Putnam
Convertible
Income-Growth
Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the appointment of Dolores Snyder Bamford to
your fund's management team. Dolores joined Putnam as a security analyst
in 1992 and more recently has been a portfolio manager in the Global
Value Equity Group. She has 11 years of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 20, 2000
REPORT FROM FUND MANAGEMENT
Charles G. Pohl
Dolores S. Bamford
Putnam Convertible Income-Growth Trust's fiscal year, which ended
October 31, 2000, was characterized by dramatic price swings in the
equity markets. Early-stage technology and telecommunications companies
were leading the stock market as the fiscal year began, particularly in
December 1999. These companies also dominated the convertible markets,
growing to nearly 60% of this relatively small universe of 600 issues.
However, in March and April, and again in October, the high-tech sector
began to experience setbacks for the first time in many months.
Investors began to look for shelter in other market areas.
Because the price of convertible securities is based on their value as
income securities as well as their value as stock options, investors
whose convertible holdings were issued by a narrow band of volatile
high-tech stocks found their upside potential reduced during this
period. In light of this fund's conservative philosophy and the high
valuations prevalent in the tech sector earlier this year, we limited
your fund's holdings in technology and telecommunications throughout
most of the year. This held the fund back on the upside. We also shifted
the portfolio in the course of this year, emphasizing convertible bonds
and convertible preferred stocks over straight stocks to act as a buffer
in a down market. In hindsight, both moves were early, but we believe
they were justified by the risks involved.
Total return for 12 months ended 10/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
5.16% -0.90% 4.38% -0.21% 4.45% 3.53% 4.73% 1.07%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 8.0%
Electric utilities 7.8%
Electronics 7.2%
Software 6.8%
Pharmaceuticals 4.8%
Footnote reads:
*Based on net assets as of 10/31/00. Holdings will vary over time.
* AS HYBRIDS, CONVERTIBLES TEND TO LIMIT VOLATILITY
Because convertibles can be converted into a fixed number of shares of
the issuer's common stock at a fixed price, they are essentially
stock-bond hybrids. (A convertible is a bond or preferred stock share
that carries the right of conversion into common stock shares of the
underlying company. Even if that right is never exercised, the
convertible still provides regular interest or dividend income.) The
convertible's income feature is what limits downside risk. The price of
a convertible bond, for example, will decline with the stock of the
issuing company in a down market, but only to a point that reflects
prevailing interest rate levels on comparable straight bonds. Bonds
selling at a discount generally find interested buyers in time, creating
a price floor.
Like a straight equity portfolio, a convertible fund can be adjusted to
be more aggressive or more conservative -- to pursue growth or
concentrate on value -- but the equation is more complex. Our decisions
are based on our analysis of the risk/return profile of the convertible
securities universe. Typically, we start by determining which companies
we want to own and which convertibles seem most attractive relative to
the underlying stocks. Our investment criteria include yield, credit
quality, and premium (the difference between the stock's current price
and the conversion price), as well as the results of "bottom-up"
research into the company's prospects and our overview of the markets
and the economy. Given that in the last five years, the bulk of
convertible issuance has been from technology and telecommunications
companies, sector diversification and valuation issues were also
priorities in portfolio construction.
* TECHNOLOGY/TELECOMMUNICATIONS LEADERSHIP LOSES MOMEMTUM
During the past fiscal year, the halt in the meteoric rise of a select
list of high-tech stocks reflected investors' concern about high
valuations and the prospect that rising interest rates might slow the
economy and impact earnings. As the sizzle faded from some
growth-oriented young companies, investors began to take renewed
interest in mature companies with a strong track record and attractive
valuations -- a long-neglected area of the market.
"In addition to competitive returns, convertible securities can provide
a 'cushion' during times of wild market swings."
-- Peter Conroy, EBI Securities Corporation, June 24, 2000, TheBullseye.com
Your fund's portfolio continues to include some young new-economy
companies, but financials, energy, and health-care issues are also well
represented. Our emphasis on financial companies increased gradually
throughout the year because we believed that inflation would remain in
check, which is an important element for good performance in this
sector. We liked the fundamental outlook for banks and insurers, and as
the air began to come out of the high-tech bubble, many investors came
to share our view. The fund benefited from stock holdings in Chubb and
Bank of America, as well as from positions in major insurance companies,
including American General and Allstate. (The Bank of America position
was reduced after substantial appreciation, locking in gains for the
fund.)
We also gradually increased the fund's position in energy during the
year, emphasizing the oil services industry as well as exploration and
production companies. The portfolio included Diamond Offshore Drilling,
which provides contract services for oil and gas companies (sold before
the end of the fiscal year); Weatherford International, which supplies
equipment and services to oil and gas drilling companies in 50
countries; and Tosco Corporation, a leading U.S. oil refining and
marketing company. The fund also owns such well-known companies as Exxon
Mobil Corp. and Apache Corp.
* CONVERTIBLE MARKET EXPANDING, POSITIVE OUTLOOK FOR 2001
The convertible markets also have been undergoing a shift in the past
few years. An increasing number of convertible arbitrageurs have been
coming into the market, along with "asset stripper" investors who
purchase convertible issues and repackage their components into
derivative securities. The presence of these arbitrageurs and asset
strippers is creating a larger market for convertible securities, which
is a positive for your fund. As the market grows, a greater number of
high-quality companies are using convertibles to fund future growth. One
example is fiber-optic maker Corning Inc., which recently raised $1.75
billion via a convertible bond issue. Corning will use the combined
proceeds of this offering and a new stock issue to acquire Pirelli's
SpA's optical components and devices business.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Liberty Media Group cv. into Sprint PCS
144A cv. deb. 3 3/4s, 2030
Telecommunications
Reliant Energy, Inc. cv. into Time-Warner
Inc. $2.00 cv. pfd.
Electric utilities
MediaOne Group, Inc. cv. into Vodafone
Grp. PLC $7.00 cv. pfd.
Cable television
Jacor Communications, Inc. cv. into
Clear Channel Communications, Inc. cv.
Liquid Yield Option Notes (LYON) zero %, 2018
Broadcasting
Veritas Software Corp.
cv. disc. notes 1.856s, 2006
Software
Elan Finance Corp. Ltd.
cv. company guaranty zero %, 2018 (Bermuda)
Investment banking/brokerage
El Paso Energy Capital Trust
$2.375 cv. pfd.
Natural gas utilities
Solectron Corp.
cv. notes zero %, 2019
Electronics
Tribune Co. cv. into America Online Inc.
$2.00 cv. pfd.
Publishing
Sanmina Corp.
cv. sub. notes 4 1/4s, 2004
Electronics
Footnote reads:
These holdings represent 15.5% of the fund's net assets as of 10/31/00.
Portfolio holdings will vary over time.
Notwithstanding the uncertainty caused by political divisions in the
United States and unrest in the Middle East, prospects are building for
a strong 2001. The downside risk for the economy seems limited. The
prospect of wage inflation as a result of low unemployment continues to
be offset by gains in productivity derived from technological advances.
The Internet and many new technologies are still in their infancy, and
we expect overseas markets to offer vast new opportunities for growth.
Significant declines in many Nasdaq stocks, in particular, appear to
have rid the market of some of its excesses, and many observers are
predicting a return to more normal behavior in the marketplace.
By repositioning the fund to concentrate more fully on convertible
securities, our goal has been twofold: to capitalize on the conservative
attributes these securities offer and to align the fund to participate
in the broader opportunities becoming available in the convertible
markets. In our opinion, the fund's current composition provides a
strong foundation for a rewarding year in fiscal 2001.
