-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WDge8FEfe3OUThzss8Jt8F+ebj1MTaYmnCCmanFG8rZJyhoskfGPpB3epwiERD9O jUzgHWCBtRPSNNx4klNZzA== 0000928816-01-500245.txt : 20010626 0000928816-01-500245.hdr.sgml : 20010626 ACCESSION NUMBER: 0000928816-01-500245 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM CONVERTIBLE INCOME GROWTH TRUST CENTRAL INDEX KEY: 0000081247 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042493360 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02280 FILM NUMBER: 1666371 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND DATE OF NAME CHANGE: 19841212 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CONVERTIBLE FUND INC /PRED/ DATE OF NAME CHANGE: 19821109 N-30D 1 putntd.txt PUTNAM CONVERTIBLE INCOME-GROWTH TRUST Putnam Convertible Income-Growth Trust SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 4-30-01 [SCALE LOGO OMITTED] FROM THE TRUSTEES [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III] Dear Shareholder: When Putnam Convertible Income-Growth Trust was introduced nearly 30 years ago, its portfolio was dominated by the securities of large industrial companies. In recent years, the emphasis has shifted to midsize and small companies, and the portfolio now reflects this evolution. Your fund's management has concluded that the time has come to formalize these changes in investment strategy, a move in which your Trustees fully concur. You will find an extensive discussion of the changes in the following report from fund management and we encourage you to study them so you can better understand the operation of your fund in the current market environment. We agree with fund management's view that the changes will enable your fund to capitalize on market opportunities while maintaining its conservative risk profile. Finally, we are pleased to announce the addition of James A. Polk to your fund's management team. Before joining Putnam in 1998, Jim was with MFS Investment Management. He has 7 years of investment experience. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds June 20, 2001 REPORT FROM FUND MANAGEMENT Dolores S. Bamford James A. Polk From November 1, 2000 to April 30, 2001, the first half of Putnam Convertible Income-Growth Trust's 2001 fiscal year, the stock and bond markets experienced extreme volatility. As many companies reported disappointing revenues and earnings, stock valuations suffered precipitous losses and investor sentiment seemed irretrievably negative. Taking decisive action to revive the ailing economy, the Federal Reserve Board lowered short term interest rates four times, for a total of two percentage points, between January 1 and April 30. Though initially slow to respond, the market showed signs of recovery in April, as cyclical sectors rallied, giving investors reason for optimism. Your fund, which tends to rise and fall with the broad market, experienced its share of turbulence. The conservative qualities of the fund provided a measure of protection to shareholders, however it was not sufficient to completely avoid the losses served up by the market. Despite strong performance in April, net results for the semiannual period were negative. However, it is worth noting that the fund's shares at NAV slightly outperformed the fund's benchmark, the Merrill Lynch All-Convertible Bond Index, which returned -9.67% for the period. Total return for 6 months ended 4/30/01 Class A Class B Class C Class M NAV POP NAV CDSC NAV CDSC NAV POP - ----------------------------------------------------------------------- -8.17% -13.47% -8.55% -12.74% -8.61% -9.45% -8.43% -11.63% - ----------------------------------------------------------------------- Past performance is not indicative of future results. Performance information for longer periods and explanation of performance calculation methods begin on page 5. * STRATEGY MODIFIED TO HELP BOOST PERFORMANCE The convertible market has evolved considerably since the early years of your fund's operation. The typical convertible issuer is currently more likely to be a small- or midsized company in a growth-oriented industry, instead of one of the large industrial companies that once dominated the convertible markets. In light of these changes and current market conditions, we have undertaken a number of steps that we believe will enable the fund to better capitalize on market opportunities while maintaining its conservative risk profile. