Putnam
Convertible
Income-Growth
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
One of the benefits of a broadly diversified portfolio such as that of
Putnam Convertible Income-Growth Trust is that it can provide a smoother
ride through the ups and downs of markets. This has been an appealing
attribute in the volatile markets of the past two years.
I am pleased to report that during the first half of your fund's current
fiscal year, your fund delivered results comfortably above its long-term
average. The fund's managers attribute this positive performance to its
broad exposure to different types of companies, well-timed and carefully
selected acquisitions of attractively priced securities, and the
portfolio's one-third allocation to the common stocks of undervalued
companies.
In the following report, fund managers Charles Pohl and Forrest Fontana
provide a detailed accounting both of the fund's performance and of their
strategy during the six months ended April 30, 1999. Then they offer their
views on prospects for the fiscal year's second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 16, 1999
Report from the Fund Managers
Charles G. Pohl
Forrest N. Fontana
In the first six months of Putnam Convertible Income-Growth Trust's 1999
fiscal year, convertible bonds and stocks recovered following a difficult
1998. As you may recall, at the beginning of the period stocks and bonds
were rebounding from the effects of the Russian debt crisis following the
decision by the Federal Reserve Board to ease monetary policy and bolster
market confidence. Large-capitalization stocks were the first to recover,
and large-cap convertibles soon followed in their footsteps. The
convertibles of smaller companies revived more gradually but have
performed well during 1999.
Our commitment to maintain both the fund's value discipline and its
exposure to different types of companies proved rewarding over the period,
generating returns well above the fund's long-term average. For complete
performance information, including the fund's longer-term results, please
turn to the tables that begin on page 6.
Total return for 6 months ended 4/30/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------
15.53% 8.90% 15.17% 10.17% 15.28% 11.25%
- ------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* DIVERSIFICATION STEERS FUND TO STEADY RESULTS
The fund's better-than-normal gains in 1999 can be attributed, we believe,
to our consistent value strategy and rigid security selection. We invest
approximately two thirds of the fund's assets in convertible securities
from different types of companies, primarily large growth companies and a
wide range of small companies that use convertibles to finance new
ventures. We also allocate one third of our assets to undervalued
large-company stocks. We believe this strategy gives the fund exposure to
every sector and to nearly every domestic investment style. During the
period, each style experienced at least one strong surge in performance.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Oil and gas 8.1%
Insurance and finance 7.6%
Retail 6.0%
Electronics and electrical equipment 5.2%
Pharmaceuticals and biotechnology 4.4%
Footnote reads:
*Based on net assets as of 4/30/99. Holdings will vary over time.
As we have explained in previous reports, your fund's primary emphasis on
convertible securities is intended to reduce risk. Convertibles combine
qualities of stocks and bonds. They pay a regular coupon like a bond and
have the right to convert into equity shares in the underlying company.
The income stream provided by the convertible offsets part of the
volatility a stock might experience. As a result, convertibles tend to
perform well when either stocks or bonds perform well but are
significantly less volatile than stocks.
* BUYING OPPORTUNITIES OF 1998 EXCEL IN 1999
Much of the fund's gains in 1999 derived from the strong performance of
securities we added when prices were weak during 1998. As we described in
the last annual report, small-company convertibles became deeply
discounted in 1998. Economic contraction in Asia and Latin America
temporarily affected the profits of many small industrial and
high-technology manufacturers and drove down the prices of both their
stocks and their convertible issues. This downturn worsened when Russia's
financial crisis in August unleashed a torrent of selling.
Because we have a value investment style, we see heavy selling pressure as
an opportunity. Short-term market volatility does not deter us because we
are confident in our research and investment discipline. We do rigorous
analysis of each company's financial statements to understand its earnings
outlook. We buy convertibles that we conclude are priced below what the
issuing company's earnings would justify, except for a small number of
holdings (5%-10% of the fund) that have unusually high yields.
Last year we added several companies in the energy sector that had been
hurt by low oil prices, including Chevron and Unocal, as well as
exploration companies such as Diamond Offshore Drilling and Pride
International. Stock and convertible prices in this sector began to
improve significantly in March and April of 1999 as oil prices jumped,
thanks in part to a recent OPEC decision to reduce crude oil output. Given
our outlook for firm energy prices over the longer term, we still consider
these holdings undervalued.
"Convertibles purists will probably avoid this fund and its atypical asset
mix, but it has proved worthy of consideration by investors seeking a solid
performer with the ability to stay out of trouble."
-- Morningstar Mutual Funds, March 19, 1999
We also added to the fund's technology holdings in the course of 1998. The
technology weighting, at 20% of the fund's convertible holdings, is our
largest industry weighting and reflects the size of the technology sector
in the convertibles market. Many of the top-performing fund holdings in
1999 have been in the telecommunications branch of technology and include
QUALCOMM and Motorola. Among smaller tech holdings, such as Kent
Electronics, Credence Systems, and Quantum Corp., performance has been
more volatile, but we believe that these companies still have strong
potential. Holdings in the cable television industry also have performed
well, since it appears that many large companies are planning to integrate
Internet and telephone access with cable services.
Finally, in the capital goods sector, companies such as industrial-equipment
manufacturer Ingersoll-Rand and construction-machinery maker Case Corporation
have appreciated in response to improving earnings reports and a stronger
outlook for world growth. While these holdings as well as others discussed in
this report were viewed favorably at the end of the reporting period, all
portfolio holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* VALUE STOCKS SHOW NEW LIFE IN SEMIANNUAL PERIOD
As we have already mentioned, your fund's allocation to value stocks
provides important diversification. The convertible market is skewed in
favor of growth companies, especially in the technology sector. The stock
portion of the fund, by contrast, rarely has a large technology weighting
because tech stocks tend to be priced expensively; instead it has large
weightings in financials and utilities.
In addition to providing diversification, value stocks also came to
prominence during the period. After underperforming growth stocks for
nearly two years, value stocks perked up and clearly outperformed in
April. Within the value stock universe, your fund seeks companies that
have qualities of both "cheapness and change," meaning a low stock price
combined with positive internal change that can improve performance. Many
companies in the portfolio have struggled with somewhat lower revenues
during the past two years but have responded by increasing their
efficiency. Now these companies are reporting somewhat stronger earnings
and stand to benefit from stronger economic activity throughout the world
in the coming year.
According to Lipper Analytical Services, Putnam Convertible Income-Growth
Trust's class A shares' total return ranked in the top 30%, or 5 out of 17
funds, in Lipper's convertible securities universe for 10-year performance
as of April 30, 1999.
Past performance is not indicative of future results. Lipper Analytical
Services, an independent research organization, ranks funds according to total
return performance. Its rankings vary over time and do not reflect the effects
of sales charges. For the period ended 4/30/99, the fund's class A shares
ranked in the top 47% (27 out of 57) and top 33% (9 out of 27) for 1- and
5-year returns, respectively. Performance of other share classes will vary.
* FUND CAN BENEFIT FROM MARKET BROADENING
As the fund enters the second half of the 1999 fiscal year, we can report
encouraging signs that a wider range of securities is making gains in the
market. While major market indexes reported by the news media have set
many new records in the past couple of years, most of those gains derived
from a small number of stocks.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Credence Systems Corp.
