Putnam
Convertible
Income-Growth
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-00
[SCALE LOGO OMITTED]
FROM THE CHAIRMAN
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
year 2000. In the following report, the fund's managers discuss
performance for the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam
Convertible Income-Growth Trust that I will be signing. After more than
30 years as Chairman of the Trustees and President of the Putnam Funds,
the time has come for me to step aside. As of July 1, 2000, John Hill
will become Chairman. John is currently an independent Trustee and has
served on the board for the past 14 years. In addition, my son, George
Putnam, III, will take on the role of President. I am confident that the
leadership of the funds will be in exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay
in close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 21, 2000
REPORT FROM THE FUND MANAGERS
Charles G. Pohl
Forrest N. Fontana
The convertible market extended its gains into the new millennium,
providing a positive backdrop for the first six months of Putnam
Convertible Income-Growth Trust's new fiscal year. However, rising
interest rates and other factors created strong headwinds in March and
April, particularly for the technology-related issues that have come to
represent a large portion of the convertible market. While the fund's
performance kept pace with the stock market, a somewhat defensive
investment strategy prior to March, when the convertible market was
exceptionally strong, left returns well behind those of its benchmark
convertible index. For more detailed performance information, see pages
6 and 7.
Total return for 6 months ended 4/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------
7.45% 1.25% 7.03% 2.24% 7.09% 6.13% 7.18% 3.43%
----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* TECHNOLOGY TAKES OVER
Compared with a total of more than 5,000 common stocks traded on the
various stock exchanges, the convertible market is relatively small,
containing roughly 600 issues. It is also transitory by nature. The
convertible market tends to be dominated by companies in rapidly growing
industries, but those high-growth sectors can and have changed with the
evolution of the U.S. economy.
During 1999 and the beginning of 2000, the principal issuers of
convertible securities have been companies in the technology and
telecommunications industries. In fact, by the end of 1999, the combined
technology and telecommunications sectors amounted to more than 60% of
the convertible universe, up from 29% in 1998. This mix differs greatly
from the market's composition in the early to mid 1990s, when most
issuers were from the cyclical and consumer services sectors. Concurrent
with the shift to technology has been a change in the life stage of the
issuer, with new issues reflecting younger, relatively untested
companies that were enthusiastically embraced by the market.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 11.9%
Electronics 9.8%
Electric utilities 5.6%
Broadcasting 5.3%
Software 4.2%
Footnote reads:
*Based on net assets as of 4/30/00. Holdings will vary over time.
For much of the period covered by this report, technology-related
convertibles (including the telecommunications sector) were clearly the
place to be, outperforming all other sectors by a wide margin. In the
fourth quarter alone, technology-related convertibles returned more than
56%, according to Merrill Lynch, compared with 12% for consumer services
issues, the second best-performing sector. Among the technology
companies that contributed to the fund's positive performance during the
period were Exodus Communications, Inc., BEA Systems, Inc., and VERITAS
Software Corp. While these holdings, as well as others discussed in this
report, were viewed favorably at the end of the reporting period, all
portfolio holdings are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
In March, technology issues experienced their first major setback in
several months. Rising interest rates, lofty valuations, and the
Microsoft antitrust trial were just some of the factors that combined to
drive the prices of technology convertibles lower. Despite recent
setbacks, technology remained the best-performing convertible sector of
the six-month period, and the fund's slight underweight position in
technology hurt performance relative to our benchmark index.
* STRATEGY CHANGES TO KEEP PACE
Throughout 1999, our decision to underweight technology convertibles was
based on our desire to provide a measure of diversification in the
portfolio. With the convertible market steeped in technology names, we
accomplished this in part by investing in common stocks in a broad mix
of sectors and industries. In particular, the fund owned "value" stocks,
those that we believed were temporarily undervalued and poised for a
rebound. Although these stocks provided diversification, they failed to
keep pace with the torrid performance of convertible securities in 1999.
[GRAPHIC OMITTED: TOP 10 CONVERTIBLE HOLDINGS]
TOP 10 CONVERTIBLE HOLDINGS
AT&T Corp.-Liberty Media Group
Convertible subordinated notes, 33/4%, 2030
Telecommunications
Reliant Energy, Inc.
$2.00 convertible preferred
Electric utilities
MediaOne Group, Inc.
$7.00 convertible preferred
Cable television
Nextel Communications, Inc.
Convertible subordinated notes, 51/4%, 2010
Telecommunications
Sealed Air Corp
$2.00 convertible preferred
Paper and forest products
America Online, Inc.
Convertible subordinated notes 0%, 2019
Technology services
Echostar Communications Corp.
Convertible subordinated notes, 47/8%, 2007
Broadcasting
AES Trust II
$3.38 convertible preferred
Electric utilities
Xerox Corp.
Convertible subordinated notes, 0.057%, 2018
Photography/imaging
Calpine Corp.
$2.875 convertible preferred
Electric utilities
Footnote reads:
These holdings represent 16.6% of the fund's net assets as of 4/30/00.
Portfolio holdings will vary over time.
To remain competitive and keep pace with the changing market, we shifted
the portfolio during the period by reducing the common stock portion
(roughly 30% of net assets at the start of the period) and increasing
exposure to convertible bonds and convertible preferred stocks. To
prevent increasing the fund's risk profile unnecessarily, we sought
issues with attractive yields that could act as a buffer in a down
market. The March/April selloff in technology helped considerably. After
the break in the market, many technology convertibles were trading at
depressed prices and with yields in excess of 10%. New issues added to
the portfolio during this period include Aether Systems, Internet
Capital Group, Redback Networks, and Juniper Networks. As always, when
selecting securities for the fund, we selected what we believe are some
of the best names in the convertible market, companies with little debt,
a lot of cash, and positive cash flows. Our preference for high-quality
names helped the fund in March and April, when many convertible issues
in the technology sector fell nearly in tandem with their underlying
stocks.
Another way we sought to keep the fund's risk profile in check was by
diversifying within the convertible universe. From roughly 150 names at
the start of the period, we increased the fund's convertible holdings to
about 250 at the end of April. Within the group, the fund is weighted
slightly in favor of smaller issuers to provide greater opportunity
along with broader diversification. The fund's expanded list of holdings
also includes an emphasis on energy-related companies that, in our
opinion, have strong fundamentals and are benefiting from higher oil and
gas prices. Holdings include Apache Corporation, an exploration and
production company; Weatherford International, an exploration equipment
maker; and Diamond Offshore Drilling, a specialized deep-sea driller.
"With our more comprehensive participation in the convertible market and
given the buying opportunities afforded by the recent market setbacks,
we believe the fund is well positioned to make the most of the
opportunities that lie ahead."
-- Charles G. Pohl, fund manager
In keeping with our shift in strategy to a greater emphasis on
convertible securities, we are now using the Merrill Lynch All
Convertible Bond Index as the fund's performance benchmark. The Merrill
index is market-value weighted and is a good measure of today's
convertible securities market. Performance comparisons can be found
starting on page 6. We will continue to show the performance of the S&P
500 alongside the Merrill Lynch index for the remainder of the fund's
current fiscal year.
* SECURITY SELECTION IS KEY
After six interest-rate increases by the Federal Reserve Board, the
markets are focusing increasingly on valuations and fundamentals.
Volatility is high at the moment and will likely continue until economic
data point to a slowdown in the economy, which may happen later this
year. In the meantime, the market's ups and downs afford us the
opportunity to find bargains in convertible names we like.
