
bonds.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DBL. DAGGERS]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS **
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured up to certain
limits by federal/state agencies. Savings accounts may also be insured
up to certain limits. Please call your financial advisor or Putnam at
1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and expenses. Please read
it carefully before you invest or send money.
Portfolio of investments owned
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
CONVERTIBLE BONDS AND NOTES (44.2%) *
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
Aerospace and Defense (0.5%)
- ------------------------------------------------------------------------------------------------------------
$ 3,750,000 Rohr Industries, Inc. cv. sub. deb. 7s, 2012 $ 3,337,500
2,103,000 UNC, Inc. cv. sub. deb. 7 1/2s, 2006 2,092,485
--------------
5,429,985
Airlines (0.2%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Reno Air, Inc. cv. sr. notes 9s, 2002 2,060,000
Automotive (2.0%)
- ------------------------------------------------------------------------------------------------------------
9,740,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 5,539,625
8,200,000 Magna International cv. sub. deb. 5s, 2002 8,917,500
3,750,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 3,262,500
JPY 400,000,000 Toyota Motor Corp. cv. deb. 1.2s, 1998 (Japan) 5,983,784
--------------
23,703,409
Banks (1.4%)
- ------------------------------------------------------------------------------------------------------------
2,089,000 Banamex (Nassau Branch) 144A cv. jr. sub. notes
11s, 2003(Bahamas) 2,151,670
380,000 Banco Nationale Mexico 144A cv. company guaranty
7s, 1999(Bahamas) 363,850
7,500,000 Mitsubishi Bank Ltd. International Finance (Bermuda)
cv. trust guaranteed notes 3s, 2002(Japan) 7,621,875
JPY 830,000,000 Sumitomo Bank Ltd. 144A cv. bank guarantee
0 3/4s, 2001(Japan) 6,959,692
--------------
17,097,087
Basic Industrial Products (1.3%)
- ------------------------------------------------------------------------------------------------------------
1,964,000 Cooper Industries, Inc. cv. sub. 7.05s, 2015 2,180,040
3,700,000 SKF Corp. 144A cv. deb. zero %, (Sweden) 2,712,563
3,000,000 Thermo Electron Corp. cv. deb. 5s, 2001 4,950,000
5,750,000 Thermo Electron Corp. 144A cv. sub. 4 1/4s, 2003 6,202,813
--------------
16,045,416
Broadcasting (0.4%)
- ------------------------------------------------------------------------------------------------------------
4,350,000 International Cabletel, Inc. 144A cv. deb. 7 1/4s, 2005 4,181,438
450,000 International Cabletel, Inc. cv. sub. notes 7s, 2008 383,625
--------------
4,565,063
Building and Construction (0.4%)
- ------------------------------------------------------------------------------------------------------------
3,500,000 Continental Homes Holding cv. sub. notes 6 7/8s, 2002 3,250,625
1,805,000 U.S. Home Corp. cv. deb. 4 7/8s, 2005 1,624,500
--------------
4,875,125
Business Equipment and Services (1.8%)
- ------------------------------------------------------------------------------------------------------------
750,000 Career Horizons, Inc. cv. bonds 7s, 2002 1,263,750
1,500,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 1,263,750
9,050,000 Corporate Express, Inc. 144A cv. notes 4 1/2s, 2000 7,726,438
7,006,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 4,834,140
750,000 U.S. Office Products Co. cv. sub notes 5 1/2s, 2003 635,625
6,440,000 U.S. Office Products Co. 144A cv. sub. notes 5 1/2s, 2003 5,401,550
--------------
21,125,253
Chemicals (0.5%)
- ------------------------------------------------------------------------------------------------------------
2,250,000 Hercules, Inc. cv. deb. 8s, 2010 5,982,188
Computer Equipment (1.2%)
- ------------------------------------------------------------------------------------------------------------
4,590,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 3,878,550
10,800,000 Softkey International, Inc. 144A cv. sr. notes 5 1/2s, 2000 8,032,500
2,500,000 Synoptics Communications Inc. 144A cv. sub. deb.
5 1/4s, 2003 2,184,375
--------------
14,095,425
Computers (0.7%)
- ------------------------------------------------------------------------------------------------------------
750,000 MacNeal-Schwendler cv. sub. deb. 7 7/8s, 2004 725,625
8,575,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 6s, 2006 7,792,531
--------------
8,518,156
Conglomerates (0.9%)
- ------------------------------------------------------------------------------------------------------------
1,400,000 Dart & Kraft Finance N.V. cv. company guaranty
Ser. WW, 7 3/4s, 1998 4,872,000
3,750,000 Hexcel Corp. cv. sub. notes 7s, 2003 4,893,750
1,500,000 Samsung Heavy Industries cv. deb. 0 1/2s, 2009 1,593,750
--------------
11,359,500
Consumer Non Durables (1.3%)
- ------------------------------------------------------------------------------------------------------------
1,625,000 BEC Group, Inc. cv. sub. notes 8s, 2002 [2 DBL. DAGGERS] 1,438,125
22,250,000 Coleman Worldwide Corp. cv. sr. sec. notes LYON
zero %, 2013 6,730,625
2,000,000 Dixie Yarns, Inc. cv. deb. 7s, 2012 1,605,000
6,835,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 6,168,588
--------------
15,942,338
Consumer Services (3.4%)
- ------------------------------------------------------------------------------------------------------------
4,040,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 4,373,300
13,350,000 Boston Chicken, Inc. cv. notes LYON zero %, 2015 3,287,438
17,950,000 Comcast Corp. cv. notes 1 1/8s, 2007 9,154,500
1,500,000 Comcast Corp. cv. sub. deb. 3 3/8s, (3 3/8s, (5 1/2s, 9/9/97)),
2005 ++ 1,365,000
20,150,000 Hollinger, Inc. cv. LYON zero %, 2013 7,354,750
280,000 Pharmaceutical Marketing Services Inc. cv. notes
6 1/4s, 2003 224,000
6,625,000 Pharmaceutical Marketing Services Inc. 144A cv. deb.