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 10/31/00, 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 10/31/00
Class A Class B Class C Class M
(inception dates) (6/29/72) (7/15/93) (7/26/99) (3/13/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 5.16% -0.90% 4.38% -0.21% 4.45% 3.53% 4.73% 1.07%
------------------------------------------------------------------------------
5 years 76.53 66.42 70.06 68.16 70.14 70.14 72.40 66.39
Annual average 12.04 10.72 11.20 10.95 11.21 11.21 11.51 10.72
------------------------------------------------------------------------------
10 years 311.29 287.63 281.23 281.23 281.65 281.65 291.37 277.71
Annual average 15.19 14.51 14.32 14.32 14.33 14.33 14.62 14.21
------------------------------------------------------------------------------
Annual average
(life of fund) 12.03 11.79 11.01 11.01 11.18 11.18 11.29 11.15
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/00
Merrill Lynch
S&P 500 All-Convertible Consumer
Index Index price index
------------------------------------------------------------------------------
1 year 6.09% 20.82% 3.45%
------------------------------------------------------------------------------
5 years 166.65 116.87 13.14
Annual average 21.66 16.74 2.50
------------------------------------------------------------------------------
10 years 490.83 400.36 30.26
Annual average 19.44 17.47 2.68
------------------------------------------------------------------------------
Annual average
(life of fund) 13.58 --* 5.17
------------------------------------------------------------------------------
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-, 5- and 10-year,
if available, 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. For class C
shares, returns for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the
first year and is eliminated thereafter, and the higher operating
expenses applicable to class C 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.
*This index began operations 12/31/87.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 10/31/90
Fund's class A S&P 500 Consumer price
Date shares at POP Index index
10/31/90 9,425 10,000 10,000
10/31/91 13,105 13,350 10,292
10/31/92 15,484 14,679 10,622
10/31/93 18,852 16,872 10,914
10/31/94 19,197 17,524 11,199
10/31/95 21,958 22,158 11,513
10/31/96 26,127 27,497 11,858
10/31/97 32,099 36,327 12,105
10/31/98 31,660 44,315 12,277
10/31/99 36,859 55,691 12,592
10/31/00 $38,763 $59,083 $13,026
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B and class C
shares would have been valued at $38,123 and $38,165, respectively, and
no contingent deferred sales charges would apply; a $10,000 investment
in the fund's class M shares would have been valued at $39,137 ($37,771
at public offering price). See first page of performance section for
performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/00
Class A Class B Class C Class M
------------------------------------------------------------------------------
Distributions
(number) 4 4 4 4
------------------------------------------------------------------------------
Income $0.767 $0.616 $0.671 $0.668
------------------------------------------------------------------------------
Capital gains
Long-term 0.668 0.668 0.668 0.668
------------------------------------------------------------------------------
Short-term 1.261 1.261 1.261 1.261
------------------------------------------------------------------------------
Total $2.696 $2.545 $2.600 $2.597
------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
------------------------------------------------------------------------------
10/31/99 $20.26 $21.50 $20.02 $20.23 $20.13 $20.86
------------------------------------------------------------------------------
10/31/00 18.62 19.76 18.37 18.55 18.50 19.17
------------------------------------------------------------------------------
Current return (end of period)
------------------------------------------------------------------------------
Current
dividend
rate1 4.62% 4.35% 3.88% 3.95% 4.13% 3.99%
------------------------------------------------------------------------------
Current 30-day
SEC yield2 3.83 3.61 3.08 3.09 3.33 3.21
------------------------------------------------------------------------------
1 Most recent distribution, annualized and divided by NAV or POP at end
of period.
2 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 9/30/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (6/29/72) (7/15/93) (7/26/99) (3/13/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 12.33% 5.87% 11.53% 6.63% 11.58% 10.60% 11.86% 7.94%
------------------------------------------------------------------------------
5 years 79.66 69.29 73.04 71.10 73.08 73.08 75.48 69.30
Annual average 12.43 11.10 11.59 11.34 11.60 11.60 11.90 11.10
------------------------------------------------------------------------------
10 years 298.86 276.06 269.94 269.94 270.10 270.10 279.46 266.07
Annual average 14.84 14.16 13.98 13.98 13.98 13.98 14.27 13.86
------------------------------------------------------------------------------
Annual average
(life of fund) 12.21 11.97 11.19 11.19 11.36 11.36 11.47 11.33
------------------------------------------------------------------------------
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 section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
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 or C 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. The CDSC for class C shares is 1% for one
year after purchase.
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.
Merrill Lynch All Convertible Bond Index* is a market capitalization
weighted index including all mandatory and non-mandatory domestic
corporate convertible securities with an original par or market value of
at least $50 million and is frequently used as a general measure of
convertible bond market performance.
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.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, 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 are determined. All investment and noninvestment 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 sources 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-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders
Putnam Convertible Income-Growth Trust
We have audited the accompanying statement of assets and liabilities
of Putnam Convertible Income-Growth Trust, including the Fund's
portfolio, as of October 31, 2000, and the related statement of
operations for the year then ended, statement of changes in net assets
for each of the years in the two-year period then ended and financial
highlights for each of the years or periods in the two-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits. The financial highlights for each of the
years in the three-year period ended October 31, 1998 were audited by
other auditors whose report dated December 11, 1998 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of October 31, 2000 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Convertible Income-Growth Trust as of
October 31, 2000, the results of its operations, changes in its net
assets and financial highlights for each of the years or periods
described above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Boston, Massachusetts
December 1, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000
CONVERTIBLE BONDS AND NOTES (48.5%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising and Marketing Services (1.2%)
-------------------------------------------------------------------------------------------------------------------
$ 700,000 DoubleClick, Inc. cv. sub. notes 4 3/4s, 2006 $ 475,125
196,000 DoubleClick, Inc. 144A cv. sub. notes 4 3/4s, 2006 133,035
896,000 Inco, Ltd. cv. deb. 7 3/4s, 2016 812,000
4,200,000 Interpublic Group Cos., Inc. cv. sub. notes 1.8s, 2004 4,924,500
3,425,000 Omnicom Group, Inc. cv. sub. deb. 2 1/4s, 2013 6,473,250
2,550,000 Young & Rubicam, Inc. 144A cv. sr. notes 3s, 2005 2,556,375
-------------
15,374,285
Aerospace/Defense (0.5%)
-------------------------------------------------------------------------------------------------------------------
836,000 DRS Technologies, Inc. cv. sr. sub. deb 9s, 2003 1,312,520
4,297,000 Kellstrom Industries, Inc. cv. sub. notes 5 1/2s, 2003 1,842,339
2,468,000 Orbital Sciences Corp. cv. sub. notes 5s, 2002 1,378,995