Convertible subordinated notes 5.25%, 2002
Semiconductors
MediaOne Group, Inc. Series D
$2.25 convertible preferred
Cable television
Monsanto Co.
$2.60 convertible preferred
Food and beverages
Kent Electronics Corp.
Convertible subordinated notes, 4.5%, 2004
Electronic components
Citigroup, Inc.
Common stock
Insurance and finance
QUALCOMM, Inc.
$2.875 cumulative convertible preferred
Telecommunications
Bank of America Corp.
Common stock
Insurance and finance
Wendy's Financing Series A
$2.50 convertible preferred
Restaurants
Tower Automotive Capital Trust 144A
$3.375 convertible preferred
Automobiles
Berkshire Hathaway, Inc.
Convertible senior notes 1s, 2001
Insurance and finance
Footnote reads:
These holdings represent 7.7% of the fund's net assets as of 4/30/99.
Portfolio holdings will vary over time.
As 1998 illustrated, large numbers of companies were struggling to achieve
earnings growth and investors were willing to bid up certain companies to
extremely high valuations. In April, however, previously lagging value
stocks and a wide array of small companies suddenly sprang to life. This
broad advance benefited the fund because of its holdings across different
areas of the market.
We believe these broad gains could be sustainable, since we foresee solid
growth in the United States and improving growth in the international
markets where many companies held by the fund have operations. Interest
rates have risen in recent months, but we believe they pose little risk
because most convertibles remain significantly undervalued in the wake of
1998's downdraft. We believe the fund remains well diversified and is
structured to provide low-risk exposure to some of the more attractive
growth opportunities of the equity market.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 4/30/99, there is no guarantee the fund will
continue to hold these securities in the future. The lower credit ratings
of high-yield bonds in the portfolio reflect a greater possibility that
adverse changes in the economy or poor performance by the issuers of these
bonds may affect the issuer's ability to pay principal and interest.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Convertible Income-Growth Trust is designed for investors seeking current
income and capital appreciation mainly through bonds and preferred stocks
convertible into common stock, with conservation of capital as a secondary
objective.
TOTAL RETURN FOR PERIODS ENDED 4/30/99
Class A Class B Class M
(inception dates) (6/29/72) (7/15/93) (3/13/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------
6 months 15.53% 8.90% 15.17% 10.17% 15.28% 11.25%
- --------------------------------------------------------------------------
1 year 3.38 -2.57 2.67 -1.81 3.00 -0.62
- --------------------------------------------------------------------------
5 years 98.09 86.67 90.93 88.93 93.14 86.33
Annual average 14.65 13.30 13.81 13.59 14.07 13.25
- --------------------------------------------------------------------------
10 years 238.66 219.10 213.38 213.38 221.16 209.88
Annual average 12.97 12.30 12.10 12.10 12.38 11.97
- --------------------------------------------------------------------------
Annual average
(life of fund) 12.50 12.25 11.47 11.47 11.75 11.60
- --------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/99
Lehman Bros.
S&P 500 Corporate Consumer
Index Bond Index price index
- ---------------------------------------------------------------------
6 months 22.32% 1.75% 1.47%
- ---------------------------------------------------------------------
1 year 21.82 5.84 2.28
- ---------------------------------------------------------------------
5 years 228.92 51.34 12.75
Annual average 26.89 8.64 2.43
- ---------------------------------------------------------------------
10 years 461.10 147.13 35.01
Annual average 18.83 9.47 3.05
- ---------------------------------------------------------------------
Annual average
(life of fund) 14.03 --* 5.29
- ---------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50% respectively. Class B share returns for the 1-year and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares the higher operating expenses applicable to
such shares. All returns assume reinvestment of distributions at NAV.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than their original cost.
* Inception date of index was 12/31/72.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/99
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 2 2 2
- ------------------------------------------------------------------------------
Income $0.480 $0.406 $0.428
- ------------------------------------------------------------------------------
Capital gains:
Long-term 1.868 1.868 1.868
- ------------------------------------------------------------------------------
Short-term -- -- --
- ------------------------------------------------------------------------------
Total $2.348 $2.274 $2.296
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/98 $20.04 $21.26 $19.83 $19.92 $20.64
- ------------------------------------------------------------------------------
4/30/99 20.58 21.84 20.35 20.45 21.19
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 4.94% 4.65% 4.22% 4.43% 4.27%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 3.67 3.46 2.94 3.18 3.07
- ------------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/99 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (6/29/72) (7/15/93) (3/13/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 12.91% 6.43% 12.52% 7.52% 12.81% 8.85%
- ------------------------------------------------------------------------------
1 year -1.74 -7.39 -2.45 -6.71 -2.07 -5.50
- ------------------------------------------------------------------------------
5 years 85.53 74.85 78.70 76.70 81.02 74.71
Annual average 13.16 11.82 12.31 12.06 12.60 11.81
- ------------------------------------------------------------------------------
10 years 230.15 211.13 205.46 205.46 213.16 202.22
Annual average 12.69 12.02 11.81 11.81 12.09 11.69
- ------------------------------------------------------------------------------
Annual average
(life of fund) 12.30 12.05 11.27 11.27 11.55 11.40
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance summary for method of calculation.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
Comparative benchmarks
Standard & Poor's 500 Composite Stock Price Index* is an index of common
stocks frequently used as a general measure of stock market performance.