6 1/4s, 2003 5,432,500
4,925,000 Protection One, Inc. cv. sr. sub. notes 6 3/4s, 2003 4,684,906
4,930,000 WMS Industries, Inc. cv. deb. 5 3/4s, 2002 4,732,800
--------------
40,609,194
Electronics and Electrical Equipment (3.3%)
- ------------------------------------------------------------------------------------------------------------
1,850,000 Diagnostic Retrieval System cv. sr. sub. deb. 9s, 2003 2,275,500
6,000,000 Magnetek, Inc. cv. deb. 8s, 2001 6,660,000
7,615,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 5,654,138
3,940,000 Richardson Electronics, Ltd. cv. sr. sub. deb 8 1/4s, 2006 3,610,025
475,000 Richardson Electronics Ltd. cv. sub. deb. 7 1/4s, 2006 369,906
6,020,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 4,981,550
730,000 Sanmina Corp. 144A cv. sub. notes 5 1/2s, 2002 1,339,550
5,015,000 SCI Systems, Inc. cv. sub. notes 5s, 2006 6,901,894
3,750,000 Texas Instruments cv. sub. deb. 2 3/4s, 2002 8,076,563
--------------
39,869,126
Electronic Components and Instruments (2.8%)
- ------------------------------------------------------------------------------------------------------------
1,500,000 Cirrus Logic Inc. 144A cv. sub. notes 6s, 2003 995,625
2,035,000 Dovatron International cv. sub. notes 6s, 2002 2,131,663
7,750,000 HMT Technology Corp. 144A cv. sub. notes 5 3/4s, 2004 6,238,750
2,700,000 Lernout & Hauspie Speech Products N.V. 144A
cv. sub. notes 8s, 2001(Belgium) 3,051,000
5,100,000 Solectron Corp. 144A cv. sub. notes 6s, 2006 5,590,875
5,200,000 Thermo Instruments Systems, Inc. 144A cv. deb. 4 1/2s, 2003 4,875,000
1,215,000 Thermo Instruments Systems, Inc. 144A cv. company
guaranty 3 3/4s, 2000 2,226,488
3,425,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 3,459,250
275,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 277,750
4,425,000 Thermo Quest Corp. 144A cv. company guaranty 5s, 2000 4,425,000
--------------
33,271,401
Environmental Control (1.2%)
- ------------------------------------------------------------------------------------------------------------
3,100,000 OHM Corp. cv. sub. deb. 8s, 2006 2,836,500
3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,467,200
1,060,000 U.S. Filter Corp. 144A cv. sub. notes 6s, 2005 1,780,800
2,600,000 USA Waste Services, Inc. cv. sub. notes 4s, 2002 2,567,500
4,878,000 WMX Technologies, Inc. cv. sub. notes 2s, 2005 4,219,470
--------------
14,871,470
Food (0.4%)
- ------------------------------------------------------------------------------------------------------------
2,500,000 Chiquita Brands International cv. deb. 7s, 2001 2,275,000
2,400,000 Chiquita Brands International, Inc. 144A cv. sub. 7s, 2001 2,184,000
--------------
4,459,000
Food and Beverages (0.5%)
- ------------------------------------------------------------------------------------------------------------
5,200,000 Grand Metropolitan PLC cv. unsub. deb. 6 1/2s, 2000
(United Kingdom) 6,396,000
Health Care (2.5%)
- ------------------------------------------------------------------------------------------------------------
2,740,000 Careline, Inc. cv. sr. sub. notes 8s, 2001 3,394,175
4,400,000 NovaCare, Inc. cv. sub. deb. 5 1/2s, 2000 3,987,500
500,000 Quantum Health Resources, Inc. cv. sub. deb. 4 3/4s, 2000 459,375
5,000,000 Renal Treatment Centers, Inc. cv. sub. notes 5 5/8s, 2006 4,525,000
3,235,000 Renal Treatment Centers, Inc. 144A cv. sub. notes 5 5/8s, 2006 2,927,675
2,350,000 Rotech Medical Corp. 144A cv. sub. deb. 5 1/4s, 2003 2,015,125
2,738,000 TheraTx, Inc. cv. sub. deb. 8s, 2002 2,724,310
6,500,000 TheraTx, Inc. 144A cv. sub. 8s, 2002 6,467,500
4,250,000 Vivra, Inc. 144A cv. sub. notes 5s, 2001 4,053,438
--------------
30,554,098
Hospital Management and Medical Services (1.5%)
- ------------------------------------------------------------------------------------------------------------
4,270,000 Integrated Health Services, Inc. cv. sub. deb. 6s, 2003 4,547,550
4,500,000 PhyMatrix, Inc. cv. sub. deb. 6 3/4s, 2003 3,678,750
4,395,000 Sun Healthcare Group, Inc. 144A cv. sub. 6s, 2004 3,999,450
1,750,000 Tenet Health Care Corp. cv. sub. notes 6s, 2005 2,100,000
3,310,000 U.S. Diagnostic Laboratories, Inc. 144A cv. sub. deb. 9s, 2003 3,177,600
--------------
17,503,350
Insurance and Finance (2.0%)
- ------------------------------------------------------------------------------------------------------------
5,800,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 5,560,750
5,000,000 NAC Re Corp. cv. deb. 5 1/4s, 2002 5,031,250
3,065,000 Pioneer Financial Services, Inc. cv. sub. notes 6 1/2s, 2003 4,425,094
13,550,000 USF&G Corp. cv. sub. notes zero %, 2009 8,875,250
--------------
23,892,344
Medical Supplies and Devices (0.4%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Phoenix Shannon 144A cv. sr. sub. notes 9 1/2s, 2000 + 600,000
5,615,000 Uromed Corp. 144A cv. sub. notes 6s, 2003 3,376,019
1,000,000 Ventritex, Inc. cv. sub. notes 5 3/4s, 2001 1,118,750
--------------
5,094,769
Metals and Mining (0.4%)
- ------------------------------------------------------------------------------------------------------------
4,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 4,232,043
Oil and Gas (1.3%)
- ------------------------------------------------------------------------------------------------------------
2,500,000 Apache Corp. 144A cv. sub. deb. 6s, 2002 2,996,875
4,380,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 4,949,400
2,750,000 Pennzoil Co. cv. sub. deb. 6 1/2s, 2003 4,403,438
1,075,000 Pride Petroleum Services, Inc. cv. sub. deb. 6 1/4s, 2006 1,562,781
2,160,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 2,003,400
--------------
15,915,894
Oil and Gas Pipelines (0.2%)
- ------------------------------------------------------------------------------------------------------------
2,250,000 SFP Pipeline Holdings, Inc. cv. variable rate exch. deb.