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Electronics 13.2% Pharmaceuticals 7.0% Software 6.3% Broadcasting 4.7% Media 4.2% Footnote reads: *Based on net assets as of 4/30/01. Holdings will vary over time. We are emphasizing securities of small and mid-cap companies. Our current research indicates that convertible offerings of small- and mid-cap companies are more attractive than those of large-cap companies. We may, therefore, increase the fund's exposure to these securities as we find those that meet out criteria. In our opinion, the opportunity for appreciation may be greater among smaller companies, which tend to respond more dramatically to the stimulating effect of lower interest rates. We are reducing the number of holdings. In April, we began to cut back total portfolio holdings (which numbered over 300 securities at the time) to approximately 200 securities. By taking larger positions in fewer names, the fund is likely to derive a greater impact from the performance of individual securities. We intend to keep the fund broadly diversified and to adequately manage risk. We are maintaining a lower proportion of common stocks. Although the fund has historically maintained a 25% allocation to common stocks, currently we are limiting this to about 15% of the portfolio. As part of a more disciplined approach that is focused on convertibles, we will buy common stocks selectively and for strategic purposes, to provide exposure to industries where the available convertibles do not meet our criteria. We are targeting convertibles that are equity-sensitive. As long-term shareholders know, convertibles are hybrid securities that can exhibit a range of behaviors from bond-like to equity-like. Those that behave more like their underlying common stock are considered to be "equity-sensitive." In the current market environment, we favor equity-sensitive convertibles, because we believe they have the potential to appreciate in value as the economy accelerates and the equity markets improve. In our opinion, with these changes in strategy, your fund is more likely to produce positive results under current market conditions. Of course, as the investment landscape changes, we will monitor and make adjustments to strategy when indicated. * FUND SHIFTED TO MORE AGGRESSIVE POSITIONING As the semiannual period began, the fund was positioned heavily in high-quality companies. We emphasized convertibles issued by health care, energy, and financial companies and avoided those of technology and telecom companies. This approach helped the fund to outperform its benchmark at the close of 2000. In early January, the Fed surprised investors with a half-point interest rate cut, which, although it was intended to spur the economy, also fueled concerns about recession. Equity valuations continued to fall through March, even in the face of further interest rate reductions. Convertible securities in most sectors became very attractively priced. Under those conditions, we proceeded to implement a more aggressive strategy of buying undervalued convertibles that exhibited greater sensitivity to their underlying stocks. In particular, we added technology names that had experienced significant price reductions. After the third interest rate cut on March 20, the convertibles in the portfolio began to respond, and with the fourth rate reduction on April 18, the securities exhibited strong price appreciation. The portfolio's best performers comprised securities from the technology, industrials, energy, and consumer cyclicals sectors. The more recognizable names among them include America Online and electronics company, Advanced Micro Devices (AMD). As a group, electronics companies proved singularly rewarding. The telecommunications sector remained troubled throughout the period, and the fund benefited from its cautious, underweight position in telecom securities. Fund performance was dampened by weakness in health care and biotechnology stocks, and by large-cap equity holdings, which the fund held in greater proportion than its benchmark. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS Solectron Corp. cv. Liquid Yield Option Notes (LYON) zero %, 2020 Electronics Tyco International, Ltd. cv. notes zero %, 2020 (Bermuda) Conglomerates Reliant Energy, Inc. cv. sub. notes 2%, 2029 Electric utilities Tribune Co. $2.00 cv. pfd. Publishing AT&T Corp. - Liberty Media Group 144A cv. deb. 3 3/4%, 2030 Media Elan Finance Corp., Ltd. cv. LYON zero %, 2018 (Bermuda) Pharmaceuticals Tyco International, Ltd. Comon stock (Bermuda) Conglomerates Celestica, Inc. cv. LYON zero %, 2020 (Canada) Electronics Jacor Communications, Inc. cv. LYON zero %, 2018 Broadcasting Analog Devices, Inc. cv. notes 4 3/4%, 2005 Electronics Footnote reads: These holdings represent 13.6% of the fund's net assets as of 4/30/01. Portfolio holdings will vary over time. * MARKET CONDITIONS ARE ATTRACTIVE FOR CONVERTIBLES In our opinion, the outlook for your fund is positive. As this report was being written, lower interest rates, combined with an abundance of attractively priced securities and improving economic conditions, suggested that the worst may have passed. Indeed, investors appeared to be eagerly testing the waters of the stock market in April, driving the major equity indices to impressive gains. As always, the securities in your fund offer possible downside protection -- they are supported by their "bond floor," or the value that reflects prevailing interest rate levels on comparable straight bonds. With a more focused approach that favors smaller companies, fewer holdings, and equity sensitivity, we believe your fund is well positioned to participate in a market recovery, while providing some insulation from the volatility of equities. 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 4/30/01, there is no guarantee the fund will continue to hold these securities in the future. The lower credit ratings of high-yield bonds in the portfolio reflect a greater possibility that adverse changes in the economy or poor performance of the issuers of these bonds may affect the issuer's ability to pay principal and interest. PERFORMANCE SUMMARY This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam Convertible Income-Growth Trust is designed for investors seeking current income and capital appreciation mainly through bonds and preferred stocks convertible into common stock, with conservation of capital as a secondary objective. TOTAL RETURN FOR PERIODS ENDED 4/30/01 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 -8.17% -13.47% -8.55% -12.74% -8.61% -9.45% -8.43% -11.63% - ------------------------------------------------------------------------------ 1 year -10.12 -15.30 -10.82 -14.83 -10.86 -11.66 -10.52 -13.65 - ------------------------------------------------------------------------------ 5 years 43.12 34.91 37.80 36.30 37.79 37.79 39.86 34.94 Annual average 7.43 6.17 6.62 6.39 6.62 6.62 6.94 6.18 - ------------------------------------------------------------------------------ 10 years 194.47 177.47 172.94 172.94 172.88 172.88 180.15 170.30 Annual average 11.41 10.74 10.56 10.56 10.56 10.56 10.85 10.45 - ------------------------------------------------------------------------------ Annual average (life of fund) 11.48 11.25 10.46 10.46 10.64 10.64 10.75 10.61 - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/01 Standard & Poor's 500 Merrill Lynch Composite Stock All-Convertible Consumer Price Index Bond Index price index - ------------------------------------------------------------------------------- 6 months -12.07% -9.67% 1.67% - ------------------------------------------------------------------------------- 1 year -12.97 -11.77 3.21 - ------------------------------------------------------------------------------- 5 years 106.10 73.78 13.19 Annual average 15.56 11.69 2.51 - ------------------------------------------------------------------------------- 10 years 313.57 252.75 30.77 Annual average 15.25 13.43 2.72 - ------------------------------------------------------------------------------- Annual average (life of fund) 12.83 --* 5.14 - ------------------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-year, 5- and 10-year, if available, and life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each class and in the case of class B and class M shares the higher operating expenses applicable to such shares. For class C shares, returns for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated thereafter, and the higher operating expenses applicable to class C shares. All returns assume reinvestment of distributions at NAV. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. *Index began operations 12/31/87 and did not exist at the fund's inception.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/01 Class A Class B Class C Class M - ----------------------------------------------------------------------------------------- Distributions (number) 2 2 2 2 - ----------------------------------------------------------------------------------------- Income $0.377 $0.313 $0.317 $0.332 - ----------------------------------------------------------------------------------------- Capital gains Long-term 0.557 0.557 0.557 0.557 - ----------------------------------------------------------------------------------------- Short-term 0.523 0.523 0.523 0.523 - ----------------------------------------------------------------------------------------- Total $1.457 $1.393 $1.397 $1.412 - ----------------------------------------------------------------------------------------- Share value: NAV POP NAV NAV NAV POP - ----------------------------------------------------------------------------------------- 10/31/00 $18.62 $19.76 $18.37 $18.55 $18.50 $19.17 - ----------------------------------------------------------------------------------------- 4/30/01 15.62 16.57 15.39 15.54 15.51 16.07 - ----------------------------------------------------------------------------------------- Current return (end of period) - ----------------------------------------------------------------------------------------- Current dividend rate 1 4.15% 3.91% 3.43% 3.45% 3.64% 3.51% - ----------------------------------------------------------------------------------------- Current 30-day SEC yield 2 4.81 4.53 4.06 4.06 4.48 4.32 - ----------------------------------------------------------------------------------------- 1 Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/01 (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 -15.90% -20.75% -16.23% -20.07% -16.27% -17.04% -16.13% -19.09% - ------------------------------------------------------------------------------ 1 year -19.01 -23.67 -19.60 -23.21 -19.65 -20.37 -19.38 -22.21 - ------------------------------------------------------------------------------ 5 years 38.47 30.50 33.43 31.98 33.36 33.36 35.30 30.58 Annual average 6.73 5.47 5.94 5.71 5.93 5.93 6.23 5.48 - ------------------------------------------------------------------------------ 10 years 183.54 167.28 162.88 162.88 162.91 162.91 169.73 160.29 Annual average 10.98 10.33 10.15 10.15 10.15 10.15 10.43 10.04 - ------------------------------------------------------------------------------ Annual average (life of fund) 11.31 11.08 10.30 10.30 10.47 10.47 10.58 10.44 - ------------------------------------------------------------------------------ Past performance is no assurance of future results. More recent returns may be more or less than those shown. They do not take into account any adjustment for taxes payable on reinvested distributions. Investment returns and principal value will fluctuate so that an investor's shares when sold may be worth more or less than their original cost. See first page of performance section for performance calculation method. TERMS AND DEFINITIONS Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge only if the shares are redeemed during the first year. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund's class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase. COMPARATIVE BENCHMARKS Standard & Poor's 500 Composite Stock Price Index* is an index of common stocks frequently used as a general measure of stock market performance. Merrill Lynch All-Convertible Bond Index* is a market capitalization weighted index including all mandatory and non-mandatory domestic corporate convertible securities with an original par or market value of at least $50 million and is frequently used as a general measure of convertible bond market performance. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. *Securities indexes assume reinvestment of all distributions and interest payments and do not take into account brokerage fees or taxes. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index. A NOTE ABOUT DUPLICATE MAILINGS In response to investors' requests, the SEC has modified mailing regulations for semiannual and annual reports and prospectuses. Putnam is now able to send a single copy of these materials to customers who share the same address. This change will automatically apply to all shareholders except those who notify us. If you would prefer to receive your own copy, please call Putnam at 1-800-225-1581. 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.