The Lehman Brothers Corporate Bond Index* is an index of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
Welcome to www.putnaminv.com
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VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
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New features will be added to the site regularly. So be sure to bookmark us
at
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A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type and
industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of
shares. (For funds with preferred shares, the amount subtracted from total
assets includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the
amounts listed in the Statement of Operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
April 30, 1999 (Unaudited)
CONVERTIBLE BONDS AND NOTES (34.9%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
$ 5,000,000 Omnicom Group Inc. cv. sub. deb. 2 1/4s, 2013 $ 7,981,250
Aerospace and Defense (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,850,000 Diagnostic Retrieval Systems, Inc. cv. sr. sub. deb 9s, 2003 1,887,000
750,000 Kellstrom Industries, Inc. cv. sub. notes 5 1/2s, 2003 612,188
1,000,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 742,500
2,260,000 SPACEHAB, Inc. 144A cv. sub. notes 8s, 2007 1,678,050
--------------
4,919,738
Airlines (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
489,000 Atlantic Coast Airlines, Inc. cv. sub. notes 7s, 2004 1,701,720
2,500,000 Continental Airlines, Inc. cv. sub. deb. 6 3/4s, 2006 3,621,875
2,319,000 World Airways, Inc. cv. sr. sub. deb 8s, 2004 463,800
--------------
5,787,395
Automotive (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
5,000,000 DaimlerChrysler 144A cv. bank guaranteed zero %, 2017
(Germany) 2,812,500
1,500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 851,250
2,500,000 Magna International cv. sub. deb. 5s, 2002 2,837,500
3,000,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 2,437,500
2,000,000 Mark IV Industries, Inc. cv. sub. notes 4 3/4s, 2004 1,725,000
--------------
10,663,750
Biotechnology (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
11,000,000 Elan Finance Corp. 144A cv. company guaranty zero %, 2018 5,321,250
3,500,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 4,051,250
--------------
9,372,500
Broadcasting (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
13,000,000 Jacor Communications, Inc. cv. Liquid Yield Option Notes
(LYON) zero %, 2018 7,263,750
2,125,000 Scandinavian Broadcasting System S.A. 144A cv. sub. notes 7s,
2004 (Luxembourg) 2,589,844
--------------
9,853,594
Business Equipment and Services (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 2,677,500
6,000,000 Interpublic Group Cos. cv. sub. notes 1.8s, 2004 6,787,500
6,600,000 Mail-Well, Inc. cv. sub. notes 5s, 2002 6,360,750
2,946,000 National Data Corp. cv. sub. notes 5s, 2003 3,196,410
2,150,000 Personnel Group of America, Inc. cv. sub. notes 5 3/4s, 2004 1,738,813
--------------
20,760,973
Computer Services and Software (4.3%)
- --------------------------------------------------------------------------------------------------------------------------
5,000,000 Amazon.com, Inc. 144A cv. sub. deb. 4 3/4s, 2009 6,406,250
300,000 America Online, Inc. cv. sub. notes 4s, 2002 3,280,500
4,000,000 At Home Corp. 144A cv. sub. deb. .5426s, 2018 3,740,000
750,000 Arbor Software Corp. cv. sub. notes 4 1/2s, 2005 506,250
3,250,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 1,854,531
4,691,000 Aspen Technology, Inc. 144A cv. sub. deb. 5 1/4s, 2005 2,676,802
1,800,000 BEA Systems, Inc. cv. sub. notes 4s, 2005 1,418,625
1,200,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2005 943,500
9,000,000 Data General Corp. 144A cv. sub. notes 6s, 2004 7,425,000
883,000 Doubleclick, Inc. 144A cv. sub. notes 4 3/4s, 2006 1,589,400
1,600,000 EMC Corp. cv. sub. notes 3 1/4s, 2002 7,708,000
1,000,000 HNC Software, Inc. cv. sub. notes 4 3/4s, 2003 830,000
17,000,000 Network Associates, Inc. cv. sub deb. zero %, 2018 4,930,000
6,188,000 Platinum Technology International, Inc. cv. sub. notes
6 1/4s, 2002 5,770,310
2,385,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 1,803,656
1,500,000 Silicon Graphics Corp. cv. sr. notes 5 1/4s, 2004 1,263,750
10,620,000 System Software Associates, Inc. cv. sub. notes 7s, 2002 5,907,375
4,358,000 Vantive Corp. (The) cv. sub. notes 4 3/4s, 2002 2,936,203
--------------
60,990,152
Computers (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 1,695,000
5,000,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 7,868,750
1,500,000 Intevac, Inc. cv. sub. notes 6 1/2s, 2004 888,750
5,090,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 3,015,825
1,267,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 6s, 2006 3,593,529
20,000,000 Western Digital Corp. cv. sub. deb. zero %, 2018 4,100,000
--------------
21,161,854
Conglomerates (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,500,000 ADT Operations, Inc. cv. sub. notes zero %, 2010 7,835,625
Consumer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,855,000 Protection One, Inc. cv. sr. sub. notes 6 3/4s, 2003 2,505,263
Electronic Components (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
14,810,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 11,033,450
704,000 Level One Communications, Inc. cv. sub. notes 4s, 2004 1,425,600
1,108,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,209,105
2,000,000 Sanmina Corp. 144A cv. sub. notes 4 1/4s, 2004 2,000,000
--------------
15,668,155
Electronics and Electrical Equipment (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
4,600,000 Advanced Micro Devices, Inc. cv. sub. notes 6s, 2005 3,346,500
2,000,000 Checkpoint Systems, Inc. 144A cv. sub. deb. 5 1/4s, 2005 1,480,000
2,500,000 Cirrus Logic, Inc. cv. sub notes 6s, 2003 1,665,625
4,000,000 HMT Technology Corp. cv. sub. notes 5 3/4s, 2004 1,435,000
5,500,000 LSI Logic Corp. 144A cv. sub. notes 4 1/4s, 2004 7,150,000
5,000,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 4,700,000
11,210,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 9,584,550
11,000,000 Solectron Corp. 144A cv. notes zero %, 2019 5,403,750
1,993,000 Thermo Instrument Systems, Inc. 144A cv. deb. 4 1/2s, 2003 1,773,770
1,215,000 Thermo Instrument Systems, Inc. 144A cv. company guaranty
3 3/4s, 2000 1,331,944
275,000 Thermo Optek Corp. cv. bonds 5s, 2000 269,500
1,194,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 1,165,643
2,705,000 Thermo Quest Corp. cv. company guaranty 5s, 2000 2,630,613
--------------
41,936,895
Entertainment (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 Loews Corp. cv. sub. notes 3 1/8s, 2007 3,460,000
10,500,000 Rogers Communications cv. deb. 2s, 2005 7,927,500
--------------
11,387,500
Environmental Control (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
3,100,000 OHM Corp. cv. sub. deb. 8s, 2006 2,782,250
1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 782,500
3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,398,250
3,000,000 Waste Management, Inc. cv. sub. notes 4s, 2002 4,061,250
--------------
11,024,250
Food (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,500,000 Chiquita Brands International, Inc. cv. sub. deb. 7s, 2001 1,385,625
1,000,000 Chiquita Brands International, Inc. 144A cv. sub. deb 7s, 2001 925,000
--------------
2,310,625
Health Care (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 Assisted Living Concepts, Inc. cv. sub. deb. 6s, 2002 1,030,000
1,847,000 Renal Treatment Centers, Inc. cv. sub. notes 5 5/8s, 2006 1,539,936
3,545,000 Sun Healthcare Group, Inc. 144A cv. sub. 6s, 2004 319,050
--------------
2,888,986
Hospital Management and Medical Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
4,263,000 Integrated Health Services, Inc. cv. sr. sub. deb 5 3/4s, 2001 2,632,403
2,500,000 PhyMatrix, Inc. cv. sub. deb. 6 3/4s, 2003 1,187,500
--------------
3,819,903
Information Systems (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,750,000 Quantum Corp. cv. sub. 7s, 2004 2,516,250
Insurance and Finance (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
4,500,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 10,125,000
10,500,000 Mutual Risk Management cv. sub. deb. zero %, 2015 8,771,538
--------------
18,896,538
Lodging (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 1,650,000
Machinery (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 Thermo Fibertek Inc. 144A cv. company guaranty 4 1/2s, 2004 2,553,750
Medical Supplies and Devices (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
3,800,000 Atrix Labs, Inc. 144A cv. sub. notes 7s, 2004 2,954,500
2,000,000 Phoenix Shannon 144A cv. sr. sub. notes 9 1/2s, 2000