2,618,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 1,809,693
-------------
6,343,547
Airlines (0.1%)
-------------------------------------------------------------------------------------------------------------------
2,319,000 World Airways, Inc. cv. sr. sub. deb 8s, 2004 858,030
Automotive (1.3%)
-------------------------------------------------------------------------------------------------------------------
1,500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 637,500
8,731,000 Magna International cv. sub. deb. 5s, 2002 8,523,639
5,516,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 3,564,715
2,160,000 Standard Motor Products, Inc. cv. sub. deb. 6 3/4s, 2009 1,120,500
3,177,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 2,366,865
-------------
16,213,219
Biotechnology (3.4%)
-------------------------------------------------------------------------------------------------------------------
420,000 Affymetrix, Inc. cv. sub. notes 4 3/4s, 2007 258,825
972,000 Alexion Pharmaceuticals, Inc. 144A cv. sub. notes 5 3/4s, 2007 1,108,080
720,000 Alkermes, Inc. cv. sub. notes 3 3/4s, 2007 522,900
2,037,000 Aviron, Inc. cv. sub. notes 5 3/4s, 2005 4,369,365
2,024,000 COR Therapeutics, Inc. 144A cv. notes 5s, 2007 3,628,020
1,700,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 3,253,375
431,000 IDEC Pharmaceuticals Corp. cv. sub. notes zero %, 2019 1,137,301
314,000 ImClone Systems, Inc 144A cv. sub. notes 5 1/2s, 2005 361,885
4,591,000 Millennium Pharmaceuticals, Inc. cv. sub. notes 5 1/2s, 2007 8,636,819
1,025,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 766,188
1,247,000 Protein Design Labs, Inc. 144A cv. sub. notes 5 1/2s, 2007 2,414,504
9,500,000 Roche Holdings, Inc. 144A cv. bonds zero %, 2015 8,526,250
1,528,000 Sepracor, Inc. cv. sub. deb. 7s, 2005 1,890,900
299,000 Sepracor, Inc. cv. sub. deb. 6 1/4s, 2005 865,979
4,100,000 Sepracor, Inc. 144A cv. sub. notes 5s, 2007 3,884,750
1,000,000 Vertex Pharmaceuticals, Inc. 144A cv. sub. notes 5s, 2007 1,190,000
480,000 ViroPharma, Inc. 144A cv. sub. notes 6s, 2007 183,600
-------------
42,998,741
Broadcasting (3.4%)
-------------------------------------------------------------------------------------------------------------------
2,166,000 CD Radio, Inc. cv. sub. notes 8 3/4s, 2009 4,204,748
8,800,000 EchoStar Communications Corp. cv. sub. notes 4 7/8s, 2007 10,296,000
36,900,000 Jacor Communications, Inc. cv. Liquid Yield
Option Notes (LYON) zero %, 2018 19,833,750
6,300,000 News America Holdings, Inc. cv. LYON zero %, 2013 5,449,500
2,125,000 Scandinavian Broadcasting System SA cv. sub. notes 7s,
2004 (Luxembourg) 2,305,625
-------------
42,089,623
Cable Television (0.8%)
-------------------------------------------------------------------------------------------------------------------
11,100,000 AT&T - Liberty Media Group cv. deb. 3 3/4s, 2030 8,991,000
1,500,000 Charter Communications, Inc. 144A cv. bonds 5 3/4s, 2005 1,629,375
-------------
10,620,375
Commercial and Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
4,300,000 Cedant Corp. cv. sub. notes 3s, 2002 3,966,750
Communications Equipment (1.3%)
-------------------------------------------------------------------------------------------------------------------
680,000 Antec Corp. cv. sub. notes 4 1/2s, 2003 523,600
1,000,000 Commscope, Inc. cv. sub. notes 4s, 2006 853,750
1,200,000 Comverse Technology, Inc. cv. sub. deb. 4 1/2s, 2005 6,253,500
4,565,000 Efficient Networks, Inc. 144A cv. sub. notes 5s, 2005 3,001,488
841,000 Gilat Satellite Networks, Ltd. 144A cv. sub. notes 4 1/4s,
2005 (Israel) 540,343
1,500,000 Juniper Networks, Inc. cv. sub. notes 4 3/4s, 2007 2,085,000
400,000 Redback Networks, Inc. cv. sub. notes 5s, 2007 348,000
2,394,000 Redback Networks, Inc. 144A cv. sub. notes 5s, 2007 2,067,818
1,846,000 Terayon Communications Systems, Inc. 144A cv. sr. notes
5s, 2007 906,848
-------------
16,580,347
Computers (1.5%)
-------------------------------------------------------------------------------------------------------------------
3,825,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 3,079,125
6,350,000 Anixter International, Inc. 144A sr. notes zero %, 2020 1,603,375
4,084,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 4,032,950
2,000,000 Checkpoint Systems, Inc. 144A cv. sub. deb. 5 1/4s, 2005 1,292,500
260,000 Critical Path, Inc. 144A cv. bonds 5 3/4s, 2005 208,325
2,637,000 Digital Island, Inc. cv. bonds 6s, 2005 1,107,540
5,300,000 Hewlett-Packard Co. cv. sub. notes zero %, 2017 3,729,875
1,582,000 Quantum Corp. cv. sub. 7s, 2004 1,266,597
10,620,000 System Software Associates, Inc. cv. sub. notes 7s,
2002 (In default) (NON) 584,100
1,225,000 Vantive Corp. (The) cv. sub. notes 4 3/4s, 2002 1,238,781
-------------
18,143,168
Conglomerates (0.5%)
-------------------------------------------------------------------------------------------------------------------
700,000 ADT Operations, Inc. cv. sub. notes zero %, 2010 2,161,250
1,000,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 3,143,750
-------------
5,305,000
Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,390,000 Getty Images, Inc. 144A cv. sub. notes 5s, 2007 1,037,288
486,000 Getty Images, Inc. cv. sub. notes 4 3/4s, 2003 573,480
387,000 VerticalNet, Inc. cv. sub. deb. 5 1/4s, 2004 583,886
-------------
2,194,654
Electrical Equipment (0.5%)
-------------------------------------------------------------------------------------------------------------------
3,336,000 Amkor Technologies, Inc. 144A cv. sub. notes 5s, 2007 2,414,430
2,000,000 Mark IV Industries, Inc. cv. sub. notes 4 3/4s, 2004 1,980,000
500,000 Oak Industries, Inc. cv. sub. notes 4 7/8s, 2008 2,467,500
-------------
6,861,930
Electronics (6.6%)
-------------------------------------------------------------------------------------------------------------------
542,000 Benchmark Electronics, Inc. cv. sub notes 6s, 2006 625,333
4,200,000 Burr-Brown Corp. cv. sub. notes 4 1/4s, 2007 5,848,500
662,000 Burr-Brown Corp. 144A cv. sub. notes 4 1/4s, 2007 921,835
2,466,000 Cypress Semiconductor Corp. cv. sub. deb. 3 3/4s, 2005 2,182,410
1,203,000 International Rectifier Corp. 144A cv. sub. notes 4 1/4s, 2007 1,016,535
2,290,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 1,986,575
781,000 Kulicke & Soffa Industries, Inc. 144A cv. sub. notes 4 3/4s, 2006 689,233
2,600,000 Lattice Semiconductor Corp. 144A cv. sub. notes 4 3/4s, 2006 4,030,000
862,000 LSI Logic Corp. cv. sub. notes 4s, 2005 726,235
2,084,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 3,287,510
3,637,000 Perkinelmer, Inc. cv. deb. zero %, 2020 2,759,574
3,794,000 RF Micro Devices, Inc. 144A cv. sub. notes 3 3/4s, 2005 2,731,680
4,635,000 S3, Inc. cv. sub. notes 5 3/4s, 2003 4,026,656
4,700,000 Sanmina Corp. cv. sub. notes 4 1/4s, 2004 12,443,250
1,362,000 Semtech Corp. cv. sub notes 4 1/2s, 2007 1,293,900
18,600,000 Solectron Corp. cv. notes zero %, 2020 12,438,750
20,900,000 Solectron Corp. cv. notes zero %, 2019 15,074,125
3,000,000 Transwitch Corp. 144A cv. notes 4 1/2s, 2005 3,412,500
1,943,000 TriQuint Semiconductor, Inc. cv. notes 4s, 2007 1,583,545
2,000,000 Vitesse Semiconductor Corp. 144A cv. sub. deb. 4s, 2005 1,777,500
3,250,000 World Access, Inc. cv. sub. notes 4 1/2s, 2002 2,319,688
1,000,000 World Access, Inc. 144A Inc. cv. sub. notes 4 1/2s, 2002 713,750
-------------
81,889,084
Energy (1.2%)
-------------------------------------------------------------------------------------------------------------------
6,400,000 Global Marine, Inc. 144A cv. deb. zero %, 2020 3,120,000
3,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 3,211,813
5,298,000 Parker Drilling Corp. cv. sub. notes 5 1/2s, 2004 4,543,035
6,623,000 Pride International, Inc. cv. sub. deb. zero %, 2018 2,889,284
1,129,000 Seacor Holdings, Inc. cv. sub. notes 5.38s, 2006 1,155,814
-------------
14,919,946
Entertainment (--%)
-------------------------------------------------------------------------------------------------------------------
706,000 Speedway Motorsports, Inc. cv. sub. deb. 5 3/4s, 2003 585,980
Environmental (0.5%)
-------------------------------------------------------------------------------------------------------------------
3,293,000 Thermo Instrument Systems, Inc. 144A cv. deb. 4 1/2s, 2003 3,066,606
3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,649,425
-------------
6,716,031
Health Care Services (1.3%)