THE FUND'S PORTFOLIO April 30, 2001 (Unaudited) CONVERTIBLE BONDS AND NOTES (69.1%) (a) PRINCIPAL AMOUNT VALUE Advertising and Marketing Services (1.6%) - ------------------------------------------------------------------------------------------------------------------- $ 700,000 DoubleClick, Inc. cv. sub. notes 4 3/4s, 2006 $ 508,375 196,000 DoubleClick, Inc. 144A cv. sub. notes 4 3/4s, 2006 142,345 2,300,000 Interpublic Group of Cos., Inc. cv. sub. notes 1.87s, 2006 1,966,500 3,000,000 Interpublic Group of Cos., Inc. cv. sub. notes 1.80s, 2004 2,943,750 4,325,000 Omnicom Group, Inc. cv. sub. deb. 2 1/4s, 2013 7,822,844 4,350,000 Young & Rubicam, Inc. cv. sr. notes 3s, 2005 4,263,000 ------------- 17,646,814 Aerospace and Defense (0.3%) - ------------------------------------------------------------------------------------------------------------------- 4,297,000 Kellstrom Industries, Inc. cv. sr. notes 5 1/2s, 2003 1,364,298 2,618,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 1,623,160 ------------- 2,987,458 Airlines (0.1%) - ------------------------------------------------------------------------------------------------------------------- 2,319,000 World Airways, Inc. cv. sr. sub. deb. 8s, 2004 858,030 Automotive (1.3%) - ------------------------------------------------------------------------------------------------------------------- 1,500,000 Exide Corp. 144A cv. sr. sub. notes 2.90s, 2005 622,500 8,731,000 Magna International cv. sub. deb. 5s, 2002 8,916,535 638,000 Mascotech, Inc. cv. sub. deb. 4 1/2s, 2003 500,830 2,160,000 Standard Motor Products, Inc. cv. sub. notes 6 3/4s, 2009 1,255,500 3,177,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 2,545,571 ------------- 13,840,936 Banking (0.3%) - ------------------------------------------------------------------------------------------------------------------- 3,000,000 JMH Finance, Ltd. 144A cv. sr. notes 4 3/4s, 2007 (United Kingdom) 3,198,750 Biotechnology (2.7%) - ------------------------------------------------------------------------------------------------------------------- 3,898,000 Affymetrix, Inc. cv. sub. notes 4 3/4s, 2007 2,523,955 2,024,000 COR Therapeutics, Inc. 144A cv. notes 5s, 2007 2,251,700 3,000,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 8,400,000 3,200,000 Gilead Sciences, Inc. cv. sr. sub. notes 5s, 2007 3,856,000 2,811,000 Gilead Sciences, Inc. 144A cv. notes 5s, 2007 3,387,255 550,000 Invitrogen Corp. 144A cv. sub. notes 5 1/2s, 2007 613,938 1,025,000 Nabi, Inc. cv. sub. notes 6 1/2s, 2003 831,531 10,200,000 Roche Holdings, Inc. 144A cv. bonds zero %, 2015 7,611,750 ------------- 29,476,129 Broadcasting (3.4%) - ------------------------------------------------------------------------------------------------------------------- 86,900 Cox Communications, Inc. cv. sub. deb. 7 3/4s, 2029 5,268,313 15,200,000 Cox Communications, Inc. cv. sub. deb. 0.426s, 2020 6,289,000 6,300,000 Echostar Communications Corp. cv. sub. notes 4 7/8s, 2007 5,843,250 20,800,000 Jacor Communications, Inc. cv. Liquid Yield Option Notes (LYON) zero %, 2018 10,738,000 15,600,000 News America, Inc. 144A cv. LYON zero %, 2021 7,992,192 911,000 Scandinavian Broadcasting System SA cv. sub. notes 7s, 2004 (Luxembourg) 858,618 ------------- 36,989,373 Cable Television (2.0%) - ------------------------------------------------------------------------------------------------------------------- 7,100,000 Adelphia Communications Corp. cv. sub. notes 6s, 2006 6,523,125 3,510,000 Adelphia Communications Corp. cv. sub. notes 3 1/4s, 2021 3,676,725 4,500,000 Charter Communications, Inc. 144A cv. bonds 5 3/4s, 2005 5,484,375 7,500,000 Comcast