(In default) (NON) 20,000
1,412,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty
4 3/4s, 2004 1,179,020
5,000,000 Thermo Instrument Systems, Inc. cv. company guaranty
Ser. RG, 4s, 2005 4,056,250
--------------
8,209,770
Metals and Mining (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,000,000 Homestake Mining Co. 144A cv. sub. 5 1/2s, 2000 972,500
2,741,000 Inco Ltd. cv. deb. 5 3/4s, 2004 (Canada) 2,521,720
5,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 5,169,500
--------------
8,663,720
Oil and Gas (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 Diamond Offshore Drilling, Inc. cv. sub. notes 3 3/4s, 2007 4,315,000
6,160,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 3,141,600
5,000,000 Nabors Industries, Inc. cv. sub. notes 5s, 2006 5,918,750
3,750,000 Parker Drilling Co. cv. sub. notes 5 1/2s, 2004 2,292,188
3,000,000 PennzEnergy Co. cv. deb. 4.95s, 2008 3,172,500
5,000,000 PennzEnergy Co. cv. deb. 4.9s, 2008 5,268,750
4,241,000 Pride International, Inc. cv. sub. deb. 6 1/4s, 2006 4,527,268
4,500,000 Pride International, Inc. cv. sub. deb. zero %, 2018 1,316,250
1,500,000 Southern Mineral Corp. cv. deb. 6 7/8s, 2007 570,000
6,910,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 5,415,713
--------------
35,938,019
Paper and Forest Products (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 Smurfitt Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 2,576,250
Pharmaceuticals and Biotechnology (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
7,000,000 Alza Corp. cv. sub. LYON zero %, 2014 3,438,750
3,500,000 Centocor, Inc. cv. sub. deb. 4 3/4s, 2005 3,780,000
4,000,000 Chiron Corp. cv. sub. notes 1.9s, 2000 3,835,000
3,500,000 Duramed Pharmaceuticals, Inc. cv. sub. notes 3 1/2s, 2002 2,590,000
1,025,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 668,813
1,300,000 NeXstar Pharmaceuticals, Inc. cv. sub. deb. 6 1/4s, 2004 1,537,250
12,000,000 Roche Holdings, Inc. 144A cv. unsub. LYON zero %, 2010
(Switzerland) 7,320,000
3,005,000 Sandoz Capital BVI Ltd. 144A cv. company guaranty 2s, 2002
(Switzerland) 4,312,475
4,000,000 Sepracor, Inc. 144A cv. notes 7s, 2005 4,045,000
1,716,000 Sepracor, Inc. cv. sub. deb. 6 1/4s, 2005 3,232,515
--------------
34,759,803
Publishing (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
6,000,000 News America Holdings, Inc. cv. LYON zero %, 2013 4,218,779
4,400,000 World Color Press, Inc. cv. sub. notes 6s, 2007 4,174,500
--------------
8,393,279
REITs (Real Estate Investment Trust) (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,750,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 3,679,688
Recreation (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,211,000 Speedway Motorsports, Inc. 144A cv. sub. notes 5 3/4s, 2003 3,355,193
Restaurants (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
5,540,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 (In default) (NON) 277,000
31,650,000 Boston Chicken, Inc. cv. notes LYON zero %, 2015 (In default) (NON) 158,250
4,850,000 CKE Restaurants, Inc. cv. sub. notes 4 1/4s, 2004 3,679,938
--------------
4,115,188
Retail (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,520,000
8,500,000 Costco Cos, Inc. cv. sub. notes zero %, 2017 8,096,250
3,000,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 7,792,500
5,525,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 5,069,188
6,000,000 Office Depot, Inc. cv. LYON zero %, 2007 5,895,000
5,037,000 Pier 1 Imports, Inc. cv. sub. notes 5 3/4s, 2003 5,408,479
3,000,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 3,000,000
2,000,000 Sunglass Hut International, Inc. cv. sub. notes 5 1/4s, 2003 1,605,000
--------------
38,386,417
Satellite Services (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,084,000 Gilat Satellite Networks Ltd. cv. sub. notes 6 1/2s, 2004 (Israel) 1,475,595
Semiconductors (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
15,569,000 Credence Systems Corp. cv. sub. notes 5 1/4s, 2002 12,844,425
12,549,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 9,050,966
3,030,000 Integrated Process Equipment Corp. 144A cv. sub. notes
6 1/4s, 2004 2,276,288
3,400,000 Lam Research Corp. cv. sub. notes 5s, 2002 2,915,500
6,000,000 Micron Technology, Inc. cv. sub. notes 7s, 2004 5,962,500
500,000 National Semiconductor Corp. cv. sub. deb. 6 1/2s, 2002 423,125
3,000,000 National Semiconductor Corp. 144A cv. deb. 6 1/2s, 2002 2,538,750
--------------
36,011,554
Supermarkets (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
11,600,000 Whole Foods Market, Inc. cv. sub. deb. zero %, 2018 4,016,500
Telecommunications (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,500,000 Global TeleSystems Group, Inc. cv. sr. sub. notes 5 3/4s, 2010 4,663,750
5,845,000 Inacom Corp. cv. sub. deb. 4 1/2s, 2004 5,348,175
4,000,000 NTL, Inc. 144A cv. sub. notes 7s, 2008 (United Kingdom) 5,670,000
1,750,000 World Access, Inc. cv. sub. notes 4 1/2s, 2002 1,082,813
--------------
16,764,738
Telephone Services (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,000,000 MIDCOM Communications, Inc. cv. sub. notes 8 1/4s, 2003
(In default) (NON) 175,000
3,775,000 MIDCOM Communications, Inc. 144A cv. sub. deb. 8 1/4s, 2003
(In default) (NON) 660,625
--------------
835,625
Textiles (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,000,000 Dixie Group, Inc. (The) cv. deb. 7s, 2012 795,000
Tobacco (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
7,485,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 4,154,175
Transportation (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 2,960,563
Wireless Communications (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,750,000 Cellstar Corp. cv. sub notes 5s, 2002 1,144,063
1,600,000 Telxon Corp. cv. sub. notes 5 3/4s, 2003 1,096,000
--------------
2,240,063
--------------
Total Convertible Bonds and Notes
(cost $521,826,862) $ 493,816,086
COMMON STOCKS (32.4%) (a)
NUMBER OF SHARES VALUE
Aerospace and Defense (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
96,277 Boeing Co. $ 3,911,253
32,683 Raytheon Co. Class A 2,261,255
14,581 Raytheon Co. Class B 1,024,315
--------------
7,196,823
Airlines (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
33,000 Delta Air Lines, Inc. 2,093,438
52,331 UAL Corp. (NON) 4,225,728
--------------
6,319,166
Alcoholic Beverages (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
41,406 Anheuser-Busch Cos., Inc. 3,027,814
Automotive (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
52,600 Delphi Automotive Systems Corp. (NON) 1,022,413
84,140 Ford Motor Co. 5,379,701
72,385 General Motors Corp. 6,437,741
--------------
12,839,855
Banks (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
112,914 Bank One Corp. 6,661,926
68,249 BankBoston Corp. 3,344,201
76,195 Chase Manhattan Corp. 6,305,136
33,778 First Union Corp. 1,870,457
95,212 Fleet Financial Group, Inc. 4,100,067
97,300 Greenpoint Financial Corp. 3,405,500
4,434 M & T Bank Corp. 2,478,606
45,000 Mercantile Bancorporation, Inc. 2,565,000
25,000 Summit Bancorp 1,059,375
45,814 SunTrust Banks, Inc. 3,275,701
93,500 Washington Mutual, Inc. 3,845,188
--------------
38,911,157
Building and Construction (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
74,155 Beazer Homes USA, Inc. (NON) 1,710,200
Business Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
79,100 Avery Dennison Corp. 5,398,575
67,596 Xerox Corp. 3,971,265
--------------
9,369,840
Cable Television (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
20,219 MediaOne Group, Inc. (NON) 1,649,112
Chemicals (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
28,736 Dow Chemical Co. 3,769,804
83,300 (E.I.) du Pont de Nemours & Co., Ltd. 5,883,063
48,916 Rohm & Haas Co. 2,192,048
--------------
11,844,915
Computers (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
76,081 Apple Computer, Inc. (NON) 3,499,726
65,013 Computer Associates International, Inc. 2,775,242
38,481 IBM Corp. 8,049,744
63,006 NCR Corp. 2,583,246
--------------
16,907,958
Conglomerates (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
76,000 Allied-Signal, Inc. 4,465,000
58,707 Minnesota Mining & Manufacturing Co. 5,224,923
28,436 United Technologies Corp. 4,119,666
--------------
13,809,589
Consumer Non Durables (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
36,118 Colgate-Palmolive Co. 3,699,838
63,131 Kimberly-Clark Corp. 3,870,719
--------------
7,570,557
Consumer Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
222,390 Service Corp. International 4,614,593
Electric Utilities (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
22,100 Dominion Resources, Inc. 908,863
181,000 DPL, Inc. 3,235,375
72,661 Duke Energy Corp. 4,069,016
107,700 Entergy Corp. 3,365,625