-------------------------------------------------------------------------------------------------------------------
3,412,000 HEALTHSOUTH Corp. cv. sub. deb. 3 1/4s, 2003 2,878,875
550,000 Invitrogen Corp. 144A cv. sub. notes 5 1/2s, 2007 620,813
9,000,000 Omnicare, Inc. cv. bonds 5s, 2007 6,716,250
2,510,000 Universal Health Services, Inc. 144A sr. notes 0.426s, 2020 1,396,188
6,072,000 Wellpoint Health Networks, Inc. cv. sub. deb. zero %, 2019 4,880,370
-------------
16,492,496
Homebuilding (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,000,000 Lennar Corp. cv. deb. zero %, 2018 1,537,500
Investment Banking/Brokerage (1.3%)
-------------------------------------------------------------------------------------------------------------------
21,400,000 Elan Finance Corp. Ltd. cv. company guaranty zero %,
2018 (Bermuda) 16,665,250
1,105,000 E(a)Trade Group, Inc. cv. sub. notes 6s, 2007 926,819
-------------
17,592,069
Lodging/Tourism (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,053,000 Four Seasons Hotels, Inc. cv. notes zero %, 2029 (Canada) 844,296
3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 1,856,250
-------------
2,700,546
Machinery (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,030,000 Integrated Process Equipment cv. sub. notes 6 1/4s, 2004 1,806,638
Manufacturing (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 936,250
Medical Technology (0.5%)
-------------------------------------------------------------------------------------------------------------------
7,396,000 Allergan, Inc. 144A cv. bonds zero %, 2020 4,729,002
1,412,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty
4 3/4s, 2004 1,235,500
-------------
5,964,502
Metals (0.4%)
-------------------------------------------------------------------------------------------------------------------
2,741,000 Inco, Ltd. deb. 5 3/4s, 2004 (Canada) 2,521,720
2,148,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 1,920,222
-------------
4,441,942
Oil & Gas (1.2%)
-------------------------------------------------------------------------------------------------------------------
4,800,000 Anadarko Petroleum Corp. cv. sub. notes zero %, 2020 3,852,000
7,200,000 Devon Energy Corp. cv. deb. 4.9s, 2008 6,723,000
1,500,000 Southern Mineral Corp. cv. deb. 6 7/8s, 2007 (In default) (NON) 517,500
3,388,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 3,743,740
-------------
14,836,240
Paper & Forest Products (0.8%)
-------------------------------------------------------------------------------------------------------------------
6,600,000 Mail-Well, Inc. cv. sub. notes 5s, 2002 4,991,250
3,000,000 Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 2,497,500
3,000,000 Thermo Fibertek, Inc. 144A cv. company guaranty 4 1/2s, 2004 2,625,000
-------------
10,113,750
Pharmaceuticals (2.5%)
-------------------------------------------------------------------------------------------------------------------
2,013,000 Alpharma, Inc. cv. sub. notes 5 3/4s, 2005 2,770,391
10,500,000 Alza Corp. cv. sub. LYON zero %, 2014 10,972,500
3,800,000 Atrix Labs, Inc. cv. sub. notes 7s, 2004 3,781,000
580,000 C.V. Therapeutics 144A cv. sub. notes 4 3/4s, 2007 787,350
3,500,000 Duramed Pharmaceuticals, Inc. cv. sub. notes 3 1/2s, 2002 3,381,875
772,000 Inhale Therapeutic Systems, Inc. 144A cv. sub. notes 5s, 2007 1,089,485
1,000,000 Inhale Therapeutic Systems, Inc. 144A cv. sub. notes 3 1/2s, 2007 1,120,000
2,970,000 IVAX Corp. 144A cv. sr. sub. notes 5 1/2s, 2007 4,117,163
3,000,000 Teva Pharmaceutical Corp. LLC 144A cv. sr. notes 1 1/2s, 2005 2,985,000
-------------
31,004,764
Photography/Imaging (0.5%)
-------------------------------------------------------------------------------------------------------------------
14,601,000 Xerox Corp. cv. sub. deb. 0.57s, 2018 5,913,405
Real Estate (0.3%)
-------------------------------------------------------------------------------------------------------------------
593,000 EOP Operating LP 144A cv. sr. notes 7 1/4s, 2008 592,259
3,150,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 2,819,250
-------------
3,411,509
Restaurants (--%)
-------------------------------------------------------------------------------------------------------------------
4,666,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 (In default) (NON) 23,330
Retail (1.2%)
-------------------------------------------------------------------------------------------------------------------
12,298,000 Amazon.com, Inc. cv. sub. deb. 4 3/4s, 2009 7,732,368
1,959,000 Ann Taylor Stores Corp. cv. company guaranty 0.55s, 2019 952,564
1,003,000 Ann Taylor Stores Corp. 144A cv. company guaranty 0.55s, 2019 487,709
2,000,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,412,500
1,000,000 Costco Cos, Inc. cv. sub. notes zero %, 2017 883,750
10,862,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 2,742,655
790,000 Sunglass Hut International, Inc. cv. sub. notes 5 1/4s, 2003 608,300
-------------
14,819,846
Semiconductor (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,520,000 Advanced Energy Industries, Inc. cv. sub. notes 5 1/4s, 2006 1,098,200
524,000 Conexant Systems, Inc. cv. sub. notes 4s, 2007 320,950
1,108,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,114,925
-------------
2,534,075
Software (5.4%)
-------------------------------------------------------------------------------------------------------------------
989,000 Akamai Technologies, Inc. 144A cv. sub. notes 5 1/2s, 2007 696,009
4,000,000 Arbor Software Corp. cv. sub. notes 4 1/2s, 2005 2,880,000
1,400,000 BEA Systems, Inc. cv. sub. notes 4s, 2006 3,109,750
2,500,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2006 5,553,125
4,000,000 Citrix Systems, Inc. cv. sub. deb. zero %, 2019 1,590,000
2,400,000 I2 Technologies, Inc. cv. sub. notes 5 1/4s, 2006 5,643,000
500,000 Manugistics Group, Inc. 144A cv. sub. notes 5s, 2007 727,500
2,800,000 Mercury Interactive Corp. 144A cv. bonds 4 3/4s, 2007 3,339,000
19,100,000 Network Associates, Inc. cv. sub deb. zero %, 2018 7,162,500
1,300,000 Nvidia Corp. cv. sub. notes 4 3/4s, 2007 1,196,000
4,021,000 Rational Software Corp. 144A cv. sub. notes 5s, 2007 7,348,378
1,738,000 Siebel Systems, Inc. cv. sub. notes 5 1/2s, 2006 7,912,245
4,950,000 Veritas Software Corp. cv. disc. notes 1.856s, 2006 19,527,750
502,000 Wind River Systems, Inc. cv. sub. notes 5s, 2002 648,835
-------------
67,334,092
Technology Services (1.8%)
-------------------------------------------------------------------------------------------------------------------
16,500,000 America Online, Inc. cv. sub. notes zero %, 2019 8,373,750
2,249,000 CheckFree Holdings Corp. 144A cv. sub. notes 6 1/2s, 2006 2,133,739
628,000 CNET Networks, Inc. cv. sub. notes 5s, 2006 631,140
941,000 EarthWeb, Inc. cv. sub. notes 7s, 2005 454,033
4,004,000 Internet Capital Group, Inc. cv. sub. notes 5 1/2s, 2004 1,931,930
3,190,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 1,610,950
855,000 Safeguard Scientifics, Inc. cv. sub. notes 5s, 2006 748,125
2,975,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 5s, 2006 2,603,125
1,500,000 Silicon Graphics Corp. cv. sr. notes 5 1/4s, 2004 941,250
2,600,000 Telxon Corp. cv. sub. notes 5 3/4s, 2003 2,538,250
-------------
21,966,292
Telecommunications (5.1%)
-------------------------------------------------------------------------------------------------------------------
1,387,000 Aether Systems, Inc. cv. sub. notes 6s, 2005 953,563
5,000,000 At Home Corp. 144A cv. sub. notes 4 3/4s, 2006 3,093,750
2,100,000 Cellstar Corp. cv. sub notes 5s, 2002 661,500
3,426,000 Corecomm, Ltd. cv. sub. notes 6s, 2006 1,391,813
7,168,000 Covad Communications Group, Inc. 144A cv. sr. notes 6s, 2005 3,512,320
2,824,000 Level 3 Communication, Inc. cv. sub. deb. 6s, 2010 1,704,990
2,700,000 Liberty Media Group cv. mortgage-backed 4s, 2029 2,760,750
5,300,000 Liberty Media Group 144A cv. deb. 4s, 2029 5,419,250
35,710,000 Liberty Media Group 144A cv. deb. 3 3/4s, 2030 28,925,100
1,000,000 MIDCOM Communications, Inc. cv. sub. notes 8 1/4s,
2003 (In default) (NON) 20,000
3,775,000 MIDCOM Communications, Inc. 144A cv. sub. notes 8 1/4s,
2003 (In default) (NON) 75,500
11,728,000 Nextel Communications, Inc. cv. sr. notes 5 1/4s, 2010 9,851,520
3,000,000 Nextel Communications, Inc. cv. sr. notes 4 3/4s, 2007 5,141,330
950,000 Pinnacle Holdings, Inc. 144A cv. sub. notes 5 1/2s, 2007 533,188
630,000 Primus Telecommunications Group, Inc. 144A cv. sub. deb.