Corp. cv. deb. zero %, 2020 6,271,875 ------------- 21,956,100 Commercial and Consumer Services (0.7%) - ------------------------------------------------------------------------------------------------------------------- 10,500,000 Cendant Corp. 144A cv. sr. notes zero %, 2021 7,376,250 Communications Equipment (2.9%) - ------------------------------------------------------------------------------------------------------------------- 1,000,000 CommScope, Inc. cv. sub. notes 4s, 2006 811,250 11,500,000 Comverse Technology, Inc. 144A cv. sr. notes 1 1/2s, 2005 10,436,250 9,570,000 Corning, Inc. cv. deb. zero %, 2015 5,682,188 2,518,000 Efficient Networks, Inc. 144A cv. sub. notes 5s, 2005 2,505,410 3,893,000 Juniper Networks, Inc. cv. sub. notes 4 3/4s, 2007 3,138,731 3,173,000 ONI System Corp. cv. notes 5s, 2005 2,562,198 8,689,000 Redback Networks, Inc. cv. sub. notes 5s, 2007 5,626,128 ------------- 30,762,155 Computers (1.2%) - ------------------------------------------------------------------------------------------------------------------- 3,825,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 3,236,906 6,350,000 Anixter International, Inc. 144A cv. sr. notes zero %, 2020 1,682,750 2,000,000 Checkpoint System, Inc. 144A cv. sub. deb. 5 1/4s, 2005 1,460,000 2,237,000 Digital Island, Inc. cv. bonds 6s, 2005 576,028 9,100,000 Hewlett-Packard Co. cv. sub. notes zero %, 2017 4,868,500 1,582,000 Quantum Corp. cv. sub. 7s, 2004 1,348,655 ------------- 13,172,839 Conglomerates (2.0%) - ------------------------------------------------------------------------------------------------------------------- 28,700,000 Tyco International, Ltd. cv. notes zero %, 2020 (Bermuda) 22,027,250 Consumer Finance (1.0%) - ------------------------------------------------------------------------------------------------------------------- $ 10,400,000 Providian Financial Corp. cv. sr. notes 3 1/4s, 2005 10,465,000 Consumer Services (0.1%) - ------------------------------------------------------------------------------------------------------------------- 486,000 Getty Images, Inc. cv. sub. notes 4 3/4s, 2003 499,973 1,390,000 Getty Images, Inc. 144A cv. sub. notes 5s, 2007 1,032,075 ------------- 1,532,048 Electric Utilities (1.7%) - ------------------------------------------------------------------------------------------------------------------- 232,900 Reliant Energy, Inc. cv. sub. notes 2s, 2029 17,889,748 Electrical Equipment (0.2%) - ------------------------------------------------------------------------------------------------------------------- 981,000 Amkor Technologies, Inc. cv. sub. notes 5s, 2007 783,574 2,340,000 Amkor Technologies, Inc. 144A cv. sub. notes 5s, 2007 1,869,075 ------------- 2,652,649 Electronics (12.4%) - ------------------------------------------------------------------------------------------------------------------- 3,600,000 Advanced Micro Devices, Inc. cv. sub. notes 6s, 2005 6,093,000 11,745,000 Analog Devices, Inc. cv. notes 4 3/4s, 2005 10,717,313 8,833,000 Arrow Electronics, Inc. cv. deb. zero %, 2021 3,996,933 2,500,000 Atmel Corp. cv. sub. deb. zero %, 2018 2,059,375 1,542,000 Benchmark Electronics, Inc. cv. sub. notes 6s, 2006 1,355,033 25,400,000 Celestica, Inc. cv. LYON zero %, 2020 (Canada) 11,239,500 7,038,000 Cypress Semiconductor Corp. cv. sub. deb. 3 3/4s, 2005 6,026,288 800,000 DDi Corp. cv. sub. notes 5 1/4s, 2008 860,000 1,203,000 International Rectifier Corp. 144A cv. sub. notes 4 1/4s, 2007 1,203,000 657,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 647,966 1,830,000 Kulicke & Soffa Industries, Inc. cv. sub. notes 4 3/4s, 2006 1,715,625 419,000 Kulicke & Soffa Industries, Inc. 144A cv. sub. notes 4 3/4s, 2006 392,813 109,000 Lattice Semiconductor Corp. cv. sub. notes 4 3/4s, 2006 149,603 1,407,000 Lattice Semiconductor Corp. 144A cv. sub. notes 4 3/4s, 2006 1,931,108 10,231,000 LSI Logic Corp. cv. sub. notes 4s, 2005 8,555,674 3,637,000 PerkinElmer, Inc. cv. deb. zero %, 2020 2,045,813 6,111,000 RF Micro Devices, Inc. cv. sub. notes 3 3/4s, 2005 5,690,869 3,794,000 RF Micro Devices, Inc. 144A cv. sub. notes 3 3/4s, 2005 3,533,163 4,635,000 S3, Inc. cv. sub. notes 5 3/4s, 2003 3,383,550 22,700,000 Sanmina Corp. cv. sub. deb. zero %, 2020 8,569,250 6,900,000 SCI