Putnam
Convertible
Income-Growth
Trust
SEMIANNUAL REPORT
April 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam Convertible Income-Growth Trust has an impressive
all-around game. This fund covers the bases in the convertible universe,
and then some."
-- Morningstar Mutual Funds, December 5, 1997
* "Funds that own convertible securities are a safer haven than
equities in difficult markets, but they offer more growth potential than
bonds. So they're suitable for most portfolios -- especially when, as now,
protecting gains looms larger than seeking them."
-- Timothy Middleton, Microsoft Investor, January 13, 1998
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
28 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
While the aftereffects of the Asian crisis continued to influence the stock
market during the first half of Putnam Convertible Income-Growth Trust's
semiannual period, the dual nature of convertible securities proved a
particular advantage -- and enabled the fund to deliver strong returns.
As the U.S. economy continued its expansion and as interest rates remained
relatively low, your fund's holdings benefited from an environment favorable
to both stocks and bonds. Because we had emphasized sectors less likely to be
influenced by Asian developments, the portfolio value remained relatively
resilient even during the occasional bouts of market volatility.
In the following report, Charles Pohl, your fund's manager, comments on market
conditions and explains his sector strategy for the period.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 17, 1998
Report from the Fund Manager
Charles G. Pohl
Putnam Convertible Income-Growth Trust's class A shares earned a solid 10.23%
return at net asset value (3.88% at maximum public offering price) in the
first six months of its 1998 fiscal year, which ended April 30, 1998. The
period opened amid market uncertainty regarding the impact of the Asian
financial crisis on U.S. business activity, but the U.S. economy continued to
expand at a robust pace while long-term interest rates stayed at relatively
low levels. Both of these factors propelled the convertible securities market,
in which two thirds of the fund's assets are invested. For complete
performance information, including the returns of all share classes and over
longer time periods, please see the tables that begin on page 9.
* CONVERTIBLES SHOW RESILIENCE THROUGH ASIAN CRISIS
As the Asian crisis unnerved the U.S. stock market late in 1997, some
convertible securities, particularly those in the technology sector,
experienced a correction. However, the downturn was not severe because Asian
events simultaneously had a disinflationary effect on the U.S. economy and
pushed down interest rates, a circumstance that makes convertibles more
attractive to investors. This factor enabled convertibles to hold up better
than many common stocks of the same underlying companies, particularly those
in the hard-hit technology sector.
Given that the technology and telecommunication sectors are heavily
represented in the convertible universe, we believe that our security
selection was paramount, as always, in achieving the favorable risk-adjusted
performance in this period that investors expect from a convertible fund. To
limit risk, we manage the fund with a value tilt, buying issues of what we
believe are financially sound companies that are attractively priced relative
to other companies or sectors and have reasonable prospects for improving
returns. This approach provided relative stability as the Asian crisis
unfolded, because the portfolio was more heavily weighted in domestic
industries, such as cable television, financials, and airlines than in more
expensive technology issues. Only in late 1997 when high-quality securities in
the technology sector began trading at lower prices did our value discipline
enable us to make opportunistic purchases.
* NEW VALUE OPPORTUNITIES IN TECHNOLOGY
Technology issues account for roughly one fifth of the convertible securities
market. For that reason, we monitor the prices and competitiveness of
technology companies on an ongoing basis. Late in 1997, as the outlook for
their Asian business partners and customers deteriorated, many technology
companies suffered falling stock prices. We took advantage of this opportunity
by acquiring many issues that previously had been too expensive.
Several of the new holdings are companies that manufacture equipment used in
making and testing computer semiconductors. Examples of these companies are
Kent Electronics, Credence Systems, and LAM Research. Because these
convertibles were purchased at deep discounts, they provide the fund with
generous yields and the potential for capital appreciation. The semiconductor
industry is enduring a downturn and our near-term outlook is mixed, but these
companies feature strong balance sheets.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART OF TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Oil and gas 7.4%
Banks 6.0%
Insurance
and finance 5.8%
Pharmaceuticals
and biotechnology 5.4%
Retail 4.7%
Footnote reads:
* Based on net assets as of 4/30/98. Holdings will vary over time.
Another technology holding which continues to strengthen is Lernout & Hauspie.
This Belgian company is the global leader in the development of advanced
speech technology. Its computer voice recognition system represents the next
major step in the development of the personal computer, and the company has
signed licensing contracts with more than 100 firms for a variety of projects.
As the issue has appreciated, we have sold portions of the fund's position in
order to maintain what we consider a weighting appropriate to the fund's risk
profile.
* CONTINUING STRENGTH IN FINANCIALS; NEW STRENGTH IN CABLE
As has been the case for the last 18 months, your portfolio has consistently
overweighted financial holdings. Over the last year, restructurings and
consolidations, combined with a strong economy and a favorable interest-rate
environment, have propelled the performance of the banking sector. One of the
major players in the industry's consolidation moves was Banc One. Our
convertible holding in Banc One ultimately benefited from the company's
recently announced merger with First Chicago. Another financial issue that
also performed quite well in the period was a convertible preferred issued by
American Bankers Insurance Group. This company is a provider of specialized
insurance products. Its successful franchise, operating track record, and
unique distribution network attracted competing takeover bids from AIG and
Cendant, which prompted us to sell the holding and take profits in this
period.
Like the financial industry, the cable television industry has endured ups and
downs in recent years. We found the prices of cable issues attractive in early
1997 and acquired several for the fund that have since performed well,
including U.S. West Media Group, Telecommunications, Inc., and Time Warner.
New strategies, alliances, and technology are allowing cable companies to
expand the range of services they offer to household customers, and we see
continuing potential in this industry.
* DIVIDEND-PAYING STOCKS CONTINUE TO LEND STABILITY
While your fund's primary investments are convertible securities, we also keep
approximately one third of assets in common stocks. We choose stocks using the
same value strategy we apply to convertibles, but we focus our research on
large dividend-paying stocks that tend to be relatively steady. During the
recent period, the fund's common stock holdings generally performed well as
the market rose, though several oil companies languished as a result of
falling energy demand in Asia. The price decline gave us an opportunity to add
to the fund's energy stocks at attractive prices. We expect that these
holdings will appreciate because the depressed price of oil is reducing
exploration efforts. Therefore, supply in coming years is likely to be limited
even as demand recovers.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Safeguard Scientifics, Inc., 144A convertible subordinated notes 6s,
2006
Computer services
Kmart Financing I, $3.875 convertible cumulative preferred
Retail
H.F. Ahmanson & Co., $3.00 convertible preferred
Savings and loans
Equity Residential Properties Trust Series E, $1.75 convertible
preferred
Real estate
General Electric Co.
Conglomerate
Tele-Communications (TCI Group) Series A, $2.125 convertible
preferred
Cable television
Finova Finance Trust, $2.75 convertible cumulative preferred
Financial services
Roche Holdings, Inc., convertible unsubordinated LYON
0%, 2010 (Switzerland)
Pharmaceuticals
Continental Airlines, Inc., convertible subordinated debenture
6 3/4s, 2006
Transportation
AirTouch Communications, Inc. Series C, $2.125 convertible
preferred
Telecommunications
These hodings represent 8.0% of the fund's net assets as of 4/30/98.
Portfolio holdings will vary over time.