10.42s, 2010 [2 DBL. DAGGERS] 2,722,500
Paper and Forest Products (0.7%)
- ------------------------------------------------------------------------------------------------------------
6,750,000 Stone Container Corp. cv. sr. sub. notes 8 7/8s, 2000 7,171,875
1,800,000 Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 1,323,000
--------------
8,494,875
Pharmaceuticals (2.3%)
- ------------------------------------------------------------------------------------------------------------
14,065,000 Alza Corp. cv. sub. notes. LYON zero %, 2014 6,171,019
990,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 779,625
3,890,000 Nabi, Inc. 144A cv. sub. notes 6 1/2s, 2003 3,063,375
4,190,000 North American Vaccine, Inc. 144A cv. sub notes 6 1/2s, 2003 4,038,113
10,730,000 Roche Holdings, Inc. cv. unsub. LYON zero %, 2010
(Switzerland) 4,935,800
5,425,000 Sandoz Capital BVI Ltd. 144A cv. company guaranty
2s, 2002 (Switzerland) 6,794,813
2,000,000 Sepracor, Inc. 144A cv. sub. deb. 7s, 2002 2,370,000
--------------
28,152,745
Publishing (0.3%)
- ------------------------------------------------------------------------------------------------------------
4,850,000 Thomas Nelson, Inc. 144A cv. sub. notes 5 3/4s, 1999 4,425,625
Real Estate (0.7%)
- ------------------------------------------------------------------------------------------------------------
1,200,000 Alexander Haagen Properties cv. sub. deb. Ser. A,
7 1/2s, 2001 (R) 1,122,000
1,985,000 Camden Property Trust cv. sub. deb. 7.33s, 2001 (R) 2,243,050
1,410,000 LTC Properties, Inc. cv. sub. deb. 7 3/4s, 2002 (R) 1,461,113
3,750,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 (R) 3,801,563
--------------
8,627,726
Recreation (0.3%)
- ------------------------------------------------------------------------------------------------------------
4,211,000 Speedway Motorsports, Inc. 144A cv. sub. notes 5 3/4s, 2003 3,958,340
Retail (4.0%)
- ------------------------------------------------------------------------------------------------------------
9,510,000 Baker (J.), Inc. cv. deb. 7s, 2002 8,012,175
6,600,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 6,740,250
8,385,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 7,305,431
4,325,000 Pier 1 Imports, Inc. cv. sub. notes 5 3/4s, 2003 5,260,281
4,000,000 Proffitt's, Inc. cv. sub. deb. 4 3/4s, 2003 4,035,000
9,000,000 Rite Aid Corp. cv. deb. zero %, 2006 6,615,000
1,000,000 Staples, Inc. cv. sub. deb. 4 1/2s, 2000 1,035,000
6,350,000 Staples, Inc. 144A cv. sub. deb. 4 1/2s, 2000 6,572,250
2,850,000 Sunglass Hut Inernational, Inc. 144A cv. sub. notes 5 1/4s, 2003 2,183,813
--------------
47,759,200
Semiconductors (1.4%)
- ------------------------------------------------------------------------------------------------------------
7,550,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 6,370,313
3,600,000 National Semiconductor Corp. cv. deb. 6 1/2s, 2002 3,510,000
3,980,000 Plasma & Materials Technologies, Inc. 144A cv. notes
7 1/8s, 2001 2,706,400
4,500,000 Xilinx, Inc. 144A cv. sub. notes 5 1/4s, 2002 5,152,500
--------------
17,739,213
Telecommunications (1.3%)
- ------------------------------------------------------------------------------------------------------------
5,025,000 MIDCOM Communications, Inc. 144A cv. sub. deb.