5 3/4s, 2007 166,950
-------------
64,211,524
Textiles (--%)
-------------------------------------------------------------------------------------------------------------------
1,002,000 Dixie Group, Inc. (The) cv. deb. 7s, 2012 568,635
Tobacco (0.4%)
-------------------------------------------------------------------------------------------------------------------
7,485,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 4,444,219
Transaction Processing (0.6%)
-------------------------------------------------------------------------------------------------------------------
8,230,000 National Data Corp. cv. sub. notes 5s, 2003 7,715,625
Waste Management (1.1%)
-------------------------------------------------------------------------------------------------------------------
2,967,000 OHM Corp. cv. sub. deb. 8s, 2006 2,492,280
12,000,000 Waste Management, Inc. cv. sub. notes 4s, 2002 11,175,000
-------------
13,667,280
-------------
Total Convertible Bonds and Notes
(cost 640,295,552) $ 605,697,239
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (29.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (0.1%)
-------------------------------------------------------------------------------------------------------------------
20,954 Coltech Capital Trust 2.625 cv. pfd. $ 987,457
Automotive (0.4%)
-------------------------------------------------------------------------------------------------------------------
41,656 Federal-Mogul Financial Trust 3.50 cum. cv. pfd. 182,245
155,600 Tower Automotive Capital Trust 144A 3.375 cv. pfd. 4,240,100
-------------
4,422,345
Banking (0.9%)
-------------------------------------------------------------------------------------------------------------------
224,472 CNB Capital Trust I 1.50 cum. cv. pfd. 7,800,402
20,286 Sovereign Bancorp, Inc. 7.50 cv. pfd. 1,057,408
69,350 Union Planters Corp. Ser. E, 2.00 cum. cv. pfd. 2,912,700
-------------
11,770,510
Biotechnology (0.8%)
-------------------------------------------------------------------------------------------------------------------
20,000 Alkermes, Inc. 3.25 cv. pfd. 2,517,500
50,814 Biovail Corp. 3.375 cv. pfd. 3,868,216
23,068 Cephalon, Inc. 3.63 cv. pfd. 3,471,734
-------------
9,857,450
Broadcasting (1.0%)
-------------------------------------------------------------------------------------------------------------------
31,000 Cox Communications, Inc. 3.50 cv. pfd. 1,829,000
46,639 Emmis Broadcasting Corp. Ser. A, 3.13 cv. pfd. 1,947,178
16,801 Pegasus Communications Corp. Ser. C, 6.50 cum. cv. pfd. 1,175,020
1,110 Radio One, Inc. 144A 6.50 cum. cv. pfd. 765,900
184,500 Sinclair Broadcast Group, Inc. 3.00 cv. pfd. 5,212,125
19,975 XM Satellite Radio Holdings Ser. B, 8.25 cv. pfd. 978,775
-------------
11,907,998
Cable Television (2.2%)
-------------------------------------------------------------------------------------------------------------------
25,000 Adelphia Communications Corp. Ser. D, 5.50 cv. pfd. 2,815,625
585,000 MediaOne Group, Inc. 7.00 cv. pfd. 24,423,750
-------------
27,239,375
Commercial and Consumer Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
53,600 Carriage Services, Inc. 144A 3.50 cv. pfd. 1,179,200
Consumer Goods (0.3%)
-------------------------------------------------------------------------------------------------------------------
51,333 Estee Lauder Aces TR II 5.41 cv. pfd. 4,369,722
Electric Utilities (5.7%)
-------------------------------------------------------------------------------------------------------------------
91,200 AES Trust III 3.38 cv. pfd. 7,911,600
69,100 Alliant Energy 144A 7.25 cv. pfd. 4,409,271
87,400 Calpine Capital Trust II 5.50 cum. cv. pfd 7,297,900
70,946 CMS Energy Corp. 8.75 cum. cv. pfd. 2,243,667
174,500 Dominion Resources, Inc. 9.50 cv. pfd. 10,121,000
74,991 NiSource, Inc. 3.875 cv. pfd. 3,562,073
360,500 Reliant Energy, Inc. 2.00 cv. pfd. 26,969,906
191,400 TXU Corporation 4.625 cum. cv. pfd. 8,565,150
-------------
71,080,567
Electronics (0.2%)
-------------------------------------------------------------------------------------------------------------------
45,952 Pioneer Standard Electronics, Inc. 3.375 cv. pfd. 2,314,832
10,300 Titan Corp. 144A 5.75 cv. pfd. 288,400
-------------
2,603,232
Energy (1.0%)
-------------------------------------------------------------------------------------------------------------------
224,971 Evi, Inc. 2.50 cum. cv. pfd. 9,729,996
27,483 Hanover Compressor Capital Trust 144A 7.25 cv. pfd. 2,693,334
-------------
12,423,330
Engineering & Construction (0.2%)
-------------------------------------------------------------------------------------------------------------------
113,000 TXI Capital Trust I 2.75 cv. pfd. 2,782,625
Entertainment (0.2%)
-------------------------------------------------------------------------------------------------------------------
77,375 Six Flags, Inc. 7.50% pfd. 2,543,703
Food (0.2%)
-------------------------------------------------------------------------------------------------------------------
75,326 Suiza Capital Trust II 2.75 cv. pfd. 2,824,725
Health Care Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
45,000 Caremark RX Capital Trust I 144A 3.50 cv. pfd. 4,005,000
Household Furniture and Appliances (0.3%)
-------------------------------------------------------------------------------------------------------------------
130,192 Metromedia International Group, Inc. 3.625 cum. cv. pfd. 2,799,128
48,525 Newell Financial Trust I 2.625 cum. cv. pfd. 1,540,669
-------------
4,339,797
Insurance (1.7%)
-------------------------------------------------------------------------------------------------------------------
280,096 Conseco Financing Trust IV. 3.50 cum. cv. pfd. 2,573,382
80,000 Lincoln National Corp. 7.75 cv. pfd. 1,980,000
154,500 Lincoln National Corp. 1.85 cum. cv. pfd. 3,534,188
100,900 Metlife Capital Trust I 4.00 cv. pfd. 8,803,525
211,885 Philadelphia Consolidated Holding Corp. 0.534 cv. pfd. 2,118,850
53,780 Protective Life Corp. 3.25 cum. cv. pfd. 2,144,478
-------------
21,154,423
Media (0.1%)
-------------------------------------------------------------------------------------------------------------------
30,494 Seagram Co., Ltd. 3.76 cv. pfd. (Canada) 1,585,688
Medical Technology (0.6%)
-------------------------------------------------------------------------------------------------------------------
189,604 Owens & Minor Trust I Ser. A, 2.69 cum. cv. pfd. 7,607,861
Metals (0.3%)
-------------------------------------------------------------------------------------------------------------------
105,000 Freeport-McMoRan Copper & Gold Co., Inc. 1.75 cv. pfd. 1,128,750
70,000 Kinam Gold, Inc. Ser. B, 3.75 cum. cv. pfd. 516,250
51,000 USX Capital Trust I 3.375 cum. cv. pfd. 1,708,500
-------------
3,353,500
Natural Gas Utilities (1.3%)
-------------------------------------------------------------------------------------------------------------------
198,800 El Paso Energy Capital Trust I 2.375 cv. pfd. 15,257,900
50,478 Semco Capital Trust II 11.00% cum. cv. pfd. 599,426
-------------
15,857,326
Oil & Gas (1.8%)
-------------------------------------------------------------------------------------------------------------------
123,500 Apache Corp. 2.015 cv. pfd. 5,835,375
75,000 Coastal Corp. 1.656 cv. pfd. 3,131,250
105,600 Kerr-McGee Corp. 1.825 cv. pfd. 4,844,400
43,546 Neuvo Energy Corp. Ser. A, 2.875 cv. pfd. 1,126,753
16,200 Newfield Exploration Co. 3.25 cv. pfd. 947,700
40,300 Pogo Producing Co. Trust I Ser. A, 3.25 cv. pfd. 2,387,775
80,000 Tosco Financing Trust 2.875 cv. pfd. 3,850,000
-------------
22,123,253
Paper & Forest Products (1.3%)
-------------------------------------------------------------------------------------------------------------------
96,936 International Paper Co. 2.625 cv. pfd. 4,131,897
61,122 Owens-Illinois, Inc. 2.375 cv.pfd. 764,025
253,437 Sealed Air Corp. Ser. A, 2.00 cv.pfd. 11,816,500
-------------
16,712,422
Pharmaceuticals (0.6%)
-------------------------------------------------------------------------------------------------------------------
170,000 Monsanto Co. 2.60 cv. pfd. 8,096,250
Power Producers (0.5%)
-------------------------------------------------------------------------------------------------------------------
105,535 SEI Trust I 3.125 cum. cv. pfd. 6,371,676
Publishing (1.7%)
-------------------------------------------------------------------------------------------------------------------
159,000 Readers Digest 0.453 cv. pfd. 5,048,250
124,000 Tribune Co. 2.00 cv. pfd. 14,151,500
107,113 Tribune Co. 1.75 cv. pfd. 1,566,528
-------------
20,766,278
Railroads (0.7%)
-------------------------------------------------------------------------------------------------------------------
86,387 Canadian National Railway Co. 2.625 cv. pfd. (Canada) 4,103,383
105,100 Union Pacific Capital Trust 3.125 cum. cv. pfd. 4,729,500
-------------
8,832,883
Real Estate (1.1%)
-------------------------------------------------------------------------------------------------------------------