* POSITIVE OUTLOOK FOR CONVERTIBLES MARKET
As discussed above, the current backdrop for the convertibles market is
positive as long as the domestic economy expands and interest rates remain
low. Our chief concern is that this favorable setting is prompting many
issuers of new convertible securities to seek expensive terms. As part of our
value approach, we try to avoid overpriced offerings and have been focusing
our efforts in the secondary market in which more seasoned convertibles can
still be found at inviting prices. We believe that events in late 1997
demonstrated the wisdom of this approach, and we continue to be confident that
it provides investors with attractive long-term returns with reduced risk
along the way.
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 4/30/98, there is no guarantee the fund will continue to hold
these securities in the future.
The lower credit ratings of high-yield bonds in the portfolio reflect a
greater possibility that adverse changes in the economy or poor performance by
the issuers of these bonds may affect the issuer's ability to pay principal
and interest.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Convertible Income-Growth Trust is designed for investors seeking current
income and capital appreciation mainly through bonds and preferred stocks
convertible into common stock, with capital conservation as a secondary
objective.
TOTAL RETURN FOR PERIODS ENDED 4/30/98
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 10.23% 3.88% 9.80% 4.87% 9.96% 6.09%
- ------------------------------------------------------------------------------
1 year 26.50 19.22 25.56 20.56 25.87 21.50
- ------------------------------------------------------------------------------
5 years 104.67 92.90 97.05 95.05 99.35 92.39
Annual average 15.40 14.04 14.53 14.30 14.80 13.98
- ------------------------------------------------------------------------------
10 years 270.53 249.32 241.69 241.69 249.97 237.71
Annual average 13.99 13.32 13.07 13.07 13.35 12.94
- ------------------------------------------------------------------------------
Annual average
(life of fund) 12.87 12.61 11.82 11.82 12.10 11.95
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/98
Lehman Bros.
S&P 500 Corporate
Index Bond Index*
- ------------------------------------------------------------------------------
6 months 22.49% 3.83%
- ------------------------------------------------------------------------------
1 year 41.07 12.07
- ------------------------------------------------------------------------------
5 years 184.36 44.78
Annual average 23.25 7.68
- ------------------------------------------------------------------------------
10 years 466.16 153.95
Annual average 18.93 9.77
- ------------------------------------------------------------------------------
Life of fund
Annual average 13.73 --
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% and 3.50%, respectively. Class B share returns for
the 1-year, 5-year, and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and, in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
* Inception date of index was 12/31/72.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 4/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 2 2 2
- ------------------------------------------------------------------------------
Income $0.480 $0.401 $0.430
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 1.271 1.271 1.271
- ------------------------------------------------------------------------------
Short-term 0.685 0.685 0.685
- ------------------------------------------------------------------------------
Total $2.436 $2.357 $2.386
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/97 $23.22 $24.64 $23.01 $23.08 $23.92
- ------------------------------------------------------------------------------
4/30/98 22.92 24.32 22.68 22.76 23.59
- ------------------------------------------------------------------------------
Current return: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
(end of period)
- ------------------------------------------------------------------------------
Current dividend
rate1 4.19% 3.95% 3.58% 3.81% 3.68%
- ------------------------------------------------------------------------------
Current 30-day SEC
yield2 4.33 4.08 3.60 3.89 3.75
- ------------------------------------------------------------------------------
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 3/31/98
(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 6.62% 0.47% 6.23% 1.46% 6.34% 2.62%
- ------------------------------------------------------------------------------
1 year 27.69 20.36 26.74 21.74 27.06 22.64
- ------------------------------------------------------------------------------
5 years 103.29 91.61 95.79 93.79 97.98 91.09
Annual average 15.25 13.89 14.38 14.15 14.64 13.83
- ------------------------------------------------------------------------------
10 years 271.74 250.28 242.95 242.95 251.13 238.77
Annual average 14.03 13.36 13.12 13.12 13.38 12.98
- ------------------------------------------------------------------------------
Life of class
Annual average 12.89 12.63 11.84 11.84 12.12 11.96
- ------------------------------------------------------------------------------
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. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 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.
Consumer Price Index (CPI ) is a commonly used measure of inflation; it
does not represent an investment return.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
WELCOME TO
www.putnaminv.com
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learn more about investing and retirement planning, and access market
news and economic outlooks
from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
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You can also read Putnam economist Dr. Robert Goodman's commentary and
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using an independent Internet service provider.
New features will be added to the site regularly.
So be sure to bookmark us at
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Portfolio of investments owned
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CONVERTIBLE BONDS AND NOTES (40.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C>
Aerospace and Defense (0.3%)
- -------------------------------------------------------------------------------------------------------------
$ 3,810,000 SPACEHAB, Inc. 144A cv. sub. notes 8s, 2007 $ 4,076,700
Airlines (0.5%)
- -------------------------------------------------------------------------------------------------------------
1,948,000 Atlantic Coast Airlines 144A cv. sub. notes 7s, 2004 6,126,460
2,319,000 World Airways, Inc. 144A cv. sub. deb. 8s, 2004 1,762,440
--------------
7,888,900
Automotive (0.9%)
- -------------------------------------------------------------------------------------------------------------
10,740,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 6,927,300
3,700,000 Magna International cv. sub. deb. 5s, 2002 4,902,500
3,750,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 3,515,625
--------------
15,345,425
Banks (0.2%)
- -------------------------------------------------------------------------------------------------------------
2,089,000 Banamex S.A. (Nassau Branch) 144A cv. jr. sub. notes 11s, 2003