8 1/4s, 2003 4,170,750
22,500,000 Rogers Communications cv. deb. 2s, 2005(Canada) 12,037,500
--------------
16,208,250
Transportation (0.7%)
- ------------------------------------------------------------------------------------------------------------
GBP 3,300,000 British Airport Authority 144A cv. bonds
5 3/4s, 2006(United Kingdom) 5,488,445
$ 2,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 2,373,500
--------------
7,861,945
--------------
Total Convertible Bonds and Notes
(cost $523,846,791) $ 533,418,053
COMMON STOCKS (28.4%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (0.2%)
- ------------------------------------------------------------------------------------------------------------
28,000 Lockheed Martin Corp. $ 2,506,000
Automotive (0.8%)
- ------------------------------------------------------------------------------------------------------------
1,400 Bayerische Motoren Werke (BMW) AG (Germany) + 1,148,045
72,780 Chrysler Corp. 2,183,400
80,000 Ford Motor Co. 2,780,000
70,000 General Motors Corp. 4,051,250
--------------
10,162,695
Automotive Parts (0.1%)
- ------------------------------------------------------------------------------------------------------------
71,000 Titan Wheel International, Inc. 1,029,500
Banks (3.3%)
- ------------------------------------------------------------------------------------------------------------
74,000 Banc One Corp. 3,135,750
29,000 BankAmerica Corp. 3,389,375
5,900 BankBoston Corp. 429,225
41,500 Bankers Trust New York Corp. 3,377,063
40,000 Comerica, Inc. 2,340,000
6,300 CoreStates Financial Corp. 318,938
19,000 First of America Bank Corp. 1,263,500
100,000 Fleet Financial Group, Inc. 6,100,000
63,000 KeyCorp 3,283,875
50,000 Morgan (J.P.) & Co., Inc. 5,093,750
60,000 National City Corp. 2,925,000
54,000 NationsBank Corp. 3,260,250
85,000 PNC Bank Corp. 3,495,625
30,000 Summit Bancorp 1,395,000
--------------
39,807,351
Basic Industrial Products (0.5%)
- ------------------------------------------------------------------------------------------------------------
70,000 Deere (John) & Co. 3,220,000
60,000 General Signal Corp. 2,355,000
--------------
5,575,000
Building and Construction (0.2%)
- ------------------------------------------------------------------------------------------------------------
31,000 Armstrong World Industries, Inc. 2,038,250
Business Services and Equipment (0.9%)
- ------------------------------------------------------------------------------------------------------------
36,000 IBM Corp. 5,787,000
76,000 Xerox Corp. 4,674,000
--------------
10,461,000
Chemicals (1.2%)
- ------------------------------------------------------------------------------------------------------------
30,000 Bayer AG ADR (Germany) 1,193,649
32,000 Dow Chemical Co. 2,716,000
30,000 du Pont (E.I.) de Nemours & Co., Ltd. 3,183,750
58,000 Eastman Chemical Co. 2,958,000
50,000 Hercules, Inc. 1,968,750
65,000 Witco Chemical Corp. 2,429,375
--------------
14,449,524
Computer Services (0.2%)
- ------------------------------------------------------------------------------------------------------------
85,000 NCR Corp. + 2,465,000
Computer Software (0.2%)
- ------------------------------------------------------------------------------------------------------------
55,000 Computer Associates Intl., Inc. 2,860,000
Conglomerates (1.4%)
- ------------------------------------------------------------------------------------------------------------
58,000 Cooper Industries, Inc. 2,668,000
45,000 General Motors Corp. Class H 2,418,750
54,000 Minnesota Mining & Manufacturing Co. 4,698,000
76,000 TRW, Inc. 3,961,500
33,000 United Technologies Corp. 2,495,625
20,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) + 1,031,691
--------------
17,273,566
Consumer Durable Goods (0.2%)
- ------------------------------------------------------------------------------------------------------------
53,000 Whirlpool Corp. 2,477,750
Consumer Non Durables (1.9%)
- ------------------------------------------------------------------------------------------------------------
58,000 American Brands, Inc. 3,117,500
50,000 Avon Products, Inc. 3,081,250
20,000 Clorox Co. 2,547,500
92,000 Kimberly-Clark Corp. 4,715,000
140,000 Philip Morris Cos., Inc. 5,512,500
60,000 RJR Nabisco Holdings Corp. 1,785,000
80,000 Universal Corp. 2,240,000
--------------
22,998,750
Electric Utilities (0.3%)
- ------------------------------------------------------------------------------------------------------------
50,000 Carolina Power & Light Co. 1,700,000
82,000 Central & South West Corp. 1,650,250
--------------
3,350,250
Electronics and Electrical Equipment (1.3%)
- ------------------------------------------------------------------------------------------------------------
53,000 Emerson Electric Co. 2,689,750
16,000 General Electric Co. 1,774,000
62,000 Hewlett-Packard Co. 3,255,000
53,000 Motorola, Inc. 3,034,250
35,000 Siemens AG (Germany) 1,898,566
34,000 Texas Instruments, Inc. 3,034,500
--------------
15,686,066
Environmental Control (0.1%)
- ------------------------------------------------------------------------------------------------------------
56,000 WMX Technologies, Inc. 1,645,000
Farm Equipment (0.2%)
- ------------------------------------------------------------------------------------------------------------
90,000 New Holland N.V. (Netherlands) 1,991,250
Food and Beverages (1.1%)
- ------------------------------------------------------------------------------------------------------------
68,000 Anheuser-Busch Cos., Inc. 2,915,500
47,000 General Mills, Inc. 2,914,000
65,000 Heinz (H.J.) Co. 2,697,500
70,000 Sara Lee Corp. 2,940,000
98,000 Whitman Corp. 2,266,250
--------------
13,733,250
Health Care (0.4%)
- ------------------------------------------------------------------------------------------------------------
110,000 Baxter International, Inc. 5,266,250
Household Products (0.2%)
- ------------------------------------------------------------------------------------------------------------
63,000 Tupperware Corp. 2,094,750
Insurance and Finance (1.8%)