116,344 Potomac Electric Power Co. 3,403,062
104,344 Southern Co. 2,823,810
--------------
17,805,751
Electronics and Electrical Equipment (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
45,998 Cooper Industries, Inc. 2,225,153
53,641 Emerson Electric Co. 3,459,845
55,534 General Electric Co. 5,858,837
17,357 Lernout & Hauspie Speech Products N.V. (Belgium) 679,093
60,133 Motorola, Inc. 4,818,157
71,256 Rockwell International Corp. 3,678,591
95,000 SCI Systems, Inc. (NON) 3,615,938
90,722 Seagate Technology, Inc. (NON) 2,528,876
16,455 Sensormatic Electronics Corp. (NON) 197,460
1,632 Trikon Technologies, Inc. (NON) 285,665
--------------
27,347,615
Entertainment (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
99,239 Disney (Walt) Productions, Inc. 3,150,838
Environmental Control (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
118,900 Republic Services, Inc. (NON) 2,444,881
Financial Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
29,855 Lehman Brothers Holding, Inc. 1,658,818
38,410 Merrill Lynch & Co., Inc. 3,224,039
34,372 Morgan (J.P.) & Co., Inc. 4,631,627
--------------
9,514,484
Food (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
111,000 ConAgra, Inc. 2,761,125
30,000 General Mills, Inc. 2,193,750
70,278 Heinz (H.J.) Co. 3,281,104
93,001 Kellogg Co. 3,441,037
70,000 Nabisco Holdings Corp. Class A 2,646,875
41,000 The Quaker Oats Co. 2,647,063
--------------
16,970,954
Food and Beverages (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
154,525 Pepsi Bottling Group, Inc. (The) (NON) 3,254,683
137,774 Sara Lee Corp. 3,065,472
20,000 SYSCO Corp. 593,750
--------------
6,913,905
Hospital Management (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
163,403 Tenet Healthcare Corp. (NON) 3,860,396
Insurance and Finance (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
61,600 Allstate Corp. 2,240,700
70,500 American General Corp. 5,217,000
145,948 Bank of America Corp. 10,508,256
52,046 Chubb Corp. (The) 3,083,726
50,180 CIGNA Corp. 4,375,069
142,993 Citigroup, Inc. 10,760,223
27,083 Equitable Companies, Inc. 1,823,024
55,300 Fannie Mae 3,922,844
33,900 Hartford Financial Services Group 1,997,981
--------------
43,928,823
Leisure (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
9,293 Hasbro, Inc. 317,124
98,863 Mattel, Inc. 2,558,080
--------------
2,875,204
Medical Supplies and Devices (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
44,925 Baxter International, Inc. 2,830,275
Metals and Mining (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
54,651 Alcoa, Inc. 3,402,025
Oil and Gas (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
41,103 Atlantic Richfield Co. 3,450,083
44,400 BP Amoco PLC ADR (United Kingdom) 5,025,525
35,276 Chevron, Inc. 3,518,781
167,950 Conoco, Inc. 4,555,644
109,000 Exxon Corp. 9,053,813
118,400 Halliburton Co. 5,046,800
82,000 Mobil Corp. 8,589,500
202,415 Occidental Petroleum Corp. 4,086,253
43,992 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 2,581,781
87,330 Unocal Corp. 3,629,653
71,149 Williams Cos., Inc. 3,361,790
--------------
52,899,623
Packaging and Containers (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
78,000 Owens-Illinois, Inc. (NON) 2,262,000
100,082 Smurfit-Stone Container Corp. (NON) 2,339,417
--------------
4,601,417
Paper and Forest Products (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
73,661 Boise Cascade Corp. 2,964,855
35,237 Fort James Corp. 1,339,006
81,050 Weyerhaeuser Co. 5,440,481
--------------
9,744,342
Pharmaceuticals and Biotechnology (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
141,500 American Home Products Corp. 8,631,500
111,790 Bristol-Myers Squibb Co. 7,105,652
73,276 Merck & Co., Inc. 5,147,639
113,434 Pharmacia & Upjohn, Inc. 6,352,304
--------------
27,237,095
Photography (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
31,600 Eastman Kodak Co. 2,358,150
Publishing (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
61,500 Times Mirror Co. Class A 3,597,750
27,577 Tribune Co. 2,300,956
--------------
5,898,706
Railroads (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
107,400 Burlington Northern Santa Fe Corp. 3,933,525
REITs (Real Estate Investment Trust) (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
29,000 Equity Residential Properties Trust 1,341,250
Retail (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
56,774 Albertsons, Inc. 2,923,861
50,000 Dayton Hudson Corp. 3,365,625
92,802 Federated Department Stores, Inc. (NON) 4,332,693
249,822 K mart Corp. (NON) 3,716,102
2,571 Kroger Co. (NON) 139,637
67,214 Penney (J.C.) Co., Inc. 3,066,639
179,646 Rite Aid Corp. 4,187,997
92,136 Saks, Inc. (NON) 2,608,601
105,307 Sears, Roebuck & Co. 4,844,122
--------------
29,185,277
Savings and Loans (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
188,432 Charter One Financial, Inc. 5,888,500
Telecommunications (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
54,314 ALLTEL Corp. 3,662,800
Telephone Services (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
22,342 Sprint Corp. 2,291,451
75,655 U S West, Inc. 3,957,702
--------------
6,249,153
Telephone Utilities (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
68,596 Ameritech Corp. 4,694,539
82,767 AT&T Corp. 4,179,734
99,086 Bell Atlantic Corp. 5,709,831
120,904 SBC Communications, Inc. 6,770,624
--------------
21,354,728
Tobacco (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
86,014 Philip Morris Cos., Inc. 3,015,866
Utilities (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
122,585 Sempra Energy 2,543,639
51,000 Western Resources, Inc. 1,386,563
--------------
3,930,202
--------------
Total Common Stocks (cost $382,084,607) $ 458,117,364
CONVERTIBLE PREFERRED STOCKS (31.7%) (a)
NUMBER OF SHARES VALUE
Apparel (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
45,000 Designer Finance $3.00 cv. cum. pfd. $ 1,614,375
Automobiles (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
50,000 Federal-Mogul Financial Trust $3.50 cum. cv. pfd. 2,693,750
210,600 Tower Automotive Capital Trust 144A $3.375 cv. pfd. 10,161,450
--------------
12,855,200
Banks (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
224,472 CNB Capital Trust I $1.50 cum. cv. pfd. 5,667,918
69,350 Union Planters Corp. Ser. E, $2.00 cv. cum. pfd. 3,675,550
--------------
9,343,468
Broadcasting (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
65,000 Chancellor Media Corp. $3.00 cv. cum. pfd. 7,166,250
134,500 Sinclair Broadcast Group, Inc. $3.00 cv. pfd. 5,346,375
276,000 Triathlon Broadcasting Co. $.945 cv. pfd. 3,001,500
--------------
15,514,125
Building and Construction (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
63,000 Txi Capital Trust I $2.75 cv. pfd. 2,220,750
Building Products (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
85,000 Owens Corning Capital LLC $3.25 cv. pfd. 3,995,000
Cable Television (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
30,000 Adelphia Communications Corp. Ser. D, $5.50 cv. pfd. 6,105,000
40,000 Comcast Corp. $3.35 cv. pfd. 3,015,000
50,000 CSC Holdings, Inc. Ser. I, $8.50 cv. pfd. 5,725,000
75,000 MediaOne Group, Inc. Ser. D, $2.25 cv. pfd. 12,159,375
--------------
27,004,375
Computer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
41,467 Wang Laboratories, Inc. Ser. B, $3.25 cv. pfd. 2,156,284
Consumer Products (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
60,000 Newell Financial Trust I $2.625 cv. cum. pfd. 3,412,500
Cosmetics (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
82,333 Estee Lauder Automatic Common Exchange Security
Trust II $5.41 cv. pfd. 7,862,802
60,000 Estee Lauder Co. $3.805 cv. pfd. 5,250,000
--------------
13,112,802
Electric Utilities (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
130,000 CalEnergy Capital Trust $3.125 cv. cum. pfd. 7,247,500
110,000 El Paso Energy Capital Trust $2.375 cv. pfd. 5,513,750
65,000 Houston Industries, Inc. $3.22 cv. pfd 7,653,750
100,000 Texas Utilities Co. $4.625 cv. pfd. 5,137,500
50,000 Texas Utilities Co. $0.205 cv. pfd. 2,181,250
--------------
27,733,750
Electronics and Electrical Equipment (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
50,952 Lernout & Hauspie Speech Products N.V. 144A
$2.375 cv. pfd. (Belgium) 1,757,844
118,300 Sensormatic Electronics Corp. 144A $1.625 cv. pfd. 2,351,213
--------------
4,109,057
Electronic Components (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
74,378 Coltec Capital Trust $2.625 cv. pfd. 3,532,955
125,000 Loral Space & Comm. $3.00 cv. pfd. 6,843,750
102,100 Pioneer Standard Electronics, Inc. 144A $3.375 cv. pfd. 3,930,850
--------------
14,307,555
Engineering (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
200,000 Evi, Inc. $2.50 cum. cv. pfd. 7,250,000