(Bahamas) 2,203,895
380,000 Banco Nationale de Mexico 144A cv. company guaranty 7s,
1999 (Bahamas) 374,300
--------------
2,578,195
Basic Industrial Products (0.6%)
- -------------------------------------------------------------------------------------------------------------
7,750,000 Thermo Electron Corp. 144A cv. sub. deb. 4 1/4s, 2003 8,883,438
Broadcasting (0.5%)
- -------------------------------------------------------------------------------------------------------------
7,250,000 Jacor Communications, Inc. cv. Liquid Yield Option Notes
(LYON) zero %, 2018 3,090,316
3,505,000 Scandinavian Broadcasting System S.A. 144A cv. sub. notes
7s, 2004 (Luxembourg) 4,324,294
--------------
7,414,610
Building and Construction (0.5%)
- -------------------------------------------------------------------------------------------------------------
4,000,000 American Residential Services, Inc. cv. sub. notes 7 1/4s, 2004 2,960,000
2,500,000 D.R. Horton, Inc. cv. sub. notes 6 7/8s, 2002 5,371,875
--------------
8,331,875
Business Equipment and Services (1.7%)
- -------------------------------------------------------------------------------------------------------------
750,000 Career Horizons, Inc. cv. bonds 7s, 2002 2,385,000
10,000,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 9,037,500
2,820,000 Corporate Express, Inc. 144A cv. notes 4 1/2s, 2000 2,548,575
7,006,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 4,904,200
750,000 U.S. Office Products Co. cv. sub. notes 5 1/2s, 2003 694,688
7,190,000 U.S. Office Products Co. 144A cv. sub. notes 5 1/2s, 2003 6,039,600
--------------
25,609,563
Computer Services (1.6%)
- -------------------------------------------------------------------------------------------------------------
11,225,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 6s, 2006 16,402,531
9,520,000 System Software Associates, Inc. cv. sub. notes 7s, 2002 8,127,700
--------------
24,530,231
Computer Software (2.0%)
- -------------------------------------------------------------------------------------------------------------
1,500,000 Data General Corp. 144A cv. sub. notes 6s, 2004 1,380,000
9,500,000 Network Associates, Inc. 144A cv. sub. deb. zero %, 2018 4,441,250
11,500,000 Softkey International, Inc. 144A cv. sr. notes 5 1/2s, 2000 10,853,125
24,668,000 Western Digital Corp. 144A cv. sub. deb. zero %, 2018 9,219,665
4,500,000 Xilinx, Inc. cv. sub. notes 5 1/4s, 2002 4,781,250
--------------
30,675,290
Computers (1.4%)
- -------------------------------------------------------------------------------------------------------------
4,600,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 5,180,750
4,309,000 EMC Corp. cv. sub. notes 3 1/4s, 2002 9,065,059
5,090,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 4,161,075
1,500,000 Intevac, Inc. cv. sub. notes 6 1/2s, 2004 1,230,000
2,500,000 Synoptics Communications, Inc. 144A cv. sub. deb. 5 1/4s, 2003 2,356,250
--------------
21,993,134
Conglomerates (0.8%)
- -------------------------------------------------------------------------------------------------------------
1,400,000 Dart & Kraft Finance N.V. cv. company guaranty Ser. WW,
7 3/4s, 1998 5,447,750
3,800,000 Hexcel Corp. cv. sub. notes 7s, 2003 7,058,500
--------------
12,506,250
Consumer Durable Goods (0.4%)
- -------------------------------------------------------------------------------------------------------------
17,753,000 Sunbeam Corp. 144A cv. sr. sub. notes 1.862s, 2018 5,570,004
Consumer Non Durables (0.4%)
- -------------------------------------------------------------------------------------------------------------
7,835,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 6,894,800
Consumer Services (2.4%)
- -------------------------------------------------------------------------------------------------------------
4,200,000 America Online, Inc. 144A cv. sub. notes 4s, 2002 7,255,500
32,850,000 Boston Chicken, Inc. cv. LYON zero %, 2015 2,915,438
5,540,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 1,966,700
4,400,000 CKE Restaurants, Inc. 144A cv. sub. notes 4 1/4s, 2004 4,229,500
2,425,000 Einstein/Noah Bagel Corp. 144A cv. sub. deb. 7 1/4s, 2004 1,370,125
6,800,000 Fine Host Corp. 144A cv. sub. notes 5s, 2004 4,751,500
20,150,000 Hollinger, Inc. cv. LYON zero %, 2013 8,211,125
6,625,000 Pharmaceutical Marketing Services, Inc. 144A cv. deb.
6 1/4s, 2003 6,293,750
280,000 Pharmaceutical Marketing Services, Inc. cv. notes 6 1/4s, 2003 266,000
--------------
37,259,638
Electronic Components and Instruments (2.8%)
- -------------------------------------------------------------------------------------------------------------
1,500,000 Cirrus Logic, Inc. 144A cv. sub. notes 6s, 2003 1,151,250
2,035,000 Dovatron International cv. sub. notes 6s, 2002 2,658,219
4,750,000 HMT Technology Corp. 144A cv. sub. notes 5 3/4s, 2004 4,132,500
7,510,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 6,270,850
875,000 Lernout & Hauspie Speech Products N.V. 144A cv. sub. notes 8s,
2001 (Belgium) 5,486,250
1,205,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,765,325
3,291,000 Solectron Corp. 144A cv. sub. notes 6s, 2006 4,743,154
5,200,000 Thermo Instrument Systems, Inc. 144A cv. deb. 4 1/2s, 2003 5,362,500
1,215,000 Thermo Instrument Systems, Inc. 144A cv. company guaranty
3 3/4s, 2000 2,624,400
3,425,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 4,388,281
275,000 Thermo Optek Corp. cv. bonds 5s, 2000 345,813
4,425,000 Thermo Quest Corp. 144A cv. company guaranty 5s, 2000 5,121,938
--------------
44,050,480
Electronics and Electrical Equipment (1.0%)
- -------------------------------------------------------------------------------------------------------------
2,000,000 Checkpoint Systems, Inc. 144A cv. sub. deb. 5 1/4s, 2005 2,225,000
3,565,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 2,620,275
1,400,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 1,246,000
2,385,000 S3, Inc. cv. sub. notes 5 3/4s, 2003 1,878,188
2,385,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 1,812,600
3,165,000 SCI Systems, Inc. cv. sub. notes 5s, 2006 5,633,700
--------------
15,415,763
Entertainment (0.7%)
- -------------------------------------------------------------------------------------------------------------
3,000,000 Loews Corp. cv. sub. notes 3 1/8s, 2007 3,045,000
13,500,000 Time Warner, Inc. cv. sr. LYON zero %, 2013 8,235,000
--------------
11,280,000
Environmental Control (1.2%)
- -------------------------------------------------------------------------------------------------------------
3,100,000 OHM Corp. cv. sub. deb. 8s, 2006 3,030,250
1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 1,130,000
3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,590,325
8,600,000 USA Waste Services, Inc. cv. sub. notes 4s, 2002 10,674,750
--------------
18,425,325
Food (0.3%)
- -------------------------------------------------------------------------------------------------------------
2,500,000 Chiquita Brands International, Inc. cv. deb. 7s, 2001 2,362,500
2,400,000 Chiquita Brands International, Inc. 144A cv. sub. deb 7s, 2001 2,268,000
--------------
4,630,500
Health Care (1.2%)
- -------------------------------------------------------------------------------------------------------------
2,000,000 Assisted Living Concepts, Inc. cv. sub. deb. 6s, 2002 2,135,000