- ------------------------------------------------------------------------------------------------------------
61,000 American General Corp. 2,661,125
94,492 AON Corp. 6,283,718
50,000 Beneficial Corp. 3,200,000
18,000 CIGNA Corp. 2,706,750
55,000 Federal National Mortgage Association 2,261,875
50,000 Norwest Corp. 2,493,750
105,000 USF&G Corp. 2,100,000
--------------
21,707,218
Metals and Mining (0.3%)
- ------------------------------------------------------------------------------------------------------------
108,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 3,024,000
35,086 Freeport-McMoRan Copper & Gold Co., Inc. Class B 1,021,880
--------------
4,045,880
Oil and Gas (2.9%)
- ------------------------------------------------------------------------------------------------------------
77,857 Amoco Corp. 6,510,792
22,000 British Petroleum PLC ADR (United Kingdom) 3,027,750
87,000 Elf Aquitane ADR (France) 4,230,375
100,000 Exxon Corp. 5,662,500
30,000 Mobil Corp. 3,900,000
100,000 Occidental Petroleum Corp. 2,212,500
55,000 PanEnergy Corp. 2,433,750
18,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 3,244,500
60,000 Total Corp. ADR (France) 2,497,500
65,000 YPF S.A. ADR (Argentina) 1,795,625
--------------
35,515,292
Packaging and Containers (0.2%)
- ------------------------------------------------------------------------------------------------------------
40,000 Crown Cork & Seal Co., Inc. 2,190,000
Paper and Forest Products (0.6%)
- ------------------------------------------------------------------------------------------------------------
46,000 Temple Inland, Inc. 2,553,000
94,000 Weyerhaeuser Co. 4,300,500
--------------
6,853,500
Pharmaceuticals and Biotechnology (1.1%)
- ------------------------------------------------------------------------------------------------------------
51,000 American Home Products Corp. 3,378,750
54,000 Bristol-Myers Squibb Co. 3,537,000
134,000 Pharmacia & Upjohn, Inc. 3,969,750
30,000 Warner-Lambert Co. 2,940,000
--------------
13,825,500
Photography (0.7%)
- ------------------------------------------------------------------------------------------------------------
70,844 Eastman Kodak Co. 5,915,474
55,000 Polaroid Corp. 2,667,500
--------------
8,582,974
Pipelines (0.1%)
- ------------------------------------------------------------------------------------------------------------
41,000 Enron Corp. 1,542,625
Publishing (0.4%)
- ------------------------------------------------------------------------------------------------------------
82,000 Deluxe Corp. 2,511,250
41,000 McGraw-Hill, Inc. 2,085,875
--------------
4,597,125
Railroad (0.4%)
- ------------------------------------------------------------------------------------------------------------
26,000 Norfolk Southern Corp. 2,336,750
36,000 Union Pacific Corp. 2,295,000
--------------
4,631,750
Real Estate (0.1%)
- ------------------------------------------------------------------------------------------------------------
100,000 LTC Properties, Inc. (R) 1,675,000
Retail (1.3%)
- ------------------------------------------------------------------------------------------------------------
63,000 Dayton Hudson Corp. 2,835,000
270,000 K mart Corp. 3,678,750
60,000 Lowe's Cos., Inc. 2,280,000
47,000 Penney (J.C.) Co., Inc. 2,244,250
63,000 Rite Aid Corp. 2,898,000
50,000 Sears, Roebuck & Co. 2,400,000
--------------
16,336,000
Savings and Loans (0.4%)
- ------------------------------------------------------------------------------------------------------------
79,000 Ahmanson (H.F.) & Co. 3,011,875
40,000 Great Western Financial Corp. 1,680,000
--------------
4,691,875
Telephone Utilities (1.8%)
- ------------------------------------------------------------------------------------------------------------
96,000 American Telephone & Telegraph Co. 3,216,000
46,000 Bell Atlantic Corp. 3,116,500
38,000 BellSouth Corp. 1,691,000
47,000 GTE Corp. 2,156,125
50,000 NYNEX Corp. 2,587,500
74,452 SBC Communications, Inc. 4,132,086
100,000 Sprint Corp. 4,387,500
--------------
21,286,711
Transportation (0.6%)
- ------------------------------------------------------------------------------------------------------------
28,000 Burlington Northern Santa Fe Corp. 2,205,000
31,000 Delta Air Lines, Inc. 2,855,875
80,000 Ryder System, Inc. 2,490,000
--------------
7,550,875
Utilities (0.8%)
- ------------------------------------------------------------------------------------------------------------
50,000 Cinergy Corp. 1,662,500
81,000 Edison International 1,701,000
40,000 Potomac Electric Power Co. 900,000
35,000 Public Service Co. of Colorado 1,356,250
38,000 Union Electric Co. 1,353,750
70,000 US West, Inc. 2,458,750
--------------
9,432,250
--------------
Total Common Stocks (cost $262,394,351) $ 342,335,777
CONVERTIBLE PREFERRED STOCKS (20.9%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (0.3%)
- ------------------------------------------------------------------------------------------------------------
$ 70,000 Kaman Corp. $3.25 cv. pfd. $ 3,846,719
Automotive (0.9%)
- ------------------------------------------------------------------------------------------------------------
63,950 Federal Mogul Corp. $3.875 cv. pfd. 4,908,163
53,900 Ford Motor Co. Ser. A, $4.20 dep. shs. cv. pfd. 6,036,800
--------------
10,944,963
Banks (2.1%)
- ------------------------------------------------------------------------------------------------------------
109,500 Banc One Corp. Ser. C, $3.50 cv. pfd. 9,115,875
31,500 Matewan Bancshares, Inc. Ser. A, $1.875 cv. pfd. 763,875
56,100 Roosevelt Financial Group $3.25 cv. pfd. 4,782,525
83,550 Sovereign Bancorp Inc. $3.13 cv. pfd. 6,182,700
81,350 Union Planters Corp. Ser. E, $2.00 cv. pfd. 4,453,913
--------------
25,298,888
Basic Industrial Products (0.8%)
- ------------------------------------------------------------------------------------------------------------
40,000 Case Corp. Ser. A, $4.50 cv. pfd. 5,370,000
88,450 Greenfield Industries, Inc. 144A $3.00 cv. pfd. 3,737,013
--------------
9,107,013
Broadcasting (0.8%)
- ------------------------------------------------------------------------------------------------------------