The increased concentration in convertible securities means the fund is
likely to be somewhat more aggressive going forward. That said, we will
continue to diversify the portfolio within the convertible universe with
an emphasis on smaller-cap technology issues and high-quality companies
outside of the rapidly growing technology sector. We also expect to
continue to hold common stocks, although on a tactical basis. With our
more comprehensive participation in the convertible market and given the
buying opportunities afforded by the recent market setbacks, we believe
the fund is well positioned to make the most of the opportunities that
lie ahead.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 4/30/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Convertible Income-Growth Trust is designed for investors seeking
current income and capital appreciation mainly through bonds and
preferred stocks convertible into common stock, with conservation of
capital as a secondary objective.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 4/30/00
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
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 7.45% 1.25% 7.03% 2.24% 7.09% 6.13% 7.18% 3.43%
---------------------------------------------------------------------------------------
1 year 8.28 2.03 7.41 2.70 7.53 6.59 7.73 3.97
---------------------------------------------------------------------------------------
5 years 96.06 84.76 88.85 86.85 88.92 88.92 91.19 84.54
Annual average 14.41 13.06 13.56 13.32 13.57 13.57 13.84 13.04
---------------------------------------------------------------------------------------
10 years 259.77 239.02 233.42 233.42 233.75 233.75 241.89 229.92
Annual average 13.66 12.99 12.80 12.80 12.81 12.81 13.08 12.68
---------------------------------------------------------------------------------------
Life of fund
(Annual average 12.34 12.10 11.31 11.31 11.50 11.50 11.60 11.46
---------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/00
Merrill Lynch
S&P 500 All Convertible Consumer
Index Index price index
-------------------------------------------------------------
6 months 7.19% 23.70% 1.84%
-------------------------------------------------------------
1 year 10.13 31.52 3.01
-------------------------------------------------------------
5 years 208.37 143.86 12.71
Annual average 25.25 19.51 2.42
-------------------------------------------------------------
10 years 458.94 353.20 32.82
Annual average 18.78 16.31 2.88
-------------------------------------------------------------
Life of fund -- -- --
(Annual average) 13.88 --* 5.21
-------------------------------------------------------------
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
(where 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.
*Index did not exist at fund inception.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/00
Class A Class B Class C Class M
----------------------------------------------------------------------------
Distributions (number) 2 2 2 2
----------------------------------------------------------------------------
Income $0.430 $0.353 $0.390 $0.380
----------------------------------------------------------------------------
Capital gains
Long-term 0.668 0.668 0.668 0.668
----------------------------------------------------------------------------
Short-term 1.168 1.168 1.168 1.168
----------------------------------------------------------------------------
Total $2.266 $2.189 $2.226 $2.216
----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
----------------------------------------------------------------------------
10/31/99 $20.26 $21.50 $20.02 $20.23 $20.13 $20.86
----------------------------------------------------------------------------
4/30/00 19.45 20.64 19.19 19.39 19.31 20.01
----------------------------------------------------------------------------
Current return (end of period)
----------------------------------------------------------------------------
Current dividend rate1 4.42% 4.17% 3.69% 4.00% 3.94% 3.80%
----------------------------------------------------------------------------
Current 30-day
SEC yield2 3.67 3.45 2.92 2.93 3.17 3.06
----------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (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
------------------------------------------------------------------------------
6 months 16.65% 9.94% 16.20% 11.20% 16.28% 15.28% 16.36% 12.28%
------------------------------------------------------------------------------
1 year 20.63 13.68 19.71 14.71 19.80 18.80 19.99 15.80
------------------------------------------------------------------------------
5 years 110.59 98.43 102.88 100.88 102.92 102.92 105.43 98.26
Annual average 16.06 14.69 15.20 14.97 15.20 15.20 15.49 14.67
------------------------------------------------------------------------------
10 years 269.51 248.28 242.51 242.51 242.74 242.74 251.09 238.89
Annual average 13.96 13.29 13.10 13.10 13.11 13.11 13.38 12.98
------------------------------------------------------------------------------
Life of fund
Annual average 12.59 12.35 11.56 11.56 11.75 11.75 11.85 11.70
------------------------------------------------------------------------------
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 class 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.
WELCOME TO WWW.PUTNAMINV.COM
Now you can use your PC to get up-to-date information about your funds,
learn more about investing and retirement planning, and access market
news and economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
Putnam's Capital Markets outlook, search for a particular fund by name
or objective, use our glossary to decode investment terms . . . and much
more.
The site can be accessed through any of the major online services
(America Online, CompuServe, Prodigy) that offer web access. Of course,
you can also access it via Netscape or Microsoft Internet Explorer,
using an independent Internet service provider.
New features will be added to the site regularly. So be sure to bookmark us at
http://www.putnaminv.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price 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.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
April 30, 2000 (Unaudited)
CONVERTIBLE BONDS AND NOTES (55.6%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
Advertising and Marketing Services (1.3%)
-------------------------------------------------------------------------------------------------------------------
$ 2,250,000 Doubleclick Inc. cv. sub. notes 4 3/4s, 2006 $ 4,322,813
196,000 Doubleclick, Inc. 144A cv. sub. notes 4 3/4s, 2006 376,565
2,000,000 Interpublic Group Cos. cv. sub. notes 1.8s, 2004 2,262,500
4,250,000 Omnicom Group Inc. cv. sub. deb. 2 1/4s, 2013 7,984,688
3,250,000 Young & Rubicam, Inc. 144A cv. sub. notes 3s, 2005 3,197,188
----------------
18,143,754
Aerospace/Defense (0.5%)
-------------------------------------------------------------------------------------------------------------------
836,000 Diagnostic Retrieval Systems, Inc. cv. sr. sub. deb 9s, 2003 1,103,500
4,297,000 Kellstrom Industries, Inc. cv. sub. notes 5 1/2s, 2003 2,121,644
2,518,000 Orbital Sciences Corp. cv. sub. notes 5s, 2002 1,790,928
1,000,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 735,000
1,618,000 SPACEHAB, Inc. 144A cv. sub. notes 8s, 2007 1,189,230
----------------
6,940,302
Airlines (0.2%)
-------------------------------------------------------------------------------------------------------------------
489,000 Atlantic Coast Airlines, Inc. cv. sub. notes 7s, 2004 1,633,260
2,319,000 World Airways, Inc. cv. sr. sub. deb 8s, 2004 695,700
----------------
2,328,960
Automotive (1.2%)
-------------------------------------------------------------------------------------------------------------------
1,500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 862,500
8,731,000 Magna International cv. sub. deb. 5s, 2002 8,796,483
5,516,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 4,026,680
2,160,000 Standard Motor Products, Inc. cv. sub. deb. 6 3/4s, 2009 1,344,600
2,000,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 1,697,500
----------------
16,727,763
Biotechnology (3.2%)
-------------------------------------------------------------------------------------------------------------------
420,000 Affymetrix, Inc. 144A cv. sub. notes 4 3/4s, 2007 294,000
972,000 Alexion Pharmaceuticals, Inc. 144A cv. sub. notes
5 3/4s, 2007 567,405
720,000 Alkermes, Inc. 144A cv. sub. notes 3 3/4s, 2007 420,300
2,037,000 Aviron cv. sub. notes 5 3/4s, 2005 1,812,930
4,000,000 Chiron Corp. cv. sub. notes 1.9s, 2000 6,420,000
1,240,000 Cor Therapeutics, Inc. 144A cv. notes 5s, 2007 1,548,450
1,700,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 2,307,750
431,000 IDEC Pharmaceuticals Corp. cv. sub. notes zero %, 2019 373,354
419,000 Imclone Systems, Inc 144A cv. sub. notes 5 1/2s, 2005 402,240
3,591,000 Millennium Pharmaceuticals, Inc. 144A cv. sub. notes
5 1/2s, 2015 3,833,393
1,025,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 735,438
1,247,000 Protein Design Labs, Inc. 144A cv. sub. notes
5 1/2s, 2007 1,011,629
14,000,000 Roche Holdings, Inc. 144A cv. bonds zero %, 2015 10,465,000
1,007,000 Sepracor, Inc. cv. sub. deb. 7s, 2005 1,583,508
764,000 Sepracor, Inc. cv. sub. deb. 6 1/4s, 2005 2,989,150
7,000,000 Sepracor, Inc. 144A cv. sub. notes 5s, 2007 8,155,000
480,000 ViroPharma, Inc. 144A cv. sub. notes 6s, 2007 187,800
----------------
43,107,347
Broadcasting (3.9%)
-------------------------------------------------------------------------------------------------------------------
2,166,000 CD Radio, Inc. cv. sub. notes 8 3/4s, 2009 3,468,308
12,500,000 Clear Channel Communications, Inc. cv. sr. notes
1 1/2s, 2002 11,890,625
12,000,000 Echostar Communications Corp. 144A cv. sub.