3,610,000 HEALTHSOUTH Corp. 144A cv. sub. notes 3 1/4s, 2003 3,772,450
5,700,000 NovaCare, Inc. cv. sub. deb. 5 1/2s, 2000 5,486,250
500,000 Quantum Health Resources, Inc. cv. sub. deb. 4 3/4s, 2000 465,625
5,000,000 Renal Treatment Centers, Inc. cv. sub. notes 5 5/8s, 2006 6,475,000
--------------
18,334,325
Hospital Management and Medical Services (1.5%)
- -------------------------------------------------------------------------------------------------------------
3,000,000 Complete Management, Inc. cv. sub. deb. 8s, 2003 2,636,250
1,850,000 DRS Technologies, Inc. 144A cv. sub. deb. 9s, 2003 3,036,313
4,270,000 Integrated Health Services, Inc. cv. sub. deb. 6s, 2003 5,091,975
4,500,000 PhyMatrix, Inc. cv. sub. deb. 6 3/4s, 2003 3,718,125
4,395,000 Sun Healthcare Group, Inc. 144A cv. sub. 6s, 2004 4,334,569
1,750,000 Tenet Health Care Corp. cv. sub. notes 6s, 2005 1,610,000
3,310,000 U.S. Diagnostic Laboratories, Inc. 144A cv. sub. deb. 9s, 2003 2,449,400
--------------
22,876,632
Insurance and Finance (1.9%)
- -------------------------------------------------------------------------------------------------------------
4,300,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 7,949,625
10,500,000 Mutual Risk Management 144A cv. sub. deb. zero %, 2015 7,599,375
3,065,000 Pioneer Financial Services, Inc. cv. sub. notes 6 1/2s, 2003 5,444,206
10,530,000 USF&G Corp. cv. sub. notes zero %, 2009 7,686,900
--------------
28,680,106
Lodging (0.2%)
- -------------------------------------------------------------------------------------------------------------
3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 2,640,000
Machinery (0.2%)
- -------------------------------------------------------------------------------------------------------------
3,000,000 Thermo Fibertek, Inc. 144A cv. company guaranty 4 1/2s, 2004 3,146,250
Medical Management Services (0.2%)
- -------------------------------------------------------------------------------------------------------------
3,500,000 Continucare Corp. 144A cv. sub. notes 8s, 2002 2,975,000
Medical Supplies and Devices (1.1%)
- -------------------------------------------------------------------------------------------------------------
5,000,000 Atrix Labs, Inc. 144A cv. sub. notes 7s, 2004 5,750,000
2,000,000 Phoenix Shannon 144A cv. sr. sub. notes
9 1/2s, 2000 (In Default) (NON) 240,000
2,000,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty
4 3/4s, 2004 2,197,500
4,260,000 Thermo Instrument Systems, Inc. cv. company guaranty Ser. RG,
4s, 2005 4,435,725
385,000 Uromed Corp. cv. sub. notes 6s, 2003 166,994
5,615,000 Uromed Corp. 144A cv. sub. notes 6s, 2003 2,435,506
1,000,000 Ventritex, Inc. cv. sub. notes 5 3/4s, 2001 1,228,750
--------------
16,454,475
Metals and Mining (0.3%)
- -------------------------------------------------------------------------------------------------------------
4,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 4,377,975
Oil and Gas (2.6%)
- -------------------------------------------------------------------------------------------------------------
6,500,000 Aker Maritime cv. deb. 5 1/4s, 2002 7,670,000
6,160,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 6,213,900
3,000,000 Parker Drilling Co. cv. sub. notes 5 1/2s, 2004 2,932,500
6,950,000 Pennzoil Co. cv. deb. 4 3/4s, 2003 9,834,250
1,500,000 Pennzoil Co. cv. sub. deb. 6 1/2s, 2003 2,968,125
1,075,000 Pride International, Inc. cv. sub. deb. 6 1/4s, 2006 2,171,500
1,500,000 Southern Mineral Corp. cv. deb. 6 7/8s, 2007 1,222,500
6,910,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 6,814,988
--------------
39,827,763
Paper and Forest Products (0.4%)
- -------------------------------------------------------------------------------------------------------------
2,550,000 Stone Container Corp. cv. sr. sub. notes 8 7/8s, 2000 3,541,313
2,500,000 Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 2,275,000
--------------
5,816,313
Pharmaceuticals (3.2%)
- -------------------------------------------------------------------------------------------------------------
10,265,000 Alza Corp. cv. sub. LYON zero %, 2014 6,466,950
4,300,000 Centocor, Inc. 144A cv. sub. notes 4 3/4s, 2005 4,606,375
1,990,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 1,300,963
3,890,000 Nabi, Inc. 144A cv. sub. notes 6 1/2s, 2003 2,489,600
2,500,000 NeXstar Pharmaceuticals, Inc. 144A cv. sub. deb. 6 1/4s, 2004 2,112,500
19,830,000 Roche Holdings, Inc. cv. unsub. LYON zero %, 2010
(Switzerland) 11,154,375
5,425,000 Sandoz Capital BVI Ltd. 144A cv. company guaranty 2s, 2002
(Switzerland) 8,408,750
3,000,000 Sepracor, Inc. 144A cv. sub. deb. 7s, 2002 7,143,750
4,880,000 Sepracor, Inc. 144A cv. sub. deb. 6 1/4s, 2005 5,837,700
--------------
49,520,963
Publishing (0.2%)
- -------------------------------------------------------------------------------------------------------------
3,600,000 Thomas Nelson, Inc. 144A cv. sub. notes 5 3/4s, 1999 3,492,000
Real Estate (0.4%)
- -------------------------------------------------------------------------------------------------------------
1,410,000 LTC Properties, Inc. cv. sub. deb. 7 3/4s, 2002 (R) 1,716,675
3,750,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 3,853,125
--------------
5,569,800
Recreation (0.1%)
- -------------------------------------------------------------------------------------------------------------
2,211,000 Speedway Motorsports, Inc. 144A cv. sub. notes 5 3/4s, 2003 2,448,683
Retail (2.2%)
- -------------------------------------------------------------------------------------------------------------
1,180,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,107,725
4,150,000 Federated Department Stores, Inc. cv. notes 5s, 2003 6,142,000
3,750,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 5,850,000
8,385,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 8,311,631
5,900,000 Office Depot, Inc. cv. LYON zero %, 2007 5,818,875
1,205,000 Pier 1 Imports, Inc. cv. sub. notes 5 3/4s, 2003 2,607,319
4,600,000 Sunglass Hut International, Inc. 144A cv. sub. notes 5 1/4s, 2003 3,680,000
--------------
33,517,550
Satellite Services (0.3%)
- -------------------------------------------------------------------------------------------------------------
4,000,000 Gilat Satellite Networks Ltd. cv. sub. notes 6 1/2s, 2004 (Israel) 4,435,000
Semiconductors (2.1%)
- -------------------------------------------------------------------------------------------------------------
3,000,000 Credence Systems Corp. 144A cv. sub. notes 5 1/4s, 2002 2,535,000
11,300,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 9,831,000
3,030,000 Integrated Process Equipment Corp. 144A cv. sub. notes
6 1/4s, 2004 2,689,125
6,600,000 LAM Research Corp. 144A cv. sub. notes 5s, 2002 5,651,250
6,607,000 Micron Technology, Inc. cv. sub. notes 7s, 2004 6,350,979
3,600,000 National Semiconductor Corp. 144A cv. deb. 6 1/2s, 2002 3,465,000
4,580,000 Plasma & Materials Technologies, Inc. 144A cv. notes
7 1/8s, 2001 2,267,100
--------------
32,789,454
Shipping (0.3%)
- -------------------------------------------------------------------------------------------------------------
5,000,000 Halter Marine Group, Inc. 144A cv. sub. notes 4 1/2s, 2004 4,325,000
Telecommunications (1.0%)
- -------------------------------------------------------------------------------------------------------------