65,487 Archstone Communities Trust Ser. A, 1.75 cum. cv. pfd. 2,062,841
287,336 Equity Residential Properties Trust Ser. E, 1.75 cv. pfd. 7,506,653
74,490 Tanger Factory Outlet Centers Ser. A, 1.802 cum. cv. pfd. 1,499,111
64,617 Vornado Realty Trust Ser. A, 3.25 cum. cv. pfd. 3,150,079
-------------
14,218,684
Restaurants (0.1%)
-------------------------------------------------------------------------------------------------------------------
25,148 Wendy's Financing Ser. A, 2.50 cv. pfd. 1,225,965
Retail (0.8%)
-------------------------------------------------------------------------------------------------------------------
93,900 CVS Auto Common Exchange 6.00% cv. pfd. 8,321,888
69,244 K mart Financing I 3.875 cum. cv. pfd. 2,077,320
-------------
10,399,208
Shipping (0.2%)
-------------------------------------------------------------------------------------------------------------------
57,900 CNF Trust I Ser. A, 2.50 cum. cv. pfd. 2,410,088
Software (0.2%)
-------------------------------------------------------------------------------------------------------------------
35,000 Amdocs 6.75% cv. pfd. 1,942,500
Technology Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,200 NBC Internet, Inc. 7.25 cv. pfd. 57,200
50,000 PSINet, Inc. 144A 3.50 cv. pfd. 750,000
115,000 Vanstar Financial Trust Corp. 3.375 cv. pfd. (In default) (NON) 115,000
-------------
922,200
Telecommunications (2.9%)
-------------------------------------------------------------------------------------------------------------------
174,800 DECS Trust VI 6.25% cv. pfd. 6,118,000
50,000 Global Crossing 144A 7.00% cv. pfd. 7,956,500
40,200 Global Crossing, Ltd. 6.75% cum cv. pfd (Bermuda) 8,220,900
5,200 Mpower Communications Corp. 3.625 cum. cv. pfd. 68,250
82,300 Qwest Trends Trust 144A 5.75% cv. pfd. 6,594,288
137,000 Williams Communications Group, Inc. 144A 3.375 cv. pfd. 5,497,232
37,707 WinStar Communications, Inc. 3.50 cv. pfd. 1,409,299
-------------
35,864,469
Textiles (--%)
-------------------------------------------------------------------------------------------------------------------
45,400 Designer Finance 3.00 cv. cum. pfd. 181,600
-------------
Total Convertible Preferred Stocks (cost $410,424,839) $ 373,963,310
<CAPTION>
COMMON STOCKS (20.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Banking (3.0%)
-------------------------------------------------------------------------------------------------------------------
89,500 Bank of America Corp. $ 4,301,594
45,510 BB&T Corp. 1,450,631
151,300 Comerica, Inc. 9,125,281
369,800 Firstar Corp. 7,280,438
89,640 M & T Bank Corp. 4,499,928
31,063 Mellon Financial Corp. 1,498,790
224,200 Washington Mutual, Inc. 9,864,800
-------------
38,021,462
Broadcasting (--%)
-------------------------------------------------------------------------------------------------------------------
3,341 Pegasus Communications Corp. (NON) 118,814
1,192 XM Satellite Radio Holdings, Inc. Class A (NON) 34,568
-------------
153,382
Cable Television (0.4%)
-------------------------------------------------------------------------------------------------------------------
306,900 AT&T Corp. - Liberty Media Group Class A (NON) 5,524,200
Commercial and Consumer Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
134,000 Cendant Corp. (NON) 1,608,000
Communications Equipment (0.4%)
-------------------------------------------------------------------------------------------------------------------
16,556 Gilat Satellite Networks, Ltd. (Israel) (NON) 847,460
70,100 QUALCOMM, Inc. (NON) 4,564,181
-------------
5,411,641
Consumer Goods (0.2%)
-------------------------------------------------------------------------------------------------------------------
50,000 Clorox Co. 2,231,250
Electric Utilities (2.1%)
-------------------------------------------------------------------------------------------------------------------
136,576 CiNergy Corp. 4,182,640
127,500 CP&L, Inc. 5,139,844
234,600 Entergy Corp. 8,988,113
100,000 NiSource, Inc. 2,493,750
133,200 Reliant Energy, Inc. 5,502,825
-------------
26,307,172
Electronics (0.4%)
-------------------------------------------------------------------------------------------------------------------
111,070 Cirrus Logic, Inc. (NON) 4,789,894
Energy (2.2%)
-------------------------------------------------------------------------------------------------------------------
330,613 Baker Hughes, Inc. 11,364,822
304,200 Global Marine, Inc. (NON) 8,061,300
17,400 Halliburton Co. 644,888
25,157 Pride International, Inc. (NON) 636,787
137,400 Transocean Sedco Forex, Inc. 7,282,200
-------------
27,989,997
Entertainment (0.5%)
-------------------------------------------------------------------------------------------------------------------
100,600 Viacom, Inc. Class B (NON) 5,721,625
Financial (0.7%)
-------------------------------------------------------------------------------------------------------------------
120,800 Fannie Mae 9,301,600
Gaming & Lottery (--%)
-------------------------------------------------------------------------------------------------------------------
29,994 Station Casinos, Inc. (NON) 483,653
Health Care Services (1.3%)
-------------------------------------------------------------------------------------------------------------------
71,500 CIGNA Corp. 8,719,425
201,300 HCA -The Healthcare Corp. 8,039,419
-------------
16,758,844
Homebuilding (--%)
-------------------------------------------------------------------------------------------------------------------
4 Beazer Homes USA, Inc. (NON) 112
Insurance (2.5%)
-------------------------------------------------------------------------------------------------------------------
140,000 Ace, Ltd. 5,495,000
73,679 Allstate Corp. 2,965,580
119,428 American General Corp. 9,613,954
228,500 Metlife, Inc. 6,312,313
79,050 St. Paul Cos., Inc. 4,051,313
35,267 The Chubb Corp. 2,977,857
-------------
31,416,017
Media (--%)
-------------------------------------------------------------------------------------------------------------------
136,618 Golden Books Family Entertainment, Inc. (NON) 42,693
Natural Gas Utilities (0.6%)
-------------------------------------------------------------------------------------------------------------------
95,400 Enron Corp. 7,828,763
Oil & Gas (1.4%)
-------------------------------------------------------------------------------------------------------------------
70,000 Conoco, Inc. Class B 1,903,125
40,178 Devon Energy Corp. 2,024,971
66,701 Exxon Mobil Corp. 5,972,377
127,200 Royal Dutch Petroleum Co. PLC ADR NV (Netherlands) 7,552,500
-------------
17,452,973
Paper & Forest Products (0.1%)
-------------------------------------------------------------------------------------------------------------------
31,961 Bowater, Inc. 1,729,889
Pharmaceuticals (1.7%)
-------------------------------------------------------------------------------------------------------------------
51,500 Alza Corp. (NON) 4,168,281
72,285 Bristol-Myers Squibb Co. 4,404,867
59,000 Johnson & Johnson 5,435,252
40,421 Merck & Co., Inc. 3,635,364
62,241 Schering-Plough Corp. 3,217,082
-------------
20,860,846
Real Estate (0.4%)
-------------------------------------------------------------------------------------------------------------------
149,200 Equity Office Properties Trust (R) 4,494,650
Software (1.2%)
-------------------------------------------------------------------------------------------------------------------
211,500 Computer Associates International, Inc. 6,741,563
115,100 Microsoft Corp. (NON) 7,927,513
-------------
14,669,076
Technology Services (1.3%)
-------------------------------------------------------------------------------------------------------------------
206,900 America Online, Inc. (NON) 10,433,967
142,000 Convergys Corp. (NON) 6,185,875
824 U.S. Interactive, Inc. (NON) 824
-------------
16,620,666
Telecommunications (--%)
-------------------------------------------------------------------------------------------------------------------
5,872 Intermedia Communications, Inc. (NON) 129,918
171 Mpower Communications Corp. (NON) 1,099
6,234 WinStar Communications, Inc. (NON) 121,563
--------------
252,580
--------------
Total Common Stocks (cost $244,345,872) $ 259,670,985
<CAPTION>
PREFERRED STOCKS (--%) (a) (cost $9,742)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
13,124 Trikon Technologies, Inc. Ser. H, 8.125 pfd. (PIK) $ 111,554
<CAPTION>
SHORT-TERM INVESTMENTS (2.0%) (a) (cost $24,962,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 24,962,000 Interest in $800,000,000 joint repurchase agreement dated
October 31, 2000 with S.B.C. Warburg, Inc. due
November 1, 2000 with respect to various U.S. Government
obligations -- maturity value of $24,966,583 for an effective
yield of 6.61% $ 24,962,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,320,038,005) (b) $1,264,405,088
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,249,728,672.