Entertainment (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
179,100 Metromedia International Group, Inc. $3.625 cv. cum. pfd. 4,678,988
Financial Services (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
107,000 Devon Financing Trust $3.25 cv. pfd. 6,272,875
65,869 Finova Finance Trust $2.75 cv. cum. pfd. 4,380,289
56,000 Mandatory Common Exchange Trust (The) $3.625 cv. pfd. 252,000
70,000 Matewan Bancshares, Inc. Ser. A, $3.75 cv. cum. pfd. 2,187,500
150,000 Merrill Lynch & Co., Inc. Ser. IGL, 6.25% cv. pfd. 4,012,500
80,000 Salomon, Smith, Barney Inc. 6.25% cv. pfd. 5,600,000
70,000 USX Capital Trust I $3.375 cum. cv. pfd. 3,027,500
90,000 Walbro Captial Trust $2.00 cv. pfd. 2,306,250
--------------
28,038,914
Food (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
85,300 Chiquita Brands International, Inc. Ser. B, $3.75 cv. cum. pfd. 3,763,863
65,000 Dole Food Co., Inc. $2.75 cv. pfd. 1,998,750
--------------
5,762,613
Food and Beverages (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 Monsanto Co. $2.60 cv. pfd. 11,093,750
65,000 Ralston Purina Co. $4.336 cv. pfd. 2,851,875
--------------
13,945,625
Information Systems (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
115,000 Vanstar Financial Trust Corp. $3.375 cv. pfd. 2,228,125
Insurance and Finance (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
40,000 Aetna Inc. $6.25 cv. pfd. 3,060,000
66,433 American Bankers Insurance Group, Inc. Ser. B, $3.125 cv. pfd. 6,992,073
110,000 American General Delaware Corp. $3.00 cv. cum. pfd. 10,078,750
96,000 American Heritage Life Investment Corp. $4.25 cv. pfd. 6,156,000
80,000 Lincoln National Corp. $7.75 cv. pfd. 1,960,000
167,200 Lincoln National Corp. $0.463 cv. cum. pfd. 4,305,400
211,885 Philadelphia Consolidated Holding Corp. $0.534 cv. pfd. 2,012,908
121,100 Protective Life Corp. $3.25 cv. cum. pfd. 7,750,400
60,000 St. Paul Capital LLC $3.00 cv. cum. pfd. 3,232,500
--------------
45,548,031
Investment Companies (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
100,000 Suiza Capital Trust II $2.75 cv. pfd. 3,650,000
Machinery (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
97,040 Case Corp. $4.50 cv. cum. pfd. 7,690,420
230,000 Ingersoll-Rand Co. $0.195 cv. pfd. 6,785,000
--------------
14,475,420
Medical Supplies and Devices (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
9,860 Mckesson Corp. $2.50 cv. pfd. 549,695
164,604 Owens & Minor Trust I 144A Ser. A, $2.688 cv. cum. pfd. 5,740,565
--------------
6,290,260
Metals and Mining (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
15,000 Cyprus Amax Minerals Co. Ser. A, $4.00 cv. pfd. 654,375
75,000 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 1,415,625
70,000 Kinam Gold, Inc. Ser. B, $3.75 cv. cum. pfd. 2,423,750
90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 2,169,600
40,000 Titanium Metals Corp. $3.313 cv. pfd. 830,000
--------------
7,493,350
Oil and Gas (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
58,500 KN Energy Inc. $3.55 cv. pfd. 1,864,688
125,000 Lomak Financing Trust $2.875 cv. pfd. 2,828,125
30,000 Lomak Petroleum Ser. C., $2.03 cv. cum. pfd. 491,250
93,085 Neuvo Energy Ser. A, $2.875 cv. pfd. 3,036,898
130,000 Tosco Financing Trust $2.875 cv. pfd. 6,565,000
125,000 Unocal Capital Trust $3.125 cv. cum. pfd. 7,218,750
20,000 Williams Companies, Inc. $1.25 cum. cv. pfd. 4,407,500
--------------
26,412,211
Packaging and Containers (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
90,000 Owens-Illinois, Inc. $2.375 cv.pfd. 3,600,000
152,000 Sealed Air Corp. Ser. A, $2.00 cv.pfd. 8,835,000
--------------
12,435,000
Paper and Forest Products (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
140,000 International Paper Co. $2.625 cv. pfd. 7,140,000
Publishing (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
60,000 Golden Books Family Entertainment, Inc. $4.375 cv. cum. pfd. 412,500
50,000 Houghton Mifflin Co. $4.08 cv. pfd. 737,500
125,000 Readers Digest $0.453 cv. pfd. 4,078,125
65,000 Tribune Co. $2.00 cv. pfd. 9,685,000
278,180 Tribune Co. $1.75 cv. pfd. 7,928,130
--------------
22,841,255
Railroads (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 Union Pacific Capital Trust 144A $3.125 cum. cv. pfd. 9,031,250
Recreation (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
18,871 Royal Caribbean Cruises Ltd. Ser. A, $3.625 cum. cv. pfd. 2,167,806
142,870 Station Casinos, Inc. $3.50 cv. pfd. 7,947,144
--------------
10,114,950
REITs (Real Estate Investment Trust) (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
140,000 Archstone Communities Trust Ser. A, $1.75 cv. cum. pfd. 4,252,500
146,300 Equity Residential Property Ser. E, $1.75 cv. pfd. 3,748,938
74,490 Tanger Factory Outlet Centers Ser. A, $1.802 cv. cum. pfd. 1,769,138
20,000 Vornado Realty Trust Ser. A, $3.25 cv. cum. pfd. 1,095,000
--------------
10,865,576
Restaurants (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
178,299 Wendy's Financing Ser. A, $2.50 cv. pfd. 10,207,618
Retail (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,195 Ann Taylor Finance Trust $4.25 cv. cum. pfd. 505,498
45,000 CVS Auto Exchange 6.00% cv. pfd. 3,808,125
130,000 Dollar General Strypes Trust $3.352 cv. pfd. 5,265,000
140,000 K mart Financing I $3.875 cum. cv. pfd. 7,595,000
--------------
17,173,623
Telecommunications (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
75,000 QUALCOMM, Inc. $2.875 cum. cv. pfd. 10,687,500
5,000 TCI Pacific Comm $5.00 cv. pfd. 1,602,500
15,000 WinStar Communications. Inc. $3.50 cv. pfd. 845,625
--------------
13,135,625
Telephone Services (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 Intermedia Communications, Inc. Ser. F, $7.00 cv. pfd. 4,143,750
60,000 Nextlink Communications $3.25 cv. pfd. 5,250,000
60,000 Qwest Trends Trust 144A 5.75% cv. pfd. 4,417,500
--------------
13,811,250
Tobacco (--%)
- --------------------------------------------------------------------------------------------------------------------------
57,517 DIMON, Inc. $2.00 cv. pfd. 323,533
Transportation (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
120,500 CNF Trust I Ser. A, $2.50 cv. cum. pfd. 7,305,313
Wireless Communications (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
70,000 AirTouch Communications, Inc. Ser. C, $2.125 cv. cum. pfd. 9,056,250
50,000 Omnipoint Corp. $3.50 cv. pfd. 1,931,250
--------------
10,987,500
--------------
Total Convertible Preferred Stocks (cost $441,284,699) $ 448,525,271
PREFERRED STOCKS (--%) (a) (cost $1,163,237)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
159,304 Trikon Technologies, Inc. Ser. H, 8.125% pfd. (PIK) $ 159,304
SHORT-TERM INVESTMENTS (1.4%) (a) (cost $19,370,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$19,370,000 Interest in $600,000,000 joint repurchase agreement
dated April 30, 1999 with Salomon, Smith Barney, Inc.
due May 3, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $19,377,861 for an
effective yield of 4.87% $ 19,370,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,365,729,405) (b) $1,419,988,025
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,414,936,639.
(b) The aggregate identified cost on a tax basis is $1,370,263,647, resulting in gross unrealized appreciation and
depreciation of $181,660,455 and $131,936,077, respectively, or net unrealized appreciation of $49,724,378.
(NON) Non-income-producing security.
(PIK) Income may be received in cash or additional securities at the discretion of the issuer.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
ADR after the name of a foreign holding stands for American Depository Receipts representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,365,729,405) (Note 1) $1,419,988,025
- -----------------------------------------------------------------------------------------------
Cash 2,047,319
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 6,459,233
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,101,454
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 11,772,985
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 466,832
- -----------------------------------------------------------------------------------------------
Total assets 1,441,835,848
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 22,718,994
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,584,525
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,923,872
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 123,555
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 21,217
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,954
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 467,641
- -----------------------------------------------------------------------------------------------
Other accrued expenses 53,451