82,000 Chancellor Broadcasting Corp. 144A $3.50 cv. pfd. 4,366,500
82,720 SFX Broadcasting, Inc. Ser. D, $3.25 cv. pfd. 3,722,400
276,000 Triathlon Broadcasting Co. $0.945 cv. pfd. 2,139,000
--------------
10,227,900
Building and Construction (0.3%)
- ------------------------------------------------------------------------------------------------------------
53,800 Southdown, Inc. $2.875 cv. pfd. 3,241,450
Business Services (0.3%)
- ------------------------------------------------------------------------------------------------------------
47,000 Ikon Office Solutions, Inc. Ser. BB, $5.03 cv. pfd. 3,196,000
Computer Services (0.3%)
- ------------------------------------------------------------------------------------------------------------
79,457 Wang Laboratories, Inc. Ser. B, $3.25 cv. pfd. 3,615,294
Computers (0.3%)
- ------------------------------------------------------------------------------------------------------------
128,000 Vanstar Corp. 144A $3.375 cv. pfd. 3,920,000
Conglomerates (0.3%)
- ------------------------------------------------------------------------------------------------------------
185,000 Cooper Industries, Inc. $0.81 cv. pfd. 3,491,875
Consumer Non Durables (0.3%)
- ------------------------------------------------------------------------------------------------------------
96,075 Fieldcrest Cannon Ser. A, $3.00 cv. pfd. 4,179,263
Consumer Products (0.4%)
- ------------------------------------------------------------------------------------------------------------
68,250 Corning, Inc. $3.00 cv. pfd. 5,187,000
Consumer Services (0.6%)
- ------------------------------------------------------------------------------------------------------------
67,800 Service Corp. $3.125 cv. pfd. 7,771,575
Entertainment (0.3%)
- ------------------------------------------------------------------------------------------------------------
87,670 Station Casinos, Inc. $3.50 cv. pfd. 3,813,645
Financial Services (1.3%)
- ------------------------------------------------------------------------------------------------------------
77,000 Devon Financing Trust $3.25 cv. pfd. 4,908,750
136,643 Finova Finance Trust $2.75 cv. pfd. 7,276,240
70,000 Timet Capital Trust I 144A $3.3125 cv. pfd. 3,290,000
--------------
15,474,990
Food (0.4%)
- ------------------------------------------------------------------------------------------------------------
90,000 Chiquita Brands International, Inc. Ser. B, $3.75 cv. pfd. 5,265,000
Insurance and Finance (1.9%)
- ------------------------------------------------------------------------------------------------------------
52,849 American Bankers Insurance Group, Inc. Ser. B,
$3.125 cv. pfd. 3,322,881
140,500 American General Delaware Corp. $3.00 cv. pfd. 8,201,688
83,700 Penncorp Financial Group, Inc. 144A $3.50 cv.pfd. 4,875,525
110,400 St. Paul Capital LLC $3.00 cv. pfd. 6,789,600
--------------
23,189,694
Metals and Mining (1.2%)
- ------------------------------------------------------------------------------------------------------------
70,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. 3,631,250
292,300 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 7,892,100
90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 3,435,200
--------------
14,958,550
Oil and Gas (3.0%)
- ------------------------------------------------------------------------------------------------------------
310,181 Atlantic Richfield Co. $2.23 cv. pfd. 6,358,711
65,000 Grant Geophysical, Inc. $2.4375 cv. pfd. 56,875
30,000 Lomak Petroleum, Inc. 144A $2.03 cv. pfd. 1,398,750
100,580 Neuvo Energy Corp. Ser. A, $2.875 cv. pfd. 4,588,963
116,800 Occidental Petroleum Corp. 144A $3.875 cv. pfd. 6,394,800
75,505 Tejas Gas Corp. $2.65 cv. pfd. 4,039,518
124,500 Tosco Financing Trust 144A $2.875 cv. pfd. 6,878,625
109,900 Unocal Capital Trust $3.125 cv. pfd. 6,181,875
--------------
35,898,117
Packaging and Containers (0.5%)
- ------------------------------------------------------------------------------------------------------------
129,900 Crown Cork & Seal Co., Inc. $4.50 cv. pfd. 6,641,138
Paper and Forest Products (0.4%)
- ------------------------------------------------------------------------------------------------------------
104,400 International Paper Co. $2.63 cv. pfd. 4,945,950
Real Estate (1.3%)
- ------------------------------------------------------------------------------------------------------------
92,000 Insignia Financial Group, Inc. 144A $3.25 cv. pfd. 4,094,000
53,500 Oasis Residential, Inc. Ser. A, $2.25 cv. pfd. (R) 1,377,625
65,000 Rouse Co. Ser. B, $3.00 cv. pfd. (R) 2,957,500
195,000 Security Capital Pacific Trust Ser. A, $1.75 cv. pfd. 5,923,125
74,490 Tanger Factory Outlet Centers $1.575 cv. pfd. (R) 1,750,515
--------------
16,102,765
Retail (1.4%)
- ------------------------------------------------------------------------------------------------------------
80,000 Ann Taylor Finance Trust $4.25 cv. pfd. 5,420,000
153,000 Boise Cascade Corp. Ser. G, $1.58 cv. pfd. 4,092,750
140,600 K mart Financing I $3.875 cv. pfd. 8,102,058
--------------
17,614,808
Savings and Loans (0.5%)
- ------------------------------------------------------------------------------------------------------------
82,000 Ahmanson (H.F.) & Co. $3.00 cv. pfd. 6,478,000
Telecommunications (0.6%)
- ------------------------------------------------------------------------------------------------------------
169,000 AirTouch Communications, Inc. Ser. C, $2.125 cv. pfd. 7,689,500
--------------
Total Convertible Preferred Stocks
(cost $237,922,540) $ 252,100,097
FOREIGN GOVERNMENT BONDS AND NOTES (cost $5,088,000) (0.4%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 5,100,000 Italy (Government of) cv. bonds 5s, 2001 (Italy) $ 5,036,250
CORPORATE BONDS AND NOTES (cost $3,210,625) (0.3%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 2,500,000 Siemens Capital Corp. company guaranty
8s, 2002 (Germany) $ 3,650,000
SHORT-TERM INVESTMENTS (cost $68,220,288) (5.7%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$68,210,000 Interest in $492,645,000 joint repurchase agreement
dated April 30, 1997 with Morgan (J.P.) & Co., Inc.