1,950,000 DSC Communications Corp. cv. notes 7s, 2004 1,786,688
2,400,000 Inacom Corp. cv. sub. deb. 4 1/2s, 2004 2,619,000
1,250,000 International CableTel, Inc. cv. sub. notes 7s, 2008 1,520,305
1,000,000 MIDCOM Communications, Inc. cv. sub. notes 8 1/4s, 2003 175,000
4,525,000 MIDCOM Communications, Inc. 144A cv. sub. deb. 8 1/4s, 2003 791,875
15,100,000 Rogers Communications cv. deb. 2s, 2005 (Canada) 9,060,000
--------------
15,952,868
Textiles (0.1%)
- -------------------------------------------------------------------------------------------------------------
1,350,000 Dixie Group, Inc. (The) cv. deb. 7s, 2012 1,191,375
Transportation (1.0%)
- -------------------------------------------------------------------------------------------------------------
5,500,000 Continental Airlines, Inc. cv. sub. deb. 6 3/4s, 2006 11,130,625
3,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 4,053,500
--------------
15,184,125
--------------
Total Convertible Bonds and Notes
(cost $580,062,257) $ 626,915,778
COMMON STOCKS (30.5%) (a)
NUMBER OF SHARES VALUE
Aerospace and Defense (0.6%)
- -------------------------------------------------------------------------------------------------------------
89,700 Boeing Co. $ 4,490,606
36,000 Lockheed Martin Corp. 4,009,500
--------------
8,500,106
Airlines (0.2%)
- -------------------------------------------------------------------------------------------------------------
35,600 UAL Corp. (NON) 3,103,875
Aluminum (0.1%)
- -------------------------------------------------------------------------------------------------------------
25,000 Aluminum Co. of America 1,937,500
Automotive (0.5%)
- -------------------------------------------------------------------------------------------------------------
48,000 Chrysler Corp. 1,929,000
133,800 Ford Motor Co. 6,129,713
--------------
8,058,713
Automotive Parts (0.3%)
- -------------------------------------------------------------------------------------------------------------
65,000 Goodyear Tire & Rubber Co. (The) 4,550,000
Banks (4.7%)
- -------------------------------------------------------------------------------------------------------------
60,000 BankAmerica Corp. 5,100,000
46,000 BankBoston Corp. 4,965,125
45,500 Bankers Trust New York Corp. (CUS) 5,875,188
55,400 Citicorp 8,337,700
40,000 Crestar Financial Corp. 2,392,500
55,000 First Chicago NBD Corp. 5,108,125
20,000 First Tennessee National Corp. 688,750
73,000 Fleet Financial Group, Inc. 6,305,375
126,000 KeyCorp 5,000,625
25,000 Mercantile Bancorpation, Inc. 1,384,375
32,300 Morgan (J.P.) & Co., Inc. 4,239,375
69,000 NationsBank Corp. 5,226,750
110,000 PNC Bank Corp. 6,648,125
25,000 Summit Bancorp 1,253,125
21,000 Union Planters Corp. 1,291,500
59,000 Washington Mutual, Inc. 4,133,688
11,000 Wells Fargo & Co. 4,053,500
--------------
72,003,826
Basic Industrial Products (0.3%)
- -------------------------------------------------------------------------------------------------------------
64,000 Deere (John) & Co. 3,740,000
Business Services and Equipment (1.3%)
- -------------------------------------------------------------------------------------------------------------
104,700 Avery Dennison Corp. 5,483,663
72,000 IBM Corp. 8,343,000
60,000 Xerox Corp. 6,810,000
--------------
20,636,663
Cable Television (0.3%)
- -------------------------------------------------------------------------------------------------------------
106,300 US West Media Group (NON) 4,012,825
Cellular Communications (0.1%)
- -------------------------------------------------------------------------------------------------------------
60,000 3Com Corp. (NON) 2,055,000
Chemicals (0.4%)
- -------------------------------------------------------------------------------------------------------------
85,000 du Pont (E.I.) de Nemours & Co., Ltd. 6,189,063
Computer Software (0.1%)
- -------------------------------------------------------------------------------------------------------------
31,000 Computer Associates International, Inc. 1,815,438
Conglomerates (0.3%)
- -------------------------------------------------------------------------------------------------------------
56,550 Cooper Industries, Inc. 3,781,781
Consumer Non Durables (0.9%)
- -------------------------------------------------------------------------------------------------------------
57,500 Clorox Co. 4,822,813
42,200 Colgate-Palmolive Co. 3,784,813
148,000 Philip Morris Cos., Inc. 5,522,250
--------------
14,129,876
Containers (0.1%)
- -------------------------------------------------------------------------------------------------------------
43,000 Owens-Illinois, Inc. (NON) 1,701,188
Electric Utilities (0.5%)
- -------------------------------------------------------------------------------------------------------------
63,700 Duke Energy Corp. 3,686,638
41,400 Southern Co. 1,097,100
83,000 Texas Utilities Co. 3,320,000
--------------
8,103,738
Electronics and Electrical Equipment (2.0%)
- -------------------------------------------------------------------------------------------------------------
64,000 Emerson Electric Co. 4,072,000
140,000 General Electric Co. 11,917,500
58,200 Hewlett-Packard Co. 4,383,188
117,700 Seagate Technology, Inc. (NON) 3,141,119
101,000 Texas Instruments, Inc. 6,470,313
--------------
29,984,120
Entertainment (0.4%)
- -------------------------------------------------------------------------------------------------------------
39,000 Time Warner, Inc. 3,061,500
62,000 Viacom, Inc. Class B (NON) 3,596,000
--------------
6,657,500
Environmental Control (0.3%)
- -------------------------------------------------------------------------------------------------------------
82,300 USA Waste Services, Inc. (NON) 4,037,844
Financial Services (1.0%)
- -------------------------------------------------------------------------------------------------------------
50,000 American Express Co. 5,100,000
69,500 Lehman Brothers Holding, Inc. 4,938,844
55,000 Merrill Lynch & Co., Inc. 4,826,250
--------------
14,865,094
Food and Beverages (1.9%)
- -------------------------------------------------------------------------------------------------------------
91,000 Anheuser-Busch Cos., Inc. 4,168,938
183,000 ConAgra, Inc. 5,341,313
30,000 General Mills, Inc. 2,026,875
77,972 Heinz (H.J.) Co. 4,249,474
70,000 Nabisco Holdings Corp. Class A 3,346,875
63,400 RJR Nabisco Holdings Corp. 1,763,313
54,000 Sara Lee Corp. 3,216,375
40,500 The Quaker Oats Co. 2,106,000
160,000 Whitman Corp. 3,130,000
--------------
29,349,163
Gas Pipelines (0.1%)
- -------------------------------------------------------------------------------------------------------------
46,000 Sonat, Inc. 2,041,250
Health Care (0.6%)
- -------------------------------------------------------------------------------------------------------------
153,000 Baxter International, Inc. 8,481,938
Health Care Services (0.3%)
- -------------------------------------------------------------------------------------------------------------
57,300 United Healthcare Corp. 4,025,325
Hospital Management (0.5%)
- -------------------------------------------------------------------------------------------------------------
60,000 Tenet Healthcare Corp. (NON) 2,246,250
69,900 Wellpoint Health Networks, Inc. (NON) 5,041,538
--------------
7,287,788
Insurance and Finance (1.6%)