(b) The aggregate identified cost on a tax basis is $1,335,907,186
resulting in gross unrealized appreciation and depreciation of
$97,280,724 and $168,782,822, respectively, or net unrealized
depreciation of $71,502,098.
(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.
(R) Real Estate Investment Trust.
ADR after the name of a foreign holding stands for American
Depositary 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
October 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,320,038,005) (Note 1) $1,264,405,088
-------------------------------------------------------------------------------------------
Dividends and interest receivable 7,249,299
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 833,164
-------------------------------------------------------------------------------------------
Receivable for securities sold 34,803,325
-------------------------------------------------------------------------------------------
Receivable for variation margin 737
-------------------------------------------------------------------------------------------
Total assets 1,307,291,613
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 4,533,151
-------------------------------------------------------------------------------------------
Payable for securities purchased 39,064,089
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 11,298,835
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,895,170
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 206,378
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 53,987
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,530
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 416,093
-------------------------------------------------------------------------------------------
Other accrued expenses 89,708
-------------------------------------------------------------------------------------------
Total liabilities 57,562,941
-------------------------------------------------------------------------------------------
Net assets $1,249,728,672
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,240,071,713
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,248,835
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 61,041,041
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (55,632,917)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,249,728,672
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($933,703,152 divided by 50,145,519 shares) $18.62
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $18.62)* $19.76
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($235,896,806 divided by 12,838,280 shares)** $18.37
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($5,544,700 divided by 298,974 shares)** $18.55
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($15,369,690 divided by 831,020 shares) $18.50
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of 18.50)* $19.17
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($59,214,324 divided by 3,178,542 shares) $18.63
-------------------------------------------------------------------------------------------
* 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
Year ended October 31, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest $38,578,617
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,138) 26,625,978
-------------------------------------------------------------------------------------------
Total investment income 65,204,595
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,794,617
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,343,688
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 61,160
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,677
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,508,944
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,721,264
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 29,719
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 124,842
-------------------------------------------------------------------------------------------
Other 520,228
-------------------------------------------------------------------------------------------
Total expenses 15,121,139
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (345,251)
-------------------------------------------------------------------------------------------
Net expenses 14,775,888
-------------------------------------------------------------------------------------------
Net investment income 50,428,707
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 75,623,068
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 109,457
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the year (55,064,789)
-------------------------------------------------------------------------------------------
Net gain on investments 20,667,736
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $71,096,443
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended October 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 50,428,707 $ 49,711,842
--------------------------------------------------------------------------------------------------
Net realized gain on investments 75,732,525 126,479,771
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (55,064,789) 33,608,926
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 71,096,443 209,800,539
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (38,466,746) (38,053,728)
--------------------------------------------------------------------------------------------------
Class B (8,623,570) (9,199,217)
--------------------------------------------------------------------------------------------------
Class C (90,474) (2,859)
--------------------------------------------------------------------------------------------------
Class M (563,913) (560,639)
--------------------------------------------------------------------------------------------------
Class Y (2,592,872) (1,895,398)
--------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (2,750,433)
--------------------------------------------------------------------------------------------------
Class B -- (664,897)
--------------------------------------------------------------------------------------------------
Class C -- (207)
--------------------------------------------------------------------------------------------------
Class M -- (40,522)
--------------------------------------------------------------------------------------------------
Class Y -- (136,995)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (92,671,101) (103,539,492)
--------------------------------------------------------------------------------------------------
Class B (26,708,331) (29,085,699)
--------------------------------------------------------------------------------------------------
Class C (118,538) --
--------------------------------------------------------------------------------------------------
Class M (1,567,379) (1,803,589)
--------------------------------------------------------------------------------------------------
Class Y (5,932,817) --
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 1,570,846 (32,095,525)
--------------------------------------------------------------------------------------------------
Total decrease in net assets (104,668,452) (10,028,661)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 1,354,397,124 1,364,425,785
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $4,248,835 and $2,297,902, respectively) $1,249,728,672 $1,354,397,124
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.26 $20.04 $23.22 $21.24 $19.42
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (c) .76 .75 .76 .78 .81
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .30 2.30 (1.02) 3.70 2.70
-----------------------------------------------------------------------------------------------------
Total from
investment operations 1.06 3.05 (.26) 4.48 3.51
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.77) (.75) (.76) (.87) (.98)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) (.03) (.06) --
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.93) (2.02) (2.13) (1.57) (.71)
-----------------------------------------------------------------------------------------------------
Total distributions (2.70) (2.83) (2.92) (2.50) (1.69)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.62 $20.26 $20.04 $23.22 $21.24
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 5.16 16.42 (1.37) 22.86 18.99
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $933,703 $982,956 $1,056,693 $1,168,470 $898,486
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .97 .98 .97 1.03 1.06
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.86 3.73 3.50 3.56 3.99
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 176.66 54.74 92.76 70.74 61.43
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service
arrangements (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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.02 $19.83 $23.01 $21.09 $19.30
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (c) .61 .60 .59 .63 .66
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .29 2.27 (1.01) 3.64 2.68
-----------------------------------------------------------------------------------------------------
Total from
investment operations .90 2.87 (.42) 4.27 3.34
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.62) (.60) (.61) (.73) (.84)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) (.02) (.05) --
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.93) (2.02) (2.13) (1.57) (.71)
-----------------------------------------------------------------------------------------------------
Total distributions (2.55) (2.68) (2.76) (2.35) (1.55)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.37 $20.02 $19.83 $23.01 $21.09
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 4.38 15.58 (2.11) 21.89 18.14
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $235,897 $291,017 $289,652 $257,163 $146,127
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.72 1.73 1.72 1.78 1.81
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.11 2.99 2.74 2.78 3.26
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 176.66 54.74 92.76 70.74 61.43
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service
arrangements (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 C
--------------------------------------------------------------
For the period
Per-share Year ended July 26, 1999+
operating performance October 31 to October 31
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $20.23 $20.85
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (c) .61 .20
--------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .31 (.59)
--------------------------------------------------------------
Total from
investment operations .92 (.39)
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.67) (.20)
--------------------------------------------------------------
In excess of net
investment income -- (.03)
--------------------------------------------------------------
From net realized gain
on investments (1.93) --
--------------------------------------------------------------
Total distributions (2.60) (.23)
--------------------------------------------------------------
Net asset value,
end of period $18.55 $20.23
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(a) 4.45 (1.87)*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $5,545 $661
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.72 .47*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.17 1.12*
--------------------------------------------------------------
Portfolio turnover (%) 176.66 54.74
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service
arrangements (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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.13 $19.92 $23.08 $21.14 $19.37
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (c) .66 .65 .65 .67 .73
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .31 2.28 (1.00) 3.67 2.65
-----------------------------------------------------------------------------------------------------
Total from
investment operations .97 2.93 (.35) 4.34 3.38
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.67) (.65) (.66) (.78) (.90)
-----------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.05) (.02) (.05) --
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.93) (2.02) (2.13) (1.57) (.71)
-----------------------------------------------------------------------------------------------------
Total distributions (2.60) (2.72) (2.81) (2.40) (1.61)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.50 $20.13 $19.92 $23.08 $21.14
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 4.73 15.87 (1.75) 22.24 18.30
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $15,370 $16,338 $18,081 $14,719 $7,128
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.47 1.48 1.47 1.53 1.54
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.36 3.23 2.99 3.04 3.55
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 176.66 54.74 92.76 70.74 61.43
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service
arrangements (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
Per-share Year ended Dec. 30, 1998+
operating performance October 31 to October 31
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $20.26 $19.32
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (c) .81 .72
--------------------------------------------------------------
Net realized and unrealized
gain on investments .31 .98
--------------------------------------------------------------
Total from
investment operations 1.12 1.70
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.82) (.72)
--------------------------------------------------------------
In excess of net
investment income -- (.04)
--------------------------------------------------------------
From net realized gain
on investments (1.93) --
--------------------------------------------------------------
Total distributions (2.75) (.76)
--------------------------------------------------------------
Net asset value,
end of period $18.63 $20.26
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(a) 5.49 8.87*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $59,214 $63,425
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .72 .61*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.11 3.43*
--------------------------------------------------------------
Portfolio turnover (%) 176.66 54.74
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service
arrangements (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
October 31, 2000
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 C, 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 C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front-end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
but lower than class B and class C shares. Class Y shares, which are
sold at net asset value, are generally subject to the same expenses as
class A, class B, class C 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 that 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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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 sales price on its principal exchange, 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.