- -----------------------------------------------------------------------------------------------
Total liabilities 26,899,209
- -----------------------------------------------------------------------------------------------
Net assets $1,414,936,639
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,277,371,481
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (8,293,854)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 91,600,392
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 54,258,620
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,414,936,639
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,061,555,360 divided by 51,581,523 shares) $20.58
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $20.58)* $21.84
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($300,101,078 divided by 14,749,038 shares)** $20.35
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($17,536,979 divided by 857,385 shares) $20.45
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $20.45)* $21.19
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class Y share
($35,743,222 divided by 1,736,527 shares) $20.58
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended April 30, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest $ 16,709,816
- -----------------------------------------------------------------------------------------------
Dividends 14,522,310
- -----------------------------------------------------------------------------------------------
Total investment income 31,232,126
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,947,565
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 934,207
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,678
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,860
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,307,576
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,472,201
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 67,444
- -----------------------------------------------------------------------------------------------
Reports to shareholders 49,535
- -----------------------------------------------------------------------------------------------
Auditing 14,000
- -----------------------------------------------------------------------------------------------
Legal 5,594
- -----------------------------------------------------------------------------------------------
Postage 56,307
- -----------------------------------------------------------------------------------------------
Total expenses 7,872,967
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (143,270)
- -----------------------------------------------------------------------------------------------
Net expenses 7,729,697
- -----------------------------------------------------------------------------------------------
Net investment income 23,502,429
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 87,876,986
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 88,435,674
- -----------------------------------------------------------------------------------------------
Net gain on investments 176,312,660
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $199,815,089
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
1999* 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 23,502,429 $ 48,902,430
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 87,876,986 133,278,759
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 88,435,674 (203,859,332)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 199,815,089 (21,678,143)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (24,777,149) (39,874,535)
- ---------------------------------------------------------------------------------------------------------------
Class B (5,949,061) (8,456,841)
- ---------------------------------------------------------------------------------------------------------------
Class M (383,013) (571,054)
- ---------------------------------------------------------------------------------------------------------------
Class Y (446,520) --
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (1,430,151)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (303,316)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (20,482)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (95,643,215) (108,409,463)
- ---------------------------------------------------------------------------------------------------------------
Class B (26,827,275) (24,372,023)
- ---------------------------------------------------------------------------------------------------------------
Class M (1,669,288) (1,435,189)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 6,391,286 130,624,709
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 50,510,854 (75,926,488)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,364,425,785 1,440,352,273
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income of $8,293,854 and
$240,540, respectively) $1,414,936,639 $1,364,425,785
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.04 $23.22 $21.24 $19.42 $19.09 $20.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .35(c) .76(c) .78(c) .81(c) .85 .81
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.54 (1.02) 3.70 2.70 1.60 (.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.89 (.26) 4.48 3.51 2.45 .35
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.48) (.76) (.87) (.98) (.96) (.74)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.03) (.06) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.87) (2.13) (1.57) (.71) (1.16) (.90)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.35) (2.92) (2.50) (1.69) (2.12) (1.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.58 $20.04 $23.22 $21.24 $19.42 $19.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 15.53* (1.37) 22.86 18.99 14.38 1.84
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,061,555 $1,056,693 $1,168,470 $898,486 $756,645 $697,946
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .48* .97 1.03 1.06 1.16 .96
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.77* 3.50 3.56 3.99 4.64 4.16
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52 48.37
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid
through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.83 $23.01 $21.09 $19.30 $19.00 $20.35
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .28(c) .59(c) .63(c) .66(c) .69 .74
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.51 (1.01) 3.64 2.68 1.61 (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.79 (.42) 4.27 3.34 2.30 .19
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.40) (.61) (.73) (.84) (.84) (.66)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) (.05) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.87) (2.13) (1.57) (.71) (1.16) (.88)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.27) (2.76) (2.35) (1.55) (2.00) (1.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.35 $19.83 $23.01 $21.09 $19.30 $19.00
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 15.17* (2.11) 21.89 18.14 13.54 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $300,101 $289,652 $257,163 $146,127 $75,309 $31,432
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .86* 1.72 1.78 1.81 1.91 1.71
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.40* 2.74 2.78 3.26 3.92 3.58
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52 48.37
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid
through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 March 13, 1995+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.92 $23.08 $21.14 $19.37 $17.79
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .30(c) .65(c) .67(c) .73(c) .64
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.53 (1.00) 3.67 2.65 1.64
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.83 (.35) 4.34 3.38 2.28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.43) (.66) (.78) (.90) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) (.05) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.87) (2.13) (1.57) (.71) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.30) (2.81) (2.40) (1.61) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.45 $19.92 $23.08 $21.14 $19.37
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 15.28* (1.75) 22.24 18.30 12.99*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $17,537 $18,081 $14,719 $7,128 $1,753
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73* 1.47 1.53 1.54 1.04*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.53* 2.99 3.04 3.55 2.89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.77* 92.76 70.74 61.43 69.52
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid
through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Dec 30, 1998+
Per-share to April 30
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $19.32
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .31(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.20
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.25)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.58
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.90*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $35,743
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .24*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.24*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.77*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter, includes amounts paid
through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
Notes to financial statements
April 30, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Convertible Income-Growth Trust (the "fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks current income and capital
appreciation by investing primarily in bonds and preferred stocks
convertible into common stock with capital conservation as a secondary
objective.
The fund offers class A, class B, class M and class Y shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge, but pay a higher ongoing distribution
fee than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class M
shares are sold with a maximum front-end sales charge of 3.50% and pay an
ongoing distribution fee that is lower than class B shares and higher than
class A shares. Class Y shares, which are sold at net asset value, are
generally subject to the same expenses as class A, class B, and class M
shares but do not bear a distribution fee. Class Y shares are sold to
defined contribution plans that invest at least $150 million in a
combination of Putnam Funds and other accounts managed by affiliates of
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of
some securities traded over-the-counter -- the last reported bid price.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rate. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at fair value
following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date. Discounts on zero coupon bonds and
payment in kind bonds are accreted according to the yield-to-maturity
basis.
E) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended April 30, 1999, the fund had no borrowings against the line of
credit.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.65% of the first $500
million of average net assets, 0.55% of the next $500 million, 0.50% of
the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and
0.38% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended April 30, 1999, fund expenses were reduced by
$143,270 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,160
has been allocated to the fund and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund to an annual
rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to
class A, class B and class M shares, respectively.
For the six months ended April 30, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $74,704 and $3,950 from the
sale of class A and class M shares, respectively and $361,489 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended April 30, 1999, Putnam Mutual
Funds Corp., acting as underwriter received $4,668 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$639,722,728 and $740,732,730, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or loss
on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At April 30, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,446,419 $ 48,673,087
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,577,463 105,909,719
- -----------------------------------------------------------------------------
8,023,882 154,582,806
Shares
repurchased (9,171,146) (183,034,903)
- -----------------------------------------------------------------------------
Net decrease (1,147,264) $(28,452,097)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 9,382,467 $205,168,706
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,911,967 124,147,866
- -----------------------------------------------------------------------------
15,294,434 329,316,572
Shares
repurchased (12,883,335) (278,877,249)
- -----------------------------------------------------------------------------
Net increase 2,411,099 $ 50,439,323
- -----------------------------------------------------------------------------
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,344,406 $26,394,622
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,393,495 26,173,663
- -----------------------------------------------------------------------------
2,737,901 52,568,285
Shares
repurchased (2,592,647) (51,084,111)
- -----------------------------------------------------------------------------
Net increase 145,254 $ 1,484,174
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,687,780 $101,436,908
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,255,855 26,103,869
- -----------------------------------------------------------------------------
5,943,635 127,540,777
Shares
repurchased (2,515,435) (53,200,565)
- -----------------------------------------------------------------------------
Net increase 3,428,200 $ 74,340,212
- -----------------------------------------------------------------------------
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 73,066 $ 1,463,125
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 93,790 1,770,246
- -----------------------------------------------------------------------------
166,856 3,233,371
Shares
repurchased (216,978) (4,308,278)
- -----------------------------------------------------------------------------
Net decrease (50,122) $(1,074,907)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 618,070 $13,595,951
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 82,403 1,719,717
- -----------------------------------------------------------------------------
700,473 15,315,668
Shares
repurchased (430,655) (9,470,494)
- -----------------------------------------------------------------------------
Net increase 269,818 $ 5,845,174
- -----------------------------------------------------------------------------
For the period
December 30, 1998
(commencement
of operations)
to April 30,1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,851,218 $36,701,560
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 22,683 446,520
- -----------------------------------------------------------------------------
1,873,901 37,148,080
Shares
repurchased (137,374) (2,713,964)
- -----------------------------------------------------------------------------
Net increase 1,736,527 $34,434,116
- -----------------------------------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
*DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please
call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus
for any Putnam fund. It contains more complete information, including charges
and expenses. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Quality Bond Fund + [DBL. DAGGER]
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Edward T. Shadek, Jr.
Vice President
Charles G. Pohl
Vice President and Fund Manager
Forrest N. Fontana
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Convertible
Income-Growth Trust. It may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds,
visit
www.putnaminv.com
SA019-52502 6/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust
Supplement to Semiannual Report dated April 30, 1999
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, and M shares, which are discussed more extensively in the annual report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
for periods ended 4/30/99 NAV
6 months 15.61%
1 year 3.45
5 years 98.21
Annual average 14.67
10 years 238.87
Annual average 12.98
Life of fund, annual average (since class A inception, 6/29/72) 12.50
Share value: NAV
10/31/98 $20.04
4/30/99 $20.58
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
2 $0.493 1.868 $2.361
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results. Returns
shown for class Y shares for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect the
initial sales charge currently applicable to class A shares. These returns
have not been adjusted to reflect differences in operating expenses which,
for class Y shares, are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Performance data reflects an expense limitation previously in
effect. Without the expense limitation, total returns would have been lower.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full
report for information on comparative benchmarks. If you have questions,
please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