- -------------------------------------------------------------------------------------------------------------
48,600 Aetna, Inc. 3,927,488
50,000 Allstate Corp. 4,812,500
68,000 American General Corp. 4,530,500
38,000 AON Corp. 2,451,000
18,888 CIGNA Corp. 3,908,636
45,000 Equitable Companies, Inc. 2,783,687
50,000 Federal National Mortgage Association 2,993,750
--------------
25,407,561
Leisure (0.2%)
- -------------------------------------------------------------------------------------------------------------
94,000 Hasbro, Inc. 3,460,375
Machinery (0.2%)
- -------------------------------------------------------------------------------------------------------------
63,500 Caterpillar, Inc. 3,615,531
Medical Supplies and Devices (0.2%)
- -------------------------------------------------------------------------------------------------------------
112,400 U.S. Surgical Corp. 3,540,600
Oil and Gas (2.7%)
- -------------------------------------------------------------------------------------------------------------
95,600 Amoco Corp. 4,230,300
54,400 British Petroleum PLC ADR (United Kingdom) 5,140,800
100,000 Elf Aquitane ADR (France) 6,493,750
100,000 Exxon Corp. 7,293,750
60,000 Halliburton Co. 3,300,000
60,000 Mobil Corp. 4,740,000
66,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 3,733,125
60,000 Tosco Corp. 2,137,500
64,500 Total Corp. ADR (France) 3,789,375
--------------
40,858,600
Paper and Forest Products (0.7%)
- -------------------------------------------------------------------------------------------------------------
100,000 Fort James Corp. 4,962,500
80,000 International Paper Co. 4,175,000
37,300 Weyerhaeuser Co. 2,149,413
--------------
11,286,913
Pharmaceuticals (0.6%)
- -------------------------------------------------------------------------------------------------------------
80,000 Merck & Co., Inc. 9,640,000
Pharmaceuticals and Biotechnology (1.6%)
- -------------------------------------------------------------------------------------------------------------
97,000 American Home Products Corp. 9,033,125
70,000 Bristol-Myers Squibb Co. 7,411,250
107,100 Pharmacia & Upjohn, Inc. 4,504,894
59,000 Smithkline Beecham PLC ADR (United Kingdom) 3,514,188
--------------
24,463,457
Photography (0.3%)
- -------------------------------------------------------------------------------------------------------------
59,647 Eastman Kodak Co. 4,305,768
Publishing (0.5%)
- -------------------------------------------------------------------------------------------------------------
49,000 McGraw-Hill, Inc. 3,794,438
61,500 Times Mirror Co. Class A 3,763,031
--------------
7,557,469
REIT's (Real Estate Investment Trust) (0.3%)
- -------------------------------------------------------------------------------------------------------------
29,000 Equity Residential Properties Trust 1,424,625
78,000 Starwood Lodging Trust 3,914,625
--------------
5,339,250
Retail (1.0%)
- -------------------------------------------------------------------------------------------------------------
30,000 Dayton Hudson Corp. 2,619,375
76,300 Federated Department Stores, Inc. (NON) 3,753,006
334,800 K mart Corp. (NON) 5,838,075
8 Proffitt's, Inc. (NON) 318
130,000 Toys "R" Us (NON) 3,583,125
--------------
15,793,899
Savings and Loans (0.1%)
- -------------------------------------------------------------------------------------------------------------
28,000 Charter One Financial, Inc. 1,895,250
Specialty Consumer Products (--%)
- -------------------------------------------------------------------------------------------------------------
94,202 Bolle, Inc. (NON) 500,448
Telephone Services (0.5%)
- -------------------------------------------------------------------------------------------------------------
110,197 Cincinnati Bell, Inc. 4,215,035
69,000 US West, Inc. 3,639,750
--------------
7,854,785
Telephone Utilities (1.5%)
- -------------------------------------------------------------------------------------------------------------
95,500 American Telephone & Telegraph Co. 5,735,969
97,000 Ameritech Corp. 4,128,563
69,179 Bell Atlantic Corp. 6,472,560
120,904 SBC Communications, Inc. 5,009,960
28,795 Sprint Corp. 1,967,048
--------------
23,314,100
Transportation (0.7%)
- -------------------------------------------------------------------------------------------------------------
35,800 Burlington Northern Santa Fe Corp. 3,544,200
53,500 Canadian National Railway Co. (Canada) 3,480,844
31,400 Delta Air Lines, Inc. 3,650,250
--------------
10,675,294
--------------
Total Common Stocks (cost $389,482,064) $ 470,558,914
CONVERTIBLE PREFERRED STOCKS (25.6%) (a)
NUMBER OF SHARES VALUE
Automotive Parts (0.4%)
- -------------------------------------------------------------------------------------------------------------
63,700 Federal-Mogul Corp. 144A $3.50 cv. cum. pfd. $ 4,586,400
90,000 Walbro Capital Trust $2.00 cv. pfd. 2,013,750
--------------
6,600,150
Banks (1.1%)
- -------------------------------------------------------------------------------------------------------------
78,050 Sovereign Bancorp Inc. $3.125 cv. cum. pfd. 10,614,800
81,350 Union Planters Corp. Ser. E, $2.00 cv. pfd. 6,141,925
--------------
16,756,725
Basic Industrial Products (0.6%)
- -------------------------------------------------------------------------------------------------------------
35,040 Case Corp. Ser. A, $4.50 cv. pfd. 5,155,260
176,400 Ingersoll-Rand Co. $0.195 cv. pfd. 3,616,200
--------------
8,771,460
Broadcasting (0.6%)
- -------------------------------------------------------------------------------------------------------------
94,500 Sinclair Broadcast Group, Inc. $3.00 cv. pfd. 6,053,906
276,000 Triathlon Broadcasting Co. $0.945 cv. pfd. 2,760,000
--------------
8,813,906
Building and Construction (0.3%)
- -------------------------------------------------------------------------------------------------------------
120,000 Beazer Homes USA, Inc. Ser. A, $2.00 cv. pfd. 3,990,000
Business Equipment and Services (0.4%)
- -------------------------------------------------------------------------------------------------------------
115,000 Unisys Corp. Ser. A, $3.75 cv. pfd. 5,649,375
Cable Television (0.7%)
- -------------------------------------------------------------------------------------------------------------
169,000 Tele-Communications (TCI Group) Ser. A, $2.125 cv. pfd. 11,555,375
Communications (0.5%)
- -------------------------------------------------------------------------------------------------------------
72,000 Evergreen Media Corp. 144A $3.00 cv. pfd. 7,083,000
Computer Services (0.6%)
- -------------------------------------------------------------------------------------------------------------
171,270 Wang Laboratories, Inc. Ser. B, $3.25 cv. pfd. 9,805,208
Computers (0.5%)
- -------------------------------------------------------------------------------------------------------------
200,500 Vanstar Corp. 144A $3.375 cv. pfd. 8,045,063
Conglomerates (0.4%)
- -------------------------------------------------------------------------------------------------------------
325,000 Cooper Industries, Inc., 6.00%, cv. pfd. 5,768,750
Consumer Products (0.5%)
- -------------------------------------------------------------------------------------------------------------
130,000 Newell Financial Trust 144A $2.625 cv. cum. pfd. 7,507,500
Consumer Services (0.1%)