notes 4 7/8s, 2007 18,150,000
10,000,000 Jacor Communications, Inc. cv. Liquid Yield Option
Notes (LYON) zero %, 2018 5,675,000
13,000,000 News America Holdings, Inc. cv. LYON zero %, 2013 13,609,439
----------------
52,793,372
Communications Equipment (2.3%)
-------------------------------------------------------------------------------------------------------------------
7,000,000 American Tower Corp. 144A cv. notes 5s, 2010 7,280,000
393,000 Commscope, Inc. cv. sub. notes 4s, 2006 482,899
1,535,000 Commscope, Inc. 144A cv. sub. notes 4s, 2006 1,886,131
2,000,000 Comverse Technology, Inc. cv. sub. deb. 4 1/2s, 2005 8,327,500
5,319,000 Efficient Networks, Inc. 144A cv. sub. notes 5s, 2005 3,543,784
7,000,000 Juniper Networks, Inc. cv. sub. notes 4 3/4s, 2007 6,378,750
4,513,000 Redback Networks Inc. 144A cv. sub. notes 5s, 2007 3,184,508
----------------
31,083,572
Computer Services and Software (0.1%)
-------------------------------------------------------------------------------------------------------------------
560,000 VerticalNet, Inc. cv. sub. deb. 5 1/4s, 2004 1,618,176
Computers (1.5%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 831,250
4,604,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 4,183,885
2,000,000 Checkpoint Systems, Inc. 144A cv. sub. deb. 5 1/4s, 2005 1,372,500
260,000 Critical Path, Inc. 144A cv. bonds 5 3/4s, 2005 216,939
10,000,000 Hewlett-Packard Co. cv. sub. notes zero %, 2017 7,600,000
2,750,000 Quantum Corp. cv. sub. 7s, 2004 2,172,500
10,620,000 System Software Associates, Inc. cv. sub. notes 7s, 2002 2,349,675
1,225,000 Vantive Corp. (The) cv. sub. notes 4 3/4s, 2002 1,053,500
----------------
19,780,249
Conglomerates (0.5%)
-------------------------------------------------------------------------------------------------------------------
2,500,000 ADT Operations, Inc. cv. sub. notes zero %, 2010 6,256,250
Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
486,000 Getty Images, Inc. cv. sub. notes 4 3/4s, 2003 564,368
1,390,000 Getty Images, Inc. 144A cv. sub. notes 5s, 2007 999,063
2,150,000 Personnel Group of America, Inc. cv. sub. notes
5 3/4s, 2004 1,384,063
168,000 VerticalNet, Inc. 144A cv. sub. 5 1/4s, 2004 477,960
----------------
3,425,454
Electrical Equipment (1.1%)
-------------------------------------------------------------------------------------------------------------------
6,500,000 Amkor Technology, Inc. 144A cv. sub. notes 5s, 2007 7,954,375
2,000,000 Mark IV Industries, Inc. cv. sub. notes 4 3/4s, 2004 1,685,000
1,250,000 Oak Industries, Inc. cv. sub. notes 4 7/8s, 2008 5,334,375
----------------
14,973,750
Electronics (9.2%)
-------------------------------------------------------------------------------------------------------------------
4,165,000 Advanced Micro Devices, Inc. cv. sub. notes 6s, 2005 10,178,219
3,000,000 Atmel Corp. cv. sub. deb. zero %, 2018 4,106,250
1,444,000 Benchmark Electronics, Inc. 144A cv. sub. notes
6s, 2006 1,637,135
1,180,000 Burr-Brown Corp. 144A cv. sub. notes 4 1/4s, 2007 1,534,000
4,945,000 Cirrus Logic, Inc. cv. sub notes 6s, 2003 4,320,694
7,540,000 Cypress Semiconductor Corp. cv. sub. notes
4s, 2005 9,849,125
4,997,000 Integrated Device Technology, Inc. cv. sub. notes
5 1/2s, 2002 8,394,960
7,989,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 7,060,279
2,081,000 Kulicke & Soffa Industries, Inc. 144A cv. sub. notes
4 3/4s, 2006 3,808,230
4,500,000 Lam Research Corp. cv. sub. notes 5s, 2002 7,301,250
2,600,000 Lattice Semiconductor Corp. 144A cv. sub. notes
4 3/4s, 2006 4,520,750
2,550,000 Level One Communications, Inc. cv. sub. notes
4s, 2004 10,451,813
10,000,000 LSI Logic Corp. cv. sub. notes 4s, 2005 11,225,000
3,000,000 Motorola, Inc. cv. sub. deb. LYON, zero %, 2013 4,031,250
9,087,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 7,746,668
4,635,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 4,241,025
2,500,000 Sanmina Corp. cv. sub. notes 4 1/4s, 2004 3,700,000
10,000,000 SCI Systems, Inc. cv. sub. 3s, 2007 11,525,000
1,002,000 Semtech Corp. 144A cv. sub. notes 4 1/2s, 2007 978,203
5,000,000 Solectron Corp. 144A cv. notes zero %, 2019 3,818,750
1,540,000 TriQuint Semiconductor, Inc. 144A cv. sub. notes
4s, 2007 1,447,600
3,250,000 World Access, Inc. cv. sub. notes 4 1/2s, 2002 2,567,500
1,000,000 World Access, Inc. 144A Inc. cv. sub. notes 4 1/2s, 2002 790,000
----------------
125,233,701
Energy (1.4%)
-------------------------------------------------------------------------------------------------------------------
8,000,000 Diamond Offshore Drilling, Inc. cv. sub. notes
3 3/4s, 2007 9,150,000
3,350,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 2,822,375
3,750,000 Parker Drilling Co. cv. sub. notes 5 1/2s, 2004 2,723,438
4,500,000 Pride International, Inc. cv. sub. deb. zero %, 2018 1,715,625
1,844,000 Seacor Holdings, Inc. cv. sub. notes 5.38s, 2006 1,910,845
----------------
18,322,283
Entertainment (--%)
-------------------------------------------------------------------------------------------------------------------
706,000 Speedway Motorsports, Inc. cv. sub. deb. 5 3/4s, 2003 656,580
Environmental (0.5%)
-------------------------------------------------------------------------------------------------------------------
3,293,000 Thermo Instrument Systems, Inc. 144A cv. deb.
4 1/2s, 2003 3,025,444
3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,516,450
----------------
6,541,894
Health Care Services (1.2%)
-------------------------------------------------------------------------------------------------------------------
5,152,000 HEALTHSOUTH Corp. cv. sub. deb. 3 1/4s, 2003 4,044,320
550,000 Invitrogen Corp. 144A cv. sub. notes 5 1/2s, 2007 488,813
9,000,000 Omnicare, Inc. cv. bonds 5s, 2007 7,053,750
2,000,000 Phoenix Shannon 144A cv. sr. sub. notes
9 1/2s, 2000 (In default) (Ireland) (NON) 20,000
6,320,000 Wellpoint Health Networks, Inc. cv. sub. deb.
zero %, 2019 4,297,600
----------------
15,904,483
Homebuilding (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,000,000 Lennar Corp. cv. deb. zero %, 2018 1,177,500
Investment Banking/Brokerage (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,500,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 4,008,750
Lodging/Tourism (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 1,781,250
Machinery (0.2%)
-------------------------------------------------------------------------------------------------------------------
3,030,000 Integrated Process Equipment Corp. 144A cv.