Other investments, including restricted securities, are stated at fair
value following procedures approved by the Trustees. Market quotations are
not considered to be readily available for certain debt obligations;
such investments are stated at fair value on the basis of valuations
furnished by a pricing service or dealers, approved by the Trustees,
which determine valuations for normal institutional-size trading units of
such securities using methods based on market transactions for comparable
securities and variable relationships between securities that are generally
recognized by institutional traders.
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). Gains or losses on securities sold are determined
on the identified cost basis. 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. Non-cash dividends, if any,
are recorded at the fair market value of the securities received.
Discounts on zero coupon bonds, original issue discount bonds, and
payment in kind bonds are accreted according to the yield-to-maturity
basis.
E) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
F) 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 year ended
ended October 31, 2000, the fund had no borrowings against the line of
credit
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences include temporary and permanent
differences of losses on wash sale transactions, nontaxable dividends,
defaulted bond interest, market discount, and book accretion/amortization
adjustments. 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. For the year ended October 31,
2000, the fund reclassified $1,859,801 to decrease distributions in excess
of net investment income and $1,859,801 to decrease accumulated net realized
gains. The calculation of net investment income per share in the financial
highlights table excludes these adjustments.
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.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At October 31, 2000, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
For the year ended October 31, 2000, fund expenses were reduced by
$345,251 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 $1,508
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a 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, class C 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 Retail Management, Inc., 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 Retail Management, Inc. at an
annual rate up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets
attributable to class A, class B, class C and class M shares, respectively.
The Trustees have approved payment by the fund at an annual rate of 0.25%,
1.00%, 1.00% and 0.75% of the average net assets attributable to class A,
class B, class C and class M shares, respectively.
For the year ended October 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $198,583 and $4,421
from the sale of class A and class M shares, respectively, and received
$456,193 and $1,215 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended October 31, 2000, Putnam Retail Management,
Inc., acting as underwriter received $41,299 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $2,339,115,498 and $2,433,329,903, respectively. There were
no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended October 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 7,152,407 $ 141,639,579
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,528,472 105,567,078
---------------------------------------------------------------------------
12,680,879 247,206,657
Shares
repurchased (11,057,921) (217,722,604)
---------------------------------------------------------------------------
Net increase 1,622,958 $ 29,484,053
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 3,836,208 $ 77,158,869
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,521,734 125,222,148
---------------------------------------------------------------------------
10,357,942 202,381,017
Shares
repurchased (14,564,168) (293,918,278)
---------------------------------------------------------------------------
Net decrease (4,206,226) $ (91,537,261)
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 3,203,179 $ 62,683,312
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,428,194 26,917,469
---------------------------------------------------------------------------
4,631,373 89,600,781
Shares
repurchased (6,331,558) (123,771,531)
---------------------------------------------------------------------------
Net decrease (1,700,185) $ (34,170,750)
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 3,061,462 $ 61,415,050
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,624,095 30,838,078
---------------------------------------------------------------------------
4,685,557 92,253,128
Shares
repurchased (4,750,876) (94,893,661)
---------------------------------------------------------------------------
Net decrease (65,319) $ (2,640,533)
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 275,873 $5,387,080
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,780 110,897
---------------------------------------------------------------------------
281,653 5,497,977
Shares
repurchased (15,330) (297,819)
---------------------------------------------------------------------------
Net increase 266,323 $5,200,158
---------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations) to
October 31, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 32,592 $655,103
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 107 2,145
---------------------------------------------------------------------------
32,699 657,248
Shares
repurchased (48) (995)
---------------------------------------------------------------------------
Net increase 32,651 $656,253
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 163,110 $ 3,224,637
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 90,543 1,717,662
---------------------------------------------------------------------------
253,653 4,942,299
Shares
repurchased (234,303) (4,570,644)
---------------------------------------------------------------------------
Net increase 19,350 $ 371,655
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 147,377 $ 2,983,002
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 108,001 2,059,111
---------------------------------------------------------------------------
255,378 5,042,113
Shares
repurchased (351,215) (7,051,566)
---------------------------------------------------------------------------
Net decrease (95,837) $(2,009,453)
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 342,916 $ 7,420,675
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 475,801 8,525,689
---------------------------------------------------------------------------
818,717 15,946,364
Shares
repurchased (770,533) (15,260,634)
---------------------------------------------------------------------------
Net increase 48,184 $ 685,730
---------------------------------------------------------------------------
For the period December 30, 1998
(commencement of operations) to
October 31, 1999
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 3,363,723 $68,108,976
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 99,843 2,032,393
---------------------------------------------------------------------------
3,463,566 70,141,369
Shares
repurchased (333,208) (6,705,900)
---------------------------------------------------------------------------
Net increase 3,130,358 $63,435,469
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $37,087,866 as capital gain, for its taxable year
ended October 31, 2000.
The fund has designated 25.22% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
KPMG LLP
TRUSTEES
John A. Hill, 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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
Stephen Oristaglio
Vice President
Thomas V. Reilly
Vice President
Edward T. Shadek, Jr.
Vice President
Charles G. Pohl
Vice President and Fund Manager
Dolores S. Bamford
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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
and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN019-66574 008/223/920 12/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
----------------------------------------------------------------------------
Putnam Convertible-Income Growth Trust
Supplement to Annual Report dated 10/31/00
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, C, and M shares, which are discussed more extensively in the annual
report.
ANNUAL RESULTS AT A GLANCE
----------------------------------------------------------------------------
Total return for periods ended 10/31/00
NAV
1 year 5.49%
5 years 77.41
Annual average 12.15
10 years 313.34
Annual average 15.25
Life of fund (since class A inception, 6/29/72)
Annual average 12.05
Share value: NAV
10/31/99 $20.26
10/31/00 $18.63
----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.8181 $1.9289 $2.747
----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. 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, typically are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. 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.