Systems, Inc. cv. sub. 3s, 2007 5,537,250 1,362,000 Semtech Corp. cv. sub. notes 4 1/2s, 2007 1,247,933 4,500,000 Solectron Corp. cv. LYON zero %, 2020 2,131,875 50,545,000 Solectron Corp. cv. LYON zero %, 2020 26,852,778 2,901,000 TranSwitch Corp. cv. notes 4 1/2s, 2005 2,172,791 3,074,000 TranSwitch Corp. 144A cv. notes 4 1/2s, 2005 2,309,343 3,943,000 TriQuint Semiconductor, Inc. cv. notes 4s, 2007 3,031,181 10,700,000 Vitesse Semiconductor Corp. cv. sub. deb. 4s, 2005 8,573,375 2,000,000 Vitesse Semiconductor Corp. 144A cv. sub. deb. 4s, 2005 1,602,500 ------------- 133,624,902 Energy (2.8%) - ------------------------------------------------------------------------------------------------------------------- 3,100,000 Baker Hughes, Inc. cv. notes zero %, 2008 2,627,250 3,000,000 Global Marine, Inc. cv. deb. zero %, 2020 1,601,250 6,400,000 Global Marine, Inc. 144A cv. deb. zero %, 2020 3,416,000 1,000,000 Hanover Compressor Co. cv. sr. notes 4 3/4s, 2008 1,088,125 11,400,000 Nabors Industries, Inc. cv. deb. zero %, 2020 8,692,500 790,000 Offshore Logistics, Inc. 144A cv. sub. notes 6s, 2003 936,150 5,298,000 Parker Drilling Corp. cv. sub. notes 5 1/2s, 2004 4,794,690 5,204,000 Pride International, Inc. cv. deb. zero %, 2021 3,675,325 6,623,000 Pride International, Inc. cv. sub. deb. zero %, 2018 3,170,761 394,000 Seacor Holdings, Inc. cv. sub. notes 5 3/8s, 2006 426,998 ------------- 30,429,049 Entertainment (0.1%) - ------------------------------------------------------------------------------------------------------------------- 706,000 Speedway Motorsports, Inc. cv. sub. deb. 5 3/4s, 2003 729,828 Environmental (0.7%) - ------------------------------------------------------------------------------------------------------------------- 3,293,000 Thermo Instrument Systems, Inc. 144A cv. deb. 4 1/2s, 2003 3,210,675 3,940,000 Thermo Terratech, Inc. 144A cv. sub. deb. 4 5/8s, 2003 3,861,200 ------------- 7,071,875 Health Care Services (0.8%) - ------------------------------------------------------------------------------------------------------------------- 3,446,000 AmeriSource Health Corp. 144A cv. sub. notes 5s, 2007 4,423,803 3,000,000 Omnicare, Inc. cv. bonds 5s, 2007 2,647,500 1,984,000 Wellpoint Health Networks, Inc. cv. sub. deb. zero %, 2019 1,669,040 ------------- 8,740,343 Homebuilding (0.6%) - ------------------------------------------------------------------------------------------------------------------- 10,484,000 Lennar Corp. cv. deb. zero %, 2018 6,578,710 Insurance (0.1%) - ------------------------------------------------------------------------------------------------------------------- 1,200,000 American International Group cv. sr. notes 0.50s, 2007 1,234,500 Investment Banking/Brokerage (1.3%) - ------------------------------------------------------------------------------------------------------------------- 2,400,000 Berkshire Hathaway cv. sr. notes 1s, 2001 7,056,000 7,072,000 E*Trade Group, Inc. cv. sub. notes 6s, 2007 4,844,320 2,570,000 Neuberger Berman, Inc. 144A cv. LYON zero %, 2021 2,212,642 ------------- 14,112,962 Lodging/Tourism (0.2%) - ------------------------------------------------------------------------------------------------------------------- 849,000 Four Seasons Hotels, Inc. cv. notes zero %, 2029 (Canada) 300,334 3,000,000 ShoLodge, Inc. cv. sub. deb. 7 1/2s, 2004 1,815,000 ------------- 2,115,334 Machinery (0.1%) - ------------------------------------------------------------------------------------------------------------------- 3,030,000 Integrated Process Equipment cv. sub. notes 6 1/4s, 2004 1,420,313 Manufacturing (0.4%) - ------------------------------------------------------------------------------------------------------------------- 1,000,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 966,250 3,131,000 Thermo Electron Corp. cv. sr. notes 4s, 2005 2,986,191 ------------- 3,952,441 Media (4.1%) - ------------------------------------------------------------------------------------------------------------------- 15,000,000 America Online, Inc. cv. sub. notes zero %, 2019 8,137,500 5,400,000 AT&T Corp. - Liberty Media Group cv. deb. 3 3/4s, 2030 3,504,060 18,810,000 AT&T Corp. - Liberty Media Group 144A cv. deb. 3 3/4s, 2030 12,108,937 12,500,000 