sub. notes 6 1/4s, 2004 2,295,225
Manufacturing (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 866,250
418,000 Thermo Optek Corp. 144A cv. bonds 5s, 2000 444,648
275,000 Thermo Optek, Inc. cv. company guaranty 5s, 2000 291,500
1,382,000 Thermo Quest Corp. cv. co. guaranty 5s, 2000 1,425,188
----------------
3,027,586
Medical Technology (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,412,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty
4 3/4s, 2004 1,210,790
Metals (0.5%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Homestake Mining Co. 144A cv. sub. 5 1/2s, 2000 987,500
2,741,000 Inco Ltd. deb. 5 3/4s, 2004 (Canada) 2,456,621
4,169,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 3,637,889
----------------
7,082,010
Oil & Gas (1.4%)
-------------------------------------------------------------------------------------------------------------------
10,000,000 Devon Energy Corp. cv. deb. 4.9s, 2008 9,587,500
6,160,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 2,895,200
1,500,000 Southern Mineral Corp. cv. deb. 6 7/8s, 2007 517,500
6,910,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 6,357,200
----------------
19,357,400
Paper & Forest Products (0.8%)
-------------------------------------------------------------------------------------------------------------------
6,600,000 Mail-Well, Inc. cv. sub. notes 5s, 2002 5,469,750
3,000,000 Stone Container Corp. cv. sub. deb. 6 3/4s, 2007 2,317,500
3,000,000 Thermo Fibertek Inc. 144A cv. company guaranty
4 1/2s, 2004 2,520,000
----------------
10,307,250
Pharmaceuticals (1.3%)
-------------------------------------------------------------------------------------------------------------------
8,000,000 Alza Corp. cv. sub. LYON zero %, 2014 4,740,000
3,800,000 Atrix Labs, Inc. 144A cv. sub. notes 7s, 2004 2,907,000
580,000 C.V. Therapeutics 144A cv. sub. notes 4 3/4s, 2007 421,225
3,500,000 Duramed Pharmaceuticals, Inc. cv. sub. notes
3 1/2s, 2002 2,852,500
772,000 Inhale Therapeutic Systems 144A cv. sub. notes
5s, 2007 708,310
1,992,000 Nexstar Pharmaceuticals, Inc. cv. sub. deb. 6 1/4s, 2004 2,602,050
7,000,000 Roche Holdings, Inc. 144A cv. unsub. LYON
zero %, 2010 (Switzerland) 3,841,250
----------------
18,072,335
Photography/Imaging (1.2%)
-------------------------------------------------------------------------------------------------------------------
30,514,000 Xerox Corp. cv. sub. deb. 0.57s, 2018 16,477,560
Real Estate (0.2%)
-------------------------------------------------------------------------------------------------------------------
3,150,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 2,764,125
Restaurants (--%)
-------------------------------------------------------------------------------------------------------------------
4,666,000 Boston Chicken, Inc. cv. sub. deb. 7 3/4s, 2004 (In default) (NON) 23,330
Retail (2.7%)
-------------------------------------------------------------------------------------------------------------------
10,867,000 Amazon.com Inc. cv. sub. deb. 4 3/4s, 2009 9,182,615
1,959,000 Ann Taylor Stores Corp. cv. company guaranty
0.55s, 2019 810,536
1,003,000 Ann Taylor Stores Corp. 144A cv. company
guaranty 0.55s, 2019 414,991
2,000,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,580,000
8,500,000 Costco Cos, Inc. cv. sub. notes zero %, 2017 10,593,125
4,693,000 Michaels Stores, Inc. cv. sub. notes 6 3/4s, 2003 5,162,300
10,862,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 4,222,603
2,000,000 Sunglass Hut International, Inc. cv. sub. notes
5 1/4s, 2003 1,527,500
7,009,000 Whole Foods Market, Inc. cv. sub. deb. zero %, 2018 2,409,344
----------------
35,903,014
Semiconductor (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,520,000 Advanced Energy Industries, Inc. cv. sub. notes
5 1/4s, 2006 2,323,700
9,000,000 Conexant Systems Inc. cv. sub. notes 4s, 2007 7,616,250
1,705,000 Credence Systems Corp. cv. sub. notes 5 1/4s, 2002 3,580,500
1,108,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,375,305
----------------
14,895,755
Software (4.0%)
-------------------------------------------------------------------------------------------------------------------
4,000,000 Arbor Software Corp. cv. sub. notes 4 1/2s, 2005 3,340,000
5,000,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2006 7,675,000
5,000,000 Citrix Systems, Inc. cv. sub. deb. zero %, 2019 4,425,000
4,232,000 I2 Technologies, Inc. 144A cv. sub. notes 5 1/4s, 2006 7,897,970
19,100,000 Network Associates, Inc. cv. sub deb. zero %, 2018 6,685,000
5,621,000 Rational Software Corp. 144A cv. sub. notes 5s, 2007 7,532,140
5,000,000 Veritas Software Corp. cv. disc. notes 1.856s, 2006 15,056,250
787,000 Wind River Systems Inc. cv. sub. notes 5s, 2002 1,082,125
----------------
53,693,485
Technology Services (2.9%)
-------------------------------------------------------------------------------------------------------------------
35,000,000 American Online, Inc. cv. sub. notes zero %, 2019 18,287,500
1,318,000 CheckFree Holdings Corp. 144A cv. sub. notes
6 1/2s, 2006 1,233,978
628,000 CNET Networks, Inc. cv. sub. notes 5s, 2006 671,960
941,000 EarthWeb, Inc. 144A cv. sub. notes 7s, 2005 559,895
2,500,000 Exodus Communications, Inc. cv. sub. notes
4 3/4s, 2008 3,453,125
150,000 Interliant, Inc. 144A cv. sub. notes 7s, 2005 88,500
4,004,000 Internet Capital Group, Inc. cv. sub. notes 5 1/2s, 2004 2,577,575
3,190,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 1,571,075
500,000 Safeguard Scientifics, Inc. cv. sub. notes 5s, 2006 915,625
2,975,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 5s, 2006 5,447,969
1,500,000 Silicon Graphics Corp. cv. sr. notes 5 1/4s, 2004 1,061,250
2,600,000 Telxon Corp. cv. sub. notes 5 3/4s, 2003 2,138,500
601,000 Usinternetworking, Inc. 144A cv. sub. notes 7s, 2004 986,391
----------------
38,993,343
Telecommunications (8.3%)
-------------------------------------------------------------------------------------------------------------------
2,078,000 Aether Systems, Inc. cv. sub. notes 6s, 2005 1,942,930
5,000,000 At Home Corp. 144A cv. sub. notes 4 3/4s, 2006 3,325,000
2,900,000 Cellstar Corp. cv. sub notes 5s, 2002 2,022,750
1,400,000 Corecomm Ltd. cv. sub. notes 6s, 2006 1,795,500
1,330,000 Corecomm Ltd. P/p 144A cv. sub. notes 6s, 2006 1,705,725
900,000 iBasis, Inc. cv. sub. notes 5 3/4s, 2005 486,000
13,000,000 Level 3 Communication, Inc. cv. sub. deb. 6s, 2010 11,667,500
7,000,000 Liberty Media Corp. 144A cv. deb. 4s, 2029 9,108,750
35,710,000 Liberty Media Corp. 144A cv. deb. 3 3/4s, 2030 35,620,725
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. deb.