- -------------------------------------------------------------------------------------------------------------
56,600 Cendant Corp. $0.65 cv. pfd. 1,981,000
Electric Utilities (1.0%)
- -------------------------------------------------------------------------------------------------------------
169,000 Calenergy Capital Trust $3.125 cv. cum. pfd. 10,161,125
104,000 El Paso Energy Capital Trust $2.375 cv. pfd. 5,466,500
--------------
15,627,625
Electronics and Electrical Equipment (0.6%)
- -------------------------------------------------------------------------------------------------------------
102,100 Pioneer Standard Electronics, Inc. 144A $3.375 cv. pfd. 5,360,250
169,000 Sensormatic Electronics Corp. 144A $1.625 cv. pfd. 4,351,750
--------------
9,712,000
Entertainment (1.1%)
- -------------------------------------------------------------------------------------------------------------
159,100 Metromedia International Group, Inc. $3.625 cv. cum. pfd. 10,202,288
132,870 Station Casinos, Inc. $3.50 cv. pfd. 6,892,631
--------------
17,094,919
Financial Services (0.9%)
- -------------------------------------------------------------------------------------------------------------
145,543 Finova Finance Trust $2.75 cv. cum. pfd. 11,388,740
51,000 Mandatory Common Exchange Trust (The),
7.25%, cv. pfd. 2,346,000
--------------
13,734,740
Food (0.6%)
- -------------------------------------------------------------------------------------------------------------
85,300 Chiquita Brands International, Inc. Ser. B, $3.75 cv. pfd. 4,830,113
65,000 Dole Food Co., Inc., 7.00%, cv. pfd. 2,713,750
28,100 Suiza Foods Corp. 144A $2.75 cv. pfd. 1,366,363
--------------
8,910,226
Hospital Management (0.3%)
- -------------------------------------------------------------------------------------------------------------
319,183 MedPartners, Inc. $1.44 cv. pfd. 4,209,226
Information Systems (0.2%)
- -------------------------------------------------------------------------------------------------------------
62,500 Vanstar Financial Trust Corp. $3.375 cv. pfd. 2,468,750
Insurance and Finance (2.3%)
- -------------------------------------------------------------------------------------------------------------
97,700 Aetna, Inc. $4.758 cv. pfd. 7,669,450
84,661 American General Delaware Corp. $3.00 cv. cum. pfd. 7,196,185
31,700 American Heritage Life Investment Corp. $4.25 cv. pfd. 2,076,350
83,700 Penncorp Financial Group, Inc. 144A $3.50 cv. pfd. 3,980,981
211,885 Philadelphia Consolidated Holding Corp., 0.50%, cv. pfd. 1,946,693
121,100 Protective Life Corp. $3.25 cv. cum. pfd. 7,568,750
78,400 St. Paul Capital LLC $3.00 cv. cum. pfd. 5,723,200
--------------
36,161,609
Medical Supplies and Devices (0.3%)
- -------------------------------------------------------------------------------------------------------------
47,000 Mckesson Corp. $2.50 cv. pfd. 4,547,250
Metals and Mining (1.1%)
- -------------------------------------------------------------------------------------------------------------
70,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. 3,351,250
196,800 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 4,526,400
90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 3,435,200
70,000 Timet Capital Trust I 144A $3.313 cv. pfd. 3,241,875
30,645 Titanium Metals Corp. $3.313 cv. pfd. 1,419,247
--------------
15,973,972
Oil and Gas (2.1%)
- -------------------------------------------------------------------------------------------------------------
107,000 Devon Financing Trust $3.25 cv. pfd. 7,436,500
60,000 Lomak Petroleum, Inc. 144A $2.875 cv. pfd. 2,580,000
30,000 Lomak Petroleum, Inc. 144A $2.03 cv. pfd. 1,095,000
100,580 Neuvo Energy Ser. A, $2.875 cv. pfd. 4,727,260
167,500 Tosco Financing Trust 144A $2.875 cv. pfd. 10,385,000
109,900 Unocal Capital Trust $3.125 cv. cum. pfd. 6,305,513
--------------
32,529,273
Paper and Forest Products (0.7%)
- -------------------------------------------------------------------------------------------------------------
202,700 International Paper Co. $2.625 cv. pfd. 10,945,800
Publishing (0.5%)
- -------------------------------------------------------------------------------------------------------------
60,000 Golden Books Family Entertainment, Inc. $4.375 cv. cum. pfd. 3,277,500
100,000 Houghton Mifflin Co. $4.08 cv. pfd. 3,600,000
--------------
6,877,500
Real Estate (2.1%)
- -------------------------------------------------------------------------------------------------------------
53,500 Camden Property Trust Ser. A, $2.25 cv. cum. pfd. (R) 1,477,938
438,950 Equity Residential Properties Trust Ser. E, $1.75 cv. pfd. (R) 11,961,388
146,000 Insignia Financial Group, Inc. 144A $3.25 cv. pfd. 7,865,750
195,000 Security Capital Pacific Trust Ser. A, $1.75 cv. pfd. 5,813,438
74,490 Tanger Factory Outlet Centers $1.802 cv. pfd. (R) 2,011,230
66,500 Vornado Realty Trust Ser. A, $3.25 cv. cum. pfd. 3,823,750
--------------
32,953,494
Retail (1.5%)
- -------------------------------------------------------------------------------------------------------------
195,000 Ann Taylor Finance Trust $4.25 cv. cum. pfd. 9,847,500
204,600 Kmart Financing I $3.875 cv. cum. pfd. 13,452,450
--------------
23,299,950
Savings and Loans (0.8%)
- -------------------------------------------------------------------------------------------------------------
82,000 Ahmanson (H.F.) & Co. $3.00 cv. pfd. 12,930,375
Telecommunications (0.7%)
- -------------------------------------------------------------------------------------------------------------
144,680 AirTouch Communications, Inc. Ser. C, $2.125 cv. pfd. 11,113,229
Telephone Services (0.6%)
- -------------------------------------------------------------------------------------------------------------
118,900 US West, Inc. Ser. D, $2.25 cv. cum. pfd. 9,066,125
Tobacco (0.1%)
- -------------------------------------------------------------------------------------------------------------
127,000 DIMON, Inc. $3.25 cv. pfd. 2,143,125
Transportation (1.4%)
- -------------------------------------------------------------------------------------------------------------
75,500 CNF Trust I Ser. A, $2.50 cv. cum. pfd. 4,379,000
150,100 Hvide Capital Trust 144A $3.25 cv. pfd. 7,017,175
186,373 Union Pacific 144A $3.125 cv. cum. pfd. 9,877,769
--------------
21,273,944
--------------
Total Convertible Preferred Stocks
(cost $351,039,841) $ 393,900,644
WARRANTS (--%)(a)(NON)(cost $ 89,869) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------------------------
13,827 Security Capital Group 9/18/98 $ 38,888
SHORT-TERM INVESTMENTS (1.9%) (a)(cost $29,056,447)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$29,052,000 Interest in $500,000,000 joint repurchase agreement
dated April 30, 1998 with Lehman Brothers
due May 1, 1998 with respect to various
U.S. Treasury obligations -- maturity value of
$29,056,447 for an effective yield of 5.51% $ 29,056,447
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,349,730,478) (b) $1,520,470,671
- -------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,541,650,009.
(b) The aggregate identified cost on a tax basis is $1,349,890,142, resulting in gross unrealized appreciation
and depreciation of $232,278,149 and $61,697,620, respectively, or net unrealized appreciation of
$170,580,529.
(NON) Non-income-producing security.
(CUS) This entity provides subcustodian services to the fund.