due May 1, 1997 with respect to various
U.S. Treasury obligations -- maturity value of
$68,220,288 for an effective yield of 5.43% $ 68,220,288
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,100,682,595) *** $1,204,760,465
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,205,519,944.
*** The aggregate identified cost on a tax basis is $1,100,650,733,
resulting in gross unrealized appreciation and depreciation of
$147,648,705 and $43,538,973, respectively, or net unrealized
appreciation of $104,109,732.
+ Non-income-producing security.
++ The interest or dividend rate and date shown parenthetically
represent the new interest or dividend rate to be paid and the date the
fund will begin receiving interest or dividend income at this rate.
[2 DBL. DAGGERS] Income may be received in cash or additional securities at the
discretion of the issuer.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American Depository
Receipts Shares, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at April 30, 1997
(aggregate face value $13,746,649)
<S> <C> <C> <C> <C>
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- -------------------------------------------------------------------------------------------
Japanese Yen $ 24,618 $ 30,151 6/02/97 $ 5,533
Japanese Yen 38,296 46,962 7/28/97 8,666
Japanese Yen 25,288 30,847 12/1/97 5,559
Japanese Yen 3,317,760 4,042,341 1/28/98 724,581
Japanese Yen 26,692 32,171 11/30/98 5,479
Japanese Yen 25,987 31,538 6/01/98 5,551
Japanese Yen 27,421 32,798 6/01/99 5,377
Japanese Yen 28,089 33,432 11/30/99 5,343
Japanese Yen 28,801 34,054 5/31/00 5,253
Japanese Yen 29,466 34,583 11/30/00 5,117
Japanese Yen 8,070,452 9,397,772 5/31/01 1,327,320
- -------------------------------------------------------------------------------------------
$2,103,779
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,100,682,595) (Note 1) $1,204,760,465
- ---------------------------------------------------------------------------------------------------
Cash 8,166,526
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 9,141,914
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 11,543,890
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 2,103,779
- ---------------------------------------------------------------------------------------------------
Total assets 1,235,716,574
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 26,131,718
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,657,135
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,684,035
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 202,557
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,194
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,769
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 360,027
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 153,195
- ---------------------------------------------------------------------------------------------------
Total liabilities 30,196,630
- ---------------------------------------------------------------------------------------------------
Net assets $1,205,519,944
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,055,583,208
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,867,809
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment and foriegn
currency transactions (Note 1) 41,887,397
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 106,181,530
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,205,519,944
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,002,849,844 divided by 48,546,910 shares) $20.66
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $20.66)* $21.92
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($191,743,680 divided by 9,361,564 shares)** $20.48
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($10,926,420 divided by 531,960 shares) $20.54
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $20.54)* $21.28
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended April 30,1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $17,863,297
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $6,493) 10,587,649
- --------------------------------------------------------------------------------------------------
Total investment income 28,450,946
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 3,332,205
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 929,486
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 14,496
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 13,180
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,194,264
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 844,248
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 36,842
- --------------------------------------------------------------------------------------------------
Reports to shareholders 66,225
- --------------------------------------------------------------------------------------------------
Registration fees 15,078
- --------------------------------------------------------------------------------------------------
Auditing 13,520
- --------------------------------------------------------------------------------------------------
Legal 6,793
- --------------------------------------------------------------------------------------------------
Postage 14,998
- --------------------------------------------------------------------------------------------------
Other 68,281
- --------------------------------------------------------------------------------------------------
Total expenses 6,549,616
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (331,698)
- --------------------------------------------------------------------------------------------------
Net expenses 6,217,918
- --------------------------------------------------------------------------------------------------
Net investment income 22,233,028
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 41,617,980
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign currencies 1,377,067
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 8,842,113
- --------------------------------------------------------------------------------------------------
Net gain on investments 51,837,160
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $74,070,188
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 22,233,028 $ 37,114,720
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 41,617,980 79,062,109
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 10,219,180 45,277,440
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 74,070,188 161,454,269
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (21,584,195) (39,696,713)
- ----------------------------------------------------------------------------------------------------------------------
Class B (3,308,595) (4,495,021)
- ----------------------------------------------------------------------------------------------------------------------
Class M (209,346) (207,655)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (65,659,146) (27,754,648)
- ----------------------------------------------------------------------------------------------------------------------
Class B (11,191,470) (3,021,352)
- ----------------------------------------------------------------------------------------------------------------------
Class M (688,054) (80,667)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 182,349,934 131,834,466
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 153,779,316 218,032,679
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,051,740,628 833,707,949
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,867,809 and $4,736,917, respectively) $1,205,519,944 $1,051,740,628
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.24 $19.42 $19.09 $20.38 $17.60 $15.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .43 (d) .81 (d) .85 .81 .87 .89
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.01 2.70 1.60 (.46) 2.87 1.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.44 3.51 2.45 .35 3.74 2.78
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.48) (.98) (.96) (.74) (.96) (.96)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.54) (.71) (1.16) (.90) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.02) (1.69) (2.12) (1.64) (.96) (.96)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.66 $21.24 $19.42 $19.09 $20.38 $17.60
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 7.06* 18.99 14.38 1.84 21.74 18.16
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,002,850 $898,486 $756,645 $697,946 $707,969 $599,866
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .52* 1.06 1.16 .96 .96 1.11
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.99* 3.99 4.64 4.16 4.55 5.32
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.93* 61.43 69.52 48.37 66.63 59.89
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0514 $.0508
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts. (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or