8 1/4s, 2003 (In default) (NON) 75,500
26,000,000 Nextel Communications, Inc. 144A cv. sr. notes
5 1/4s, 2010 25,220,000
500,000 NTL, Inc. cv. sub. notes 7s, 2008 1,026,875
10,000,000 NTL, Inc. 144A cv. sub. notes 5 3/4s, 2009 8,862,500
950,000 Pinnacle Holdings Inc. 144A cv. sub. notes 5 1/2s, 2007 864,500
630,000 Primus Telecommunications Group, Inc. 144A cv.
sub. deb. 5 3/4s, 2007 530,775
8,500,000 Rogers Communications cv. deb. 2s, 2005 7,628,750
----------------
111,903,780
Textiles (--%)
-------------------------------------------------------------------------------------------------------------------
1,002,000 Dixie Group, Inc. (The) cv. deb. 7s, 2012 636,270
Tobacco (0.3%)
-------------------------------------------------------------------------------------------------------------------
7,485,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 3,489,881
Transaction Processing (0.5%)
-------------------------------------------------------------------------------------------------------------------
8,230,000 National Data Corp. cv. sub. notes 5s, 2003 6,944,063
Waste Management (1.0%)
-------------------------------------------------------------------------------------------------------------------
2,967,000 OHM Corp. cv. sub. deb. 8s, 2006 2,536,785
12,000,000 Waste Management, Inc. cv. sub. notes 4s, 2002 10,665,000
----------------
13,201,785
----------------
Total Convertible Bonds and Notes
(cost $746,663,463) $ 751,084,377
CONVERTIBLE PREFERRED STOCKS (31.4%) (a)
NUMBER OF SHARES VALUE
Automotive (0.5%)
-------------------------------------------------------------------------------------------------------------------
65,000 Federal-Mogul Financial Trust $3.50 cum. cv. pfd. $ 1,746,875
155,600 Tower Automotive Capital Trust 144A $3.375 cv. pfd. 5,621,050
----------------
7,367,925
Banking (0.8%)
-------------------------------------------------------------------------------------------------------------------
224,472 CNB Capital Trust I $1.50 cum. cv. pfd. 7,463,694
25,000 Sovereign Bancorp, Inc. $3.75 cv. pfd. 1,173,438
69,350 Union Planters Corp. Ser. E, $2.00 cv. cum. pfd. 2,435,919
----------------
11,073,051
Biotechnology (0.4%)
-------------------------------------------------------------------------------------------------------------------
20,000 Alkermes, Inc. cv. $3.25 pfd. 1,792,500
24,094 Biovail Corp. $3.375 cv. pfd. 1,132,418
15,110 Cephalon, Inc. $3.63 cv. pfd. 2,402,490
----------------
5,327,408
Broadcasting (1.4%)
-------------------------------------------------------------------------------------------------------------------
100,000 Cox Communications, Inc. $3.50 c.v. pfd. 5,737,500
46,639 Emmis Broadcasting Corp. Ser. A, $3.13 cv. pfd. 2,798,340
40,000 Pegasus Communications Corp. 144A $6.50 cv. pfd. 4,015,000
184,500 Sinclair Broadcast Group, Inc. $3.00 cv. pfd. 4,750,875
19,975 XM Satellite Radio Holdings Ser. B, $4.125 cv. pfd. 918,850
----------------
18,220,565
Building Materials (--%)
-------------------------------------------------------------------------------------------------------------------
10,321 Owens Corning Capital LLC $3.25 cv. pfd. 348,334
Cable Television (3.4%)
-------------------------------------------------------------------------------------------------------------------
35,000 Adelphia Communications Corp. Ser. D, $5.50 cv. pfd. 5,403,125
585,000 MediaOne Group, Inc. $7.00 cv. pfd. 27,129,375
45,000 TCI Pacific Comm $5.00 cv. pfd. 13,314,375
----------------
45,846,875
Coal (0.2%)
-------------------------------------------------------------------------------------------------------------------
90,400 Pittston Mineral Corp. 144A $3.125 dep. shs. cv. pfd. 2,440,800
Commercial and Consumer Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
53,600 Carriage Services, Inc. 144A $3.50 c.v. pfd. 1,340,000
Consumer Finance (--%)
-------------------------------------------------------------------------------------------------------------------
13,546 Finova Finance Trust $2.75 cv. cum. pfd. 402,994
Consumer Goods (0.6%)
-------------------------------------------------------------------------------------------------------------------
92,333 Estee Lauder Aces TR II $5.41 cv. pfd. 7,709,806
Electric Utilities (5.6%)
-------------------------------------------------------------------------------------------------------------------
240,000 AES Trust II $3.38 cv. pfd. 17,250,000
110,000 Alliant Energy 144A $7.25 cv. pfd. 8,387,500
282,644 Calpine Corp. 144A $2.875 cv. pfd. 15,192,115
350,000 Reliant Energy, Inc. $2.00 cv. pfd. 30,690,800
100,000 Texas Utilities Co. $4.625 cv. pfd. 4,300,000
----------------
75,820,415
Electronics (0.2%)
-------------------------------------------------------------------------------------------------------------------
45,952 Pioneer Standard Electronics, Inc. 144A $3.375 cv. pfd. 2,481,408
10,300 Titan Corp. 144A $2.875 cv. pfd. 530,450
----------------
3,011,858
Energy (0.8%)
-------------------------------------------------------------------------------------------------------------------
185,000 Evi, Inc. $2.50 cum. cv. pfd. 8,648,750
27,483 Hanover Compressor $3.625cv. pfd. 2,445,987
----------------
11,094,737
Engineering & Construction (0.3%)
-------------------------------------------------------------------------------------------------------------------
113,000 Txi Capital Trust I $2.75 cv. pfd. 3,686,625
Financial (--%)
-------------------------------------------------------------------------------------------------------------------
57,517 DIMON, Inc. $2.00 cv. pfd. 158,172
56,000 Mandatory Common Exchange Trust (The)
$3.625 cv. pfd. 94,500
----------------
252,672
Food (0.3%)
-------------------------------------------------------------------------------------------------------------------
83,800 Chiquita Brands International, Inc. Ser. B, $3.75
cv. cum. pfd. 1,518,875
62,151 Suiza Capital Trust II $2.75 cv. pfd. 2,050,983
----------------
3,569,858
Health Care Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
45,000 Caremark RX Capital Trust I 144A $3.50 cv. pfd. 2,227,500
Household Furniture and Appliances (0.4%)
-------------------------------------------------------------------------------------------------------------------
179,100 Metromedia International Group, Inc. $3.625
cv. cum. pfd. 4,790,925
25,000 Newell Financial Trust I $2.625 cv. cum. pfd. 940,625
----------------
5,731,550
Insurance (1.7%)
-------------------------------------------------------------------------------------------------------------------
70,000 American General Delaware Corp. $3.00 cv. cum. pfd. 4,821,250
50,881 American Heritage Life Investment Corp. $4.25 cv. pfd. 4,242,203
154,500 Lincoln National Corp. $0.463 cv. cum. pfd. 2,587,875
80,000 Lincoln National Corp. $7.75 cv. pfd. 1,710,000
211,885 Philadelphia Consolidated Holding Corp. $0.534 cv. pfd. 1,271,310
96,100 Protective Life Corp. $3.25 cv. cum. pfd. 4,024,188
75,000 St. Paul Capital LLC $3.00 cv. cum. pfd. 4,650,000
----------------
23,306,826
Investment Banking/Brokerage (0.4%)
-------------------------------------------------------------------------------------------------------------------
50,000 Salomon, Smith, Barney Inc. $6.25 cv. pfd. 5,981,250
Machinery (0.1%)
-------------------------------------------------------------------------------------------------------------------
53,444 Ingersoll-Rand Co. $0.195 cv. pfd. 1,142,366
Medical Technology (0.5%)
-------------------------------------------------------------------------------------------------------------------
189,604 Owens & Minor Trust I 144A Ser. A, $2.688 cv. cum. pfd. 6,541,338
Metals (0.4%)
-------------------------------------------------------------------------------------------------------------------
105,000 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 1,351,875
70,000 Kinam Gold, Inc. Ser. B, $3.75 cv. cum. pfd. 1,820,000
40,000 Titanium Metals Corp. $3.313 cv. pfd. 430,000
51,000 USX Capital Trust I $3.375 cum. cv. pfd. 1,855,125
----------------
5,457,000
Natural Gas Utilities (0.6%)
-------------------------------------------------------------------------------------------------------------------
150,000 El Paso Energy Capital Trust $2.375 cv. pfd. 7,968,750
Oil & Gas (1.5%)
-------------------------------------------------------------------------------------------------------------------
130,300 Apache Corp. $2.015 c.v. pfd. 5,505,175
75,000 Kerr-McGee Corp. $1.825 c.v. pfd. 3,360,938
140,000 Lomack Financing Trust 144A $2.875 cv. pfd. 1,837,500
30,000 Lomak Petroleum Ser. C., $2.03 cv. cum. pfd. 375,000
43,546 Neuvo Energy Ser. A, $2.875 cv. pfd. 1,072,320
16,200 Newfield Exploration Co. $3.25 c.v. pfd. 998,325
40,300 Pogo Producing Co. Ser. A, $3.25 c.v. pfd. 2,397,850
80,000 Tosco Financing Trust $2.875 cv. pfd. 4,110,000
----------------
19,657,108
Paper & Forest Products (2.6%)
-------------------------------------------------------------------------------------------------------------------
160,000 Georgia Pacific Group $3.75 c.v. pfd. 6,480,000
125,000 International Paper Co. $2.625 cv. pfd. 5,281,250
129,930 Owens-Illinois, Inc. $2.375 cv.pfd. 3,102,079
381,000 Sealed Air Corp. Ser. A, $2.00 cv.pfd. 20,050,125
----------------
34,913,454