(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, representing ownership
of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,349,730,478) (Note 1) $1,520,470,671
- ---------------------------------------------------------------------------------------------------
Cash 591,225
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 10,351,622
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,462,838
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 22,547,567
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 469,390
- ---------------------------------------------------------------------------------------------------
Total assets 1,556,893,313
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 11,425,344
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,077,998
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,075,882
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 33,653
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 24,721
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,541
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 515,346
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 88,819
- ---------------------------------------------------------------------------------------------------
Total liabilities 15,243,304
- ---------------------------------------------------------------------------------------------------
Net assets $1,541,650,009
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,252,601,429
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (5,964,921)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 124,273,308
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 170,740,193
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,541,650,009
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,208,621,651 divided by 52,742,477 shares) $22.92
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $22.92)* $24.32
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($313,619,459 divided by 13,827,826 shares)** $22.68
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($19,408,899 divided by 852,867 shares) $22.76
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $22.76)* $23.59
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended April 30, 1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $ 18,547,223
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $6,136) 14,188,032
- --------------------------------------------------------------------------------------------------
Total investment income 32,735,255
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,143,017
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 735,407
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,616
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,393
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,468,928
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,390,822
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 63,632
- --------------------------------------------------------------------------------------------------
Reports to shareholders 36,395
- --------------------------------------------------------------------------------------------------
Registration fees 33,000
- --------------------------------------------------------------------------------------------------
Auditing 16,884
- --------------------------------------------------------------------------------------------------
Legal 5,568
- --------------------------------------------------------------------------------------------------
Postage 14,812
- --------------------------------------------------------------------------------------------------
Other 411,840
- --------------------------------------------------------------------------------------------------
Total expenses 8,343,314
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (387,097)
- --------------------------------------------------------------------------------------------------
Net expenses 7,956,217
- --------------------------------------------------------------------------------------------------
Net investment income 24,779,038
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 115,988,024
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 848,904
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the period (630,075)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 1,687,990
- --------------------------------------------------------------------------------------------------
Net gain on investments 117,894,843
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $142,673,881
- --------------------------------------------------------------------------------------------------
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
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 24,779,038 $ 43,188,991
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 116,836,928 134,480,706
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 1,057,915 73,719,928
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 142,673,881 251,389,625
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------------------------------------------------------
Class A (24,793,434) (40,930,205)
- ----------------------------------------------------------------------------------------------------------------------
Class B (4,988,692) (6,775,056)
- ----------------------------------------------------------------------------------------------------------------------
Class M (331,758) (414,757)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income
- ----------------------------------------------------------------------------------------------------------------------
Class A -- (2,870,230)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (475,100)
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (29,085)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ----------------------------------------------------------------------------------------------------------------------
Class A (99,608,489) (66,832,559)
- ----------------------------------------------------------------------------------------------------------------------
Class B (22,393,436) (11,391,471)
- ----------------------------------------------------------------------------------------------------------------------
Class M (1,318,676) (700,350)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 112,058,340 267,640,833
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 101,297,736 388,611,645
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,440,352,273 1,051,740,628
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income of $5,964,921
and $630,075, respectively) $1,541,650,009 $1,440,352,273
- ----------------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $23.22 $21.24 $19.42 $19.09 $20.38 $17.60
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .39(d) .78(d) .81(d) .85 .81 .87
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.75 3.70 2.70 1.60 (.46) 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.14 4.48 3.51 2.45 .35 3.74
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.48) (.87) (.98) (.96) (.74) (.96)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.96) (1.57) (.71) (1.16) (.90) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.44) (2.50) (1.69) (2.12) (1.64) (.96)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.92 $23.22 $21.24 $19.42 $19.09 $20.38
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 10.23* 22.86 18.99 14.38 1.84 21.74
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,208,622 $1,168,470 $898,486 $756,645 $697,946 $707,969
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .49* 1.03 1.06 1.16 .96 .96
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.75* 3.56 3.99 4.64 4.16 4.55
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.42* 70.74 61.43 69.52 48.37 66.63
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0507 $.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>
<TABLE>
<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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $23.01 $21.09 $19.30 $19.00 $20.35 $19.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .30(d) .63(d) .66(d) .69 .74 .23
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.73 3.64 2.68 1.61 (.55) .82
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.03 4.27 3.34 2.30 .19 1.05
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.40) (.73) (.84) (.84) (.66) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.05) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.96) (1.57) (.71) (1.16) (.88) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.36) (2.35) (1.55) (2.00) (1.54) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.68 $23.01 $21.09 $19.30 $19.00 $20.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 9.80* 21.89 18.14 13.54 1.00 5.43*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $313,619 $257,163 $146,127 $75,309 $31,432 $4,439
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .87* 1.78 1.81 1.91 1.71 .52*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.36* 2.78 3.26 3.92 3.58 .91*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.42* 70.74 61.43 69.52 48.37 66.63
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0507 $.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>
<TABLE>
<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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $23.08 $21.14 $19.37 $17.79
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .33(d) .67(d) .73(d) .64
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.74 3.67 2.65 1.64
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.07 4.34 3.38 2.28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.43) (.78) (.90) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.05) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.96) (1.57) (.71) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.39) (2.40) (1.61) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.76 $23.08 $21.14 $19.37
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 9.96* 22.24 18.30 12.99*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $19,409 $14,719 $7,128 $1,753
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .74* 1.53 1.54 1.04*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.49* 3.04 3.55 2.89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.42* 70.74 61.43 69.52
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0488 $.0507 $.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, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam Convertible Income-Growth Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks current income and capital
appreciation by investing primarily in bonds and preferred stocks convertible
into common stock with capital conservation as a secondary objective.
The fund offers class A, class B 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 Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed).
Interest income is recorded on the accrual basis. 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 yield-to-maturity
basis.
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 gains and losses 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 current 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) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended April 30, 1998 the
fund had no borrowings against the line of credit.
H) 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.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.65% of the first $500 million of
average net assets, 0.55% of the next $500 million, 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405%
of the next $5 billion, 0.39% of the next $5 billion and 0.38% thereafter.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended April 30, 1998 fund expenses were reduced by $387,097
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,250 has
been allocated to the fund, and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit payment by the fund to an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended April 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $180,391 and $13,167 from the sale of
class A and class M shares, respectively and $194,951 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended April 30, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $1,274 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1998, purchases and sales of investment
securities other than short-term investments aggregated $605,343,516 and
$635,829,154, 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, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 5,527,461 $122,992,350
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,892,447 103,108,093
- ------------------------------------------------------------
10,419,908 226,100,443
Shares
repurchased (7,995,119) (175,702,583)
- ------------------------------------------------------------
Net increase 2,424,789 $ 50,397,860
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 12,142,887 $265,281,015
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,574,214 95,070,612
- ------------------------------------------------------------
16,717,101 360,351,627
Shares
repurchased (8,692,035) (190,385,046)
- ------------------------------------------------------------
Net increase 8,025,066 $169,966,581
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 2,536,115 $55,793,042
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,041,741 21,732,762
- ------------------------------------------------------------
3,577,856 77,525,804
Shares
repurchased (925,614) (20,503,730)
- ------------------------------------------------------------
Net increase 2,652,242 $57,022,074
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 5,356,953 $116,465,127
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 721,404 14,907,349
- ------------------------------------------------------------
6,078,357 131,372,476
Shares
repurchased (1,832,828) (40,163,605)
- ------------------------------------------------------------
Net increase 4,245,529 $ 91,208,871
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 305,639 $6,742,586
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 67,734 1,419,162
- ------------------------------------------------------------
373,373 8,161,748
Shares
repurchased (158,195) (3,523,342)
- ------------------------------------------------------------
Net increase 215,178 $4,638,406
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 575,594 $12,484,454
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 48,222 997,306
- ------------------------------------------------------------
623,816 13,481,760
Shares
repurchased (323,289) (7,016,379)
- ------------------------------------------------------------
Net increase 300,527 $ 6,465,381
- ------------------------------------------------------------
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
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Edward T. Shadek, Jr.
Vice President
Charles G. Pohl
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Convertible
Income-Growth Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581. You can also learn more
at Putnam Investments' 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 the principal amount
invested.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
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PAID
Putnam
Investments
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SA019-42845 008/223/920 6/98