after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 July 15, 1993+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.09 $19.30 $19.00 $20.35 $19.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .35 (d) .66 (d) .69 .74 .23
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .99 2.68 1.61 (.55) .82
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.34 3.34 2.30 .19 1.05
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.41) (.84) (.84) (.66) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.54) (.71) (1.16) (.88) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.95) (1.55) (2.00) (1.54) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.48 $21.09 $19.30 $19.00 $20.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 6.59* 18.14 13.54 1.00 5.43*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $191,744 $146,127 $75,309 $31,432 $4,439
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .89* 1.81 1.91 1.71 .52*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.63* 3.26 3.92 3.58 .91*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.93* 61.43 69.52 48.37 66.63
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0514 $.0508
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts. (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or
after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 Year ended March 13, 1995+
operating performance (Unaudited) October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $21.14 $19.37 $17.79
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .39 (d) 0.73 (d) .64
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .99 2.65 1.64
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.38 3.38 2.28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.44) (.90) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.54) (.71) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.98) (1.61) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.54 $21.14 $19.37
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 6.78* 18.30 12.99*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,926 $7,128 $1,753
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77* 1.54 1.04*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.76* 3.55 2.89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.93* 61.43 69.52
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0514 $.0508
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts. (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or
after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
April 30, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam Convertible Income-Growth Fund (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks current income and capital
appreciation by investing primarily in bonds and preferred stocks convertible
into common stock with capital preservation as a secondary objective.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60 days
or less are stated at amortized cost, which approximates market value, and
other investments are stated at fair value following procedures approved by
the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Management.
These balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date except that certain dividends from foreign
securities are recorded as soon as the fund is informed of the ex-dividend
date.
Discounts on zero coupon bonds are accreted according to the effective yield
method.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, other assets and liabilities are recorded in the books and records
of the fund after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in the
market prices of the securities. Such fluctuations are included with the net
realized and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or losses
on closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign withholding
taxes recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. The fund could be exposed to
risk if the value of the currency changes unfavorably, if the counterparties
to the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986 as amended. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.65% of the first $500 million,
0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the
next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion,
0.39% of the next $5 billion and 0.38% of any excess thereafter. Prior to
February 20, 1997, any amount over $1.5 billion was based on 0.45%.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended April 30, 1997, fund expenses were reduced by
$331,698 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $1,360 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees payable on
or after July 1, 1995. The deferred fees remain in the fund and are invested
in certain Putnam funds until distribution in accordance with the Plan.
The Fund has adopted an unfunded noncontributory defined benefit pension plan
covering all Trustees of the Fund who have served as Trustee for at least five
years. Benefits under the plan are equal to 50% of the Trustee's average total
retainer and meeting fees for the three years preceding retirement. Pension
expense for the fund is included in Trustee fees in the Statement of
operations for the six months ended April 30, 1997. Accrued pension liability
is included in Payable for compensation of Trustees in the Statement of assets
and liabilities.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $430,136,219 and
$330,955,342, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At April 30, 1997, there was an unlimited number of shares of beneficial
interest authorized.
Six months ended
April 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 6,757,504 $141,585,416
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,759,864 76,375,012
- ------------------------------------------------------------
10,517,368 217,960,428
Shares
repurchased (4,263,080) (89,908,143)
- ------------------------------------------------------------
Net increase 6,254,288 $128,052,285
- ------------------------------------------------------------
Year ended
October 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 6,225,633 $126,621,311
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,946,646 58,192,170
- ------------------------------------------------------------
9,172,279 184,813,481
Shares
repurchased (5,850,929) (119,160,209)
- ------------------------------------------------------------
Net increase 3,321,350 $ 65,653,272
- ------------------------------------------------------------
Six months ended
April 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 2,538,872 $ 52,766,446
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 583,863 11,772,190
- ------------------------------------------------------------
3,122,735 64,538,636
Shares
repurchased (691,226) (14,367,313)
- ------------------------------------------------------------
Net increase 2,431,509 $ 50,171,323
- ------------------------------------------------------------
Year ended
October 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 3,655,578 $ 74,061,724
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 303,647 5,977,026
- ------------------------------------------------------------
3,959,225 80,038,750
Shares
repurchased (931,979) (18,858,855)
- ------------------------------------------------------------
Net increase 3,027,246 $ 61,179,895
- ------------------------------------------------------------
Six months ended
April 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 315,345 $ 6,634,641
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 39,497 797,879
- ------------------------------------------------------------
354,842 7,432,520
Shares
repurchased (160,044) (3,306,194)
- ------------------------------------------------------------
Net increase 194,798 $ 4,126,326
- ------------------------------------------------------------
Year ended
October 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 330,113 $ 6,691,625
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,651 252,193
- ------------------------------------------------------------
342,764 6,943,818
- ------------------------------------------------------------
Shares
repurchased (96,145) (1,942,519)
- ------------------------------------------------------------
Net increase 246,619 $ 5,001,299
- ------------------------------------------------------------
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Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Thomas V. Reilly
Vice President
Hugh H. Mullin
Vice President and Fund Manager
Charles G. Pohl
Vice President and Fund Manager
Edward T. Shadek, Jr.
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
Convertible-Income Growth Trust. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details of
sales charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581. You
can also learn more at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
33893-008/223/920 6/97