Pharmaceuticals (0.4%)
-------------------------------------------------------------------------------------------------------------------
110,000 Monsanto Co. $2.60 cv. pfd. 4,895,000
Publishing (1.1%)
-------------------------------------------------------------------------------------------------------------------
159,000 Readers Digest $0.453 cv. pfd. 4,531,500
75,000 Tribune Co. $2.00 cv. pfd. 9,571,875
67,714 Tribune Co. $1.75 cv. pfd. 1,032,639
----------------
15,136,014
Railroads (0.9%)
-------------------------------------------------------------------------------------------------------------------
86,387 Canadian National Railway Co. $2.625
c.v. pfd. (Canada) 3,747,036
210,000 Union Pacific Capital Trust $3.125 cum. cv. pfd. 8,793,750
----------------
12,540,786
Real Estate (0.8%)
-------------------------------------------------------------------------------------------------------------------
140,000 Archstone Communities Trust Ser. A, $1.75 cv. cum. pfd. 4,042,500
231,936 Equity Residential Property Ser. E, $1.75 cv. pfd. 5,856,384
74,490 Tanger Factory Outlet Centers Ser. A, $1.802
cv. cum. pfd. 1,489,800
----------------
11,388,684
Restaurants (0.2%)
-------------------------------------------------------------------------------------------------------------------
52,049 Wendy's Financing Ser. A, $2.50 cv. pfd. 2,628,475
Retail (0.5%)
-------------------------------------------------------------------------------------------------------------------
45,000 Dollar General Strypes Trust $3.352 cv. pfd. 1,513,125
140,000 K mart Financing I $3.875 cum. cv. pfd. 5,530,000
----------------
7,043,125
Shipping (0.2%)
-------------------------------------------------------------------------------------------------------------------
57,900 CNF Trust I Ser. A, $2.50 cv. cum. pfd. 2,424,563
Software (0.5%)
-------------------------------------------------------------------------------------------------------------------
70,000 Amdocs 6.75% cv. pfd. 4,025,000
29,647 Lernout & Hauspie Speech Products N.V. 144A
$2.375 cv. pfd 2,456,995
----------------
6,481,995
Technology Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
3,200 NBC Internet, Inc. 7.25% cv. pfd. 100,800
50,000 PsiNet, Inc. 144A $3.50 cv. pfd. 1,556,250
115,000 Vanstar Financial Trust Corp. $3.375 cv. pfd. 1,078,125
7,000 Verio Inc. 144A $3.375 c.v. pfd. 327,250
----------------
3,062,425
Telecommunications (3.4%)
-------------------------------------------------------------------------------------------------------------------
100,000 Crown Castle Intl 7.25% cv. pfd 3,356,250
75,000 DECS Trust VI 6.25% cv. pfd. 3,993,750
20,000 Global Crossing Ltd 6.75% cv.pfd. 5,027,500
50,000 Global Crossing 144A 7.00% cv. pfd. 10,050,000
186,000 Intermedia Communications, Inc. Ser. F, $7.00 cv. pfd. 5,370,750
5,200 MGC Communications, Inc. Ser. D, $3.625 cv. pfd. (PIK) 254,800
25,000 Nextlink Communications $3.25 cv. pfd. 4,831,250
50,000 Omnipoint Corp. $3.50 cv. pfd. 7,268,750
55,000 Qwest Trends Trust 144A $5.75 cv. pfd. 3,891,250
36,634 WinStar Communications. Inc. $3.50 cv. pfd. 2,372,052
----------------
46,416,352
Textiles (0.1%)
-------------------------------------------------------------------------------------------------------------------
51,000 Designer Finance $3.00 cv. cum. pfd. 1,383,375
----------------
Total Convertible Preferred Stocks
(cost $456,688,637) $ 423,841,859
COMMON STOCKS (10.1%) (a)
NUMBER OF SHARES VALUE
Advertising and Marketing Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
100,000 Interpublic Group Cos. Inc. $ 4,100,000
Aerospace/Defense (0.1%)
-------------------------------------------------------------------------------------------------------------------
34,867 Boeing Co. 1,383,784
Banking (1.2%)
-------------------------------------------------------------------------------------------------------------------
40,000 Bank of America Corp. 1,960,000
151,141 BB&T Corp. 4,024,129
40,000 Comerica, Inc. 1,695,000
65,000 Fifth Third Bancorp 4,103,125
60,258 FleetBoston Financial Corp. 2,135,393
74,090 Mellon Financial Corp. 2,380,141
----------------
16,297,788
Broadcasting (0.1%)
-------------------------------------------------------------------------------------------------------------------
15,000 CBS Corp. (NON) 881,250
622 XM Satellite Radio Holdings, Inc. Class A 17,921
----------------
899,171
Cable Television (0.3%)
-------------------------------------------------------------------------------------------------------------------
80,000 AT&T Corp.-Liberty Media Group (NON) 3,995,000
Chemicals (0.6%)
-------------------------------------------------------------------------------------------------------------------
120,626 du Pont (E.I.) de Nemours & Co., Ltd. 5,722,196
50,000 Praxair, Inc. 2,221,875
----------------
7,944,071
Communications Equipment (0.3%)
-------------------------------------------------------------------------------------------------------------------
64,906 Tellabs, Inc. 3,557,660
Consumer Goods (0.2%)
-------------------------------------------------------------------------------------------------------------------
50,000 Clorox Co. 1,837,500
30,000 Colgate-Palmolive Co. (NON) 1,713,750
----------------
3,551,250
Electronics (0.3%)
-------------------------------------------------------------------------------------------------------------------
30,000 Micron Technology, Inc. 4,177,500
Energy (1.6%)
-------------------------------------------------------------------------------------------------------------------
56,213 Baker Hughes, Inc. 1,788,276
50,000 Cooper Cameron Corp.(NON) 3,750,000
110,000 Diamond Offshore Drilling, Inc. 4,434,375
45,157 Pride International, Inc. 1,021,677
20,000 Schlumberger Ltd. 1,531,250
45,000 Smith International, Inc. 3,420,000
85,000 Transocean Sedco Forex Inc. 3,995,000
30,000 Weatherford International, Inc. 1,218,750
----------------
21,159,328
Financial (0.3%)
-------------------------------------------------------------------------------------------------------------------
15,000 American Express Co. 2,250,938
25,000 Citigroup, Inc. 1,485,938
----------------
3,736,876
Gaming & Lottery (--%)
-------------------------------------------------------------------------------------------------------------------
19,996 Station Casinos, Inc. 569,886
Health Care Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
70,000 Columbia/HCA Healthcare Corp. 1,990,625
Homebuilding (--%)
-------------------------------------------------------------------------------------------------------------------
4 Beazer Homes USA, Inc. 77
Insurance (0.4%)
-------------------------------------------------------------------------------------------------------------------
30,000 American International Group, Inc. 3,290,625
35,267 The Chubb Corp. 2,243,863
----------------
5,534,488
Media (0.2%)
-------------------------------------------------------------------------------------------------------------------
136,618 Golden Books Family Entertainment, Inc. 145,157
25,000 Time Warner, Inc. 2,248,438
----------------
2,393,595
Natural Gas Utilities (0.9%)
-------------------------------------------------------------------------------------------------------------------
165,000 Enron Corp. 11,498,438
Oil & Gas (0.8%)
-------------------------------------------------------------------------------------------------------------------
80,011 BP Amoco PLC ADR (United Kingdom) 4,080,561
80,178 Devon Energy Corp. 3,863,577
44,101 Exxon Mobil Corp. 3,426,096
----------------
11,370,234
Paper & Forest Products (0.1%)
-------------------------------------------------------------------------------------------------------------------
31,961 Bowater, Inc. 1,757,855
Pharmaceuticals (1.1%)
-------------------------------------------------------------------------------------------------------------------
45,685 Bristol-Myers Squibb Co. 2,395,607
90,000 Johnson & Johnson 7,425,059
40,421 Merck & Co., Inc. 2,809,260
62,241 Schering-Plough Corp. 2,509,090
----------------
15,139,016
Railroads (0.3%)
-------------------------------------------------------------------------------------------------------------------
90,000 Union Pacific Corp. 3,791,250
Retail (0.4%)
-------------------------------------------------------------------------------------------------------------------
418,803 Pier 1 Imports, Inc. 4,763,884
Technology Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
75,000 America Online, Inc. (NON) 4,485,938
824 U.S. Interactive, Inc. 13,699
----------------
4,499,637
Telecommunications (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,749 Intermedia Communications, Inc. 112,040
20,000 Nextel Communications, Inc. Class A 2,188,750
----------------
2,300,790
----------------
Total Common Stocks (cost $135,325,257) $ 136,412,203
CORPORATE BONDS AND NOTES (1.5%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 15,000,000 Elan Finance Corp. Ltd. cv. company guaranty
zero %, 2018 (Bermuda) $ 9,937,500
1,484,000 Gilat Satellite Networks Ltd. cv. 6 1/2s, 2004 (Israel) 3,064,460
1,000,000 Inco Ltd. cv. deb. 7 3/4s, 2016 842,500
2,125,000 Scandinavian Broadcasting System SA cv. sub. notes
7s, 2004 (Luxembourg) 4,093,281
1,750,000 Telefonos de Mexico S.A. ADR cv. deb.
4 1/4s, 2004 (Mexico) 2,382,188
----------------
Total Corporate Bonds and Notes
(cost $17,301,015) $ 20,319,929
PREFERRED STOCKS (0.2%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
12,612 Trikon Technologies, Inc. Ser. H, $8.125 pfd. (PIK) $ 88,284
1,632 Trikon Technologies, Inc. Ser. I, $8.125 pfd. 2,285,480
----------------
Total Preferred Stocks (cost $1,665,354) $ 2,373,764
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,357,643,726) (b) $ 1,334,032,132
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,350,406,629.
(b) The aggregate identified cost on a tax basis is $1,367,164,676
resulting in gross unrealized appreciation and depreciation of
$146,246,329 and $113,113,785 respectively, or net unrealized
depreciation of $33,132,544
(NON) Non-income-producing security.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR, after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with
a domestic custodian bank.
-----------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 2000 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
-----------------------------------------------------------------------
S&P 500 Index
(Long) $1,460,000 $1,439,589 Jun-00 $20,411
-----------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,357,643,726) (Note1) $1,334,032,132
-------------------------------------------------------------------------------------------
Dividends and interest receivable 9,855,782
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,880,655
-------------------------------------------------------------------------------------------
Receivable for securities sold 47,168,485
-------------------------------------------------------------------------------------------
Total assets 1,392,937,054
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 11,053,912
-------------------------------------------------------------------------------------------
Payable for variation margin 32,597
-------------------------------------------------------------------------------------------
Payable for securities purchased 27,261,782
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,495,421
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,989,027
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 181,514
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 28,161
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,424
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 438,777
-------------------------------------------------------------------------------------------
Other accrued expenses 47,810
-------------------------------------------------------------------------------------------
Total liabilities 42,530,425
-------------------------------------------------------------------------------------------
Net assets $1,350,406,629
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,283,742,267
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (819,288)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 91,074,833
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (23,591,183)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $1,350,406,629
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($997,744,921 divided by 51,297,371 shares) $19.45
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $19.45)* $20.64
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($271,093,604 divided by 14,125,998 shares)** $19.19
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($2,633,102 divided by 135,826 shares)** $19.39
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($16,510,532 divided by 854,926 shares) $19.31
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of 19.31)* $20.01
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($62,424,470 divided by 3,208,874 shares) $19.45
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest $19,127,677
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,664) 13,385,253
-------------------------------------------------------------------------------------------
Total investment income 32,512,930
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,983,503
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 740,800
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 24,558
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,424
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,279,286
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,434,906
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 7,784
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 63,641
-------------------------------------------------------------------------------------------
Reports to shareholders 20,233
-------------------------------------------------------------------------------------------
Auditing 11,550
-------------------------------------------------------------------------------------------
Legal 5,649
-------------------------------------------------------------------------------------------
Postage 40,621
-------------------------------------------------------------------------------------------
Registration fees 11,944
-------------------------------------------------------------------------------------------
Other 92,998
-------------------------------------------------------------------------------------------
Total expenses 7,725,897
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (174,458)
-------------------------------------------------------------------------------------------
Net expenses 7,551,439
-------------------------------------------------------------------------------------------
Net investment income 24,961,491
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 96,855,842
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 796,386
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the period (23,023,055)
-------------------------------------------------------------------------------------------
Net gain on investments 74,629,173
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $99,590,664
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended Year ended
April 30 October 31
2000* 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 24,961,491 $ 49,711,842
--------------------------------------------------------------------------------------------------
Net realized gain on investments 97,652,228 126,479,771
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (23,023,055) 33,608,926
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 99,590,664 209,800,539
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (21,312,383) (38,053,728)
--------------------------------------------------------------------------------------------------
Class B (4,987,204) (9,199,217)
--------------------------------------------------------------------------------------------------
Class C (31,403) (2,859)
--------------------------------------------------------------------------------------------------
Class M (317,185) (560,639)
--------------------------------------------------------------------------------------------------
Class Y (1,430,506) (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 (88,010,473) (103,539,492)
--------------------------------------------------------------------------------------------------
Class B (25,515,115) (29,085,699)
--------------------------------------------------------------------------------------------------
Class C (90,751) --
--------------------------------------------------------------------------------------------------
Class M (1,490,142) (1,803,589)
--------------------------------------------------------------------------------------------------
Class Y (5,637,397) --
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 45,241,400 (32,095,525)
--------------------------------------------------------------------------------------------------
Total decrease in net assets (3,990,495) (10,028,661)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period 1,354,397,124 1,364,425,785
--------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income and undistributed net investment
income of $819,288 and $2,297,902, respectively) $1,350,406,629 $1,354,397,124
--------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
-------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
-------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.26 $20.04 $23.22 $21.24 $19.42 $19.09
-------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------
Net investment income .38(c) .75(c) .76(c) .78(c) .81(c) .85
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.08 2.30 (1.02) 3.70 2.70 1.60
-------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.46 3.05 (.26) 4.48 3.51 2.45
-------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------
From net
investment income (.43) (.75) (.76) (.87) (.98) (.96)
-------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) (.03) (.06) -- --
-------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.84) (2.02) (2.13) (1.57) (.71) (1.16)
-------------------------------------------------------------------------------------------------------------
Total distributions (2.27) (2.83) (2.92) (2.50) (1.69) (2.12)
-------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.45 $20.26 $20.04 $23.22 $21.24 $19.42
-------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.45* 16.42 (1.37) 22.86 18.99 14.38
-------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $997,745 $982,956 $1,056,693 $1,168,470 $898,486 $756,645
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .48* .98 .97 1.03 1.06 1.16
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.86* 3.73 3.50 3.56 3.99 4.64
-------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 113.33* 54.74 92.76 70.74 61.43 69.52
-------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) 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
-------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
-------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.02 $19.83 $23.01 $21.09 $19.30 $19.00
-------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------
Net investment income .30(c) .60(c) .59(c) .63(c) .66(c) .69
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.06 2.27 (1.01) 3.64 2.68 1.61
-------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.36 2.87 (.42) 4.27 3.34 2.30
-------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------
From net
investment income (.35) (.60) (.61) (.73) (.84) (.84)
-------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.06) (.02) (.05) -- --
-------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.84) (2.02) (2.13) (1.57) (.71) (1.16)
-------------------------------------------------------------------------------------------------------------
Total distributions (2.19) (2.68) (2.76) (2.35) (1.55) (2.00)
-------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.19 $20.02 $19.83 $23.01 $21.09 $19.30
-------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.03* 15.58 (2.11) 21.89 18.14 13.54
-------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $271,094 $291,017 $289,652 $257,163 $146,127 $75,309
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .85* 1.73 1.72 1.78 1.81 1.91
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.48* 2.99 2.74 2.78 3.26 3.92
-------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 113.33* 54.74 92.76 70.74 61.43 69.52
-------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) 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>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
---------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 July 26, 1999+
operating performance (Unaudited) to October 31
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
Net asset value,
beginning of period $20.23 $20.85
---------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------
Net investment income (c) .30 .20
---------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.09 (.59)
---------------------------------------------------------------------
Total from
investment operations 1.39 (.39)
---------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------
From net
investment income (.39) (.20)
---------------------------------------------------------------------
In excess of net
investment income -- (.03)
---------------------------------------------------------------------
From net realized gain
on investments (1.84) --
---------------------------------------------------------------------
Total distributions (2.23) (.23)
---------------------------------------------------------------------
Net asset value,
end of period $19.39 $20.23
---------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.09* (1.87)*
---------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,633 $661
---------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .85* .47*
---------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.49* 1.12*
---------------------------------------------------------------------
Portfolio turnover (%) 113.33* 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>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 March 13, 1995+
operating performance (Unaudited) Year ended October 31 to October 31
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.13 $19.92 $23.08 $21.14 $19.37 $17.79
-------------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------------
Net investment income .32(c) .65(c) .65(c) .67(c) .73(c) .64
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.08 2.28 (1.00) 3.67 2.65 1.64
-------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.40 2.93 (.35) 4.34 3.38 2.28
-------------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------------
From net
investment income (.38) (.65) (.66) (.78) (.90) (.70)
-------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.05) (.02) (.05) -- --
-------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.84) (2.02) (2.13) (1.57) (.71) --
-------------------------------------------------------------------------------------------------------------------
Total distributions (2.22) (2.72) (2.81) (2.40) (1.61) (.70)
-------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.31 $20.13 $19.92 $23.08 $21.14 $19.37
-------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.18* 15.87 (1.75) 22.24 18.30 12.99*
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $16,511 $16,338 $18,081 $14,719 $7,128 $1,753
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73* 1.48 1.47 1.53 1.54 1.04*
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.61* 3.23 2.99 3.04 3.55 2.89*
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 113.33* 54.74 92.76 70.74 61.43 69.52
-------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) 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>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS Y
-------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 Dec. 30, 1998+
operating performance (Unaudited) to October 31
-------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------
Net asset value,
beginning of period $20.26 $19.32
-------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------
Net investment income (c) .40 .72
-------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.09 .98
-------------------------------------------------------------------------
Total from
investment operations 1.49 1.70
-------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------
From net
investment income (.46) (.72)
-------------------------------------------------------------------------
In excess of net
investment income -- (.04)
-------------------------------------------------------------------------
From net realized gain
on investments (1.84) --
-------------------------------------------------------------------------
Total distributions (2.30) (.76)
-------------------------------------------------------------------------
Net asset value,
end of period $19.45 $20.26
-------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.58* 8.87*
-------------------------------------------------------------------------
Net assets, end of period
(in thousands) $62,424 $63,425
-------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .35* .61*
-------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.98* 3.43*
-------------------------------------------------------------------------
Portfolio turnover (%) 113.33* 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.
NOTES TO FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Convertible Income-Growth Trust (the "fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The fund seeks current income
and capital appreciation by investing primarily in bonds and preferred
stocks convertible into common stock with capital conservation as a
secondary objective.
The fund offers class A, class B, class 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
shares 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. 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. Discounts on
zero coupon bonds and original issue discount 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 six months
ended April 30, 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. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion,
0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of
the next $5 billion and 0.38% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended April 30, 2000, fund expenses were reduced by
$174,458 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,160
has been allocated to the fund, and an additional fee for each 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
in the fund and are invested in certain Putnam funds until distribution
in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as 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 Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00%, 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 .025%, 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 six months ended April 30, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $98,159 and $1,448
from the sale of class A and class M shares, respectively, and received
$254,834 and $30 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
period ended April 30, 2000, Putnam Mutual Funds Corp., acting as
underwriter received $41,043 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $1,543,921,702 and $1,591,494,627, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At April 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 3,524,012 $71,348,972
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,021,208 96,366,620
---------------------------------------------------------------------------
8,545,220 167,715,592
Shares
repurchased (5,770,410) (116,757,291)
---------------------------------------------------------------------------
Net increase 2,774,810 $50,958,301
---------------------------------------------------------------------------
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)
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 1,861,185 $37,127,531
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,325,332 25,083,845
---------------------------------------------------------------------------
3,186,517 62,211,376
Shares
repurchased (3,598,984) (72,070,594)
---------------------------------------------------------------------------
Net decrease (412,467) $(9,859,218)
---------------------------------------------------------------------------
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)
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 100,696 $2,044,714
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,913 94,806
---------------------------------------------------------------------------
105,609 2,139,520
Shares
repurchased (2,434) (47,916)
---------------------------------------------------------------------------
Net increase 103,175 $2,091,604
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 92,275 $1,862,944
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 83,016 1,581,902
---------------------------------------------------------------------------
175,291 3,444,846
Shares
repurchased (132,035) (2,640,204)
---------------------------------------------------------------------------
Net increase 43,256 $ 804,642
---------------------------------------------------------------------------
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)
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 189,859 $3,838,365
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 367,560 7,057,368
---------------------------------------------------------------------------
557,419 10,895,733
Shares
repurchased (478,903) (9,649,662)
---------------------------------------------------------------------------
Net increase 78,516 $1,246,071
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
OUR COMMITMENT TO QUALITY SERVICE
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past
9 years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change
or termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative. To learn more about Putnam, visit our Web
site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number.
1-800-225-1581
* DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Richard Leibovitch
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
Forrest N. Fontana
Vice President and Fund Manager
Richard A. Monaghan
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. For more information or to request a prospectus, call toll
free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA019-61431 008/223/920 6/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
---------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust
Supplement to Semiannual Report dated 4/30/00
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, and M shares, which are discussed more extensively in the semiannual
report.
SEMIANNUAL RESULTS AT A GLANCE
---------------------------------------------------------------------------
Total return
for periods ended 4/30/00 NAV
6 months 7.58%
1 year 8.54
5 years 96.68
Annual average 14.49
10 years 260.90
Annual average 13.69
Life of fund (since class A inception, 6/29/72)
Annual average 12.35
Share value: NAV
10/31/99 $20.26
4/30/00 $19.45
---------------------------------------------------------------------------
Short-term Long-term
Distributions: No. Income capital gains capital gains Total
2 $0.456 $1.168 $0.668 $2.292
---------------------------------------------------------------------------
Please note that past performance does not indicate future results. Returns
shown for class Y shares for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect the
initial sales charge currently applicable to class A shares. These returns
have not been adjusted to reflect differences in operating expenses which,
for class Y shares, are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Performance data reflects an expense limitation previously in
effect. Without the expense limitation, total returns would have been
lower. Investment return and principal value will fluctuate so your shares,
when redeemed, may be worth more or less than their original cost. See full
report for information on comparative benchmarks. If you have questions,
please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