AT&T Corp. - Liberty Media Group 144A cv. sr. notes 3 1/2s, 2031 9,656,250 9,600,000 AT&T Corp. - Liberty Media Group 144A cv. sr. notes 3 1/4s, 2031 10,680,000 ------------- 44,086,747 Medical Services (0.3%) - ------------------------------------------------------------------------------------------------------------------- 4,106,000 Healthsouth Corp. cv. sub. deb. 3 1/4s, 2003 3,762,123 Medical Technology (0.1%) - ------------------------------------------------------------------------------------------------------------------- 1,412,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty 4 3/4s, 2004 1,274,330 Metals (0.5%) - ------------------------------------------------------------------------------------------------------------------- 896,000 Inco, Ltd. cv. deb. 7 3/4s, 2016 (Canada) 870,240 2,741,000 Inco, Ltd. cv. deb. 5 3/4s, 2004 (Canada) 2,675,901 2,148,500 Quanex Corp. cv. sub. deb. 6.88s, 2007 1,906,794 ------------- 5,452,935 Oil & Gas (1.7%) - ------------------------------------------------------------------------------------------------------------------- 5,900,000 Anadarko Petroleum Corp. cv. sub. notes zero %, 2020 4,756,875 7,200,000 Devon Energy Corp. cv. deb. 4.90s, 2008 7,452,000 5,000,000 Kerr-McGee Corp. cv. sub. deb. 5 1/4s, 2010 6,668,750 ------------- 18,877,625 Paper & Forest Products (0.9%) - ------------------------------------------------------------------------------------------------------------------- 7,921,000 Mail-Well, Inc. cv. sub. notes 5s, 2002 6,812,060 3,000,000 Thermo Fibertek, Inc. 144A cv. company guaranty 4 1/2s, 2004 2,726,250 ------------- 9,538,310 Pharmaceuticals (5.7%) - ------------------------------------------------------------------------------------------------------------------- 4,620,000 Alkermes, Inc. cv. sub. notes 3 3/4s, 2007 3,170,475 4,000,000 Allergan, Inc. cv. bonds zero %, 2020 2,495,000 7,396,000 Allergan, Inc. 144A cv. bonds zero %, 2020 4,613,255 2,013,000 Alpharma, Inc. cv. sr. notes 5 3/4s, 2005 1,914,866 8,300,000 Alza Corp. cv. sub. deb. zero %, 2020 5,872,250 5,200,000 Alza Corp. cv. LYON zero %, 2014 6,207,500 3,800,000 Atrix Labs, Inc. cv. sub. notes 7s, 2004 3,980,500 737,000 Aviron cv. sub. notes 5 3/4s, 2005 1,190,255 500,000 Aviron cv. sub. notes 5 1/4s, 2008 509,375 15,500,000 Elan Finance Corp., Ltd. cv. LYON zero %, 2018 (Bermuda) 11,954,375 2,800,000 Inhale Therapeutic Systems, Inc. cv. sub. notes 3 1/2s, 2007 2,338,000 772,000 Inhale Therapeutic Systems, Inc. 144A cv. sub. notes 5s, 2007 795,160 1,000,000 Inhale Therapeutic Systems, Inc. 144A cv. sub. notes 3 1/2s, 2007 841,250 1,800,000 IVAX Corp. cv. sr. sub. notes 5 1/2s, 2007 2,389,500 2,970,000 IVAX Corp. 144A cv. sr. sub. notes 5 1/2s, 2007 3,942,675 3,017,000 Sepracor, Inc. cv. sub. deb. 7s, 2005 2,138,299 4,523,000 Sepracor, Inc. cv. sub. deb. 5s, 2007 2,504,611 4,400,000 Teva Pharmacuetical Corp., LLC 144A cv. sub. notes 1 1/2s, 2005 4,367,000 ------------- 61,224,346 Photography/Imaging (0.8%) - ------------------------------------------------------------------------------------------------------------------- 24,358,000 Xerox Corp. cv. sub. deb. 0.57s, 2018 8,647,090 Power Producers (0.4%) - ------------------------------------------------------------------------------------------------------------------- 3,670,000 Calpine Corp. cv. bonds zero %, 2021 3,853,500 Publishing (0.1%) - ------------------------------------------------------------------------------------------------------------------- 1,900,000 Times Mirror Co. cv. sub. notes zero %, 2017 1,220,750 Real Estate (0.5%) - ------------------------------------------------------------------------------------------------------------------- 2,853,000 EOP Operating LP 144A cv. sr. notes 7 1/4s, 2008 2,942,156 3,150,000 Malan Realty Investors cv. sub. notes 9 1/2s, 2004 2,787,750 ------------- 5,729,906 Retail (2.8%) - ------------------------------------------------------------------------------------------------------------------- 15,700,000 Amazon.com, Inc. cv. sub. deb. 4 3/4s, 2009 7,751,875 1,959,000 AnnTaylor Stores Corp. cv. company guaranty 0.55s, 2019 991,744 1,003,000 AnnTaylor Stores Corp. 144A cv. company guaranty 0.55s, 2019 507,769 2,000,000 Baker (J.), Inc. cv. deb. 7s, 2002 1,647,500 6,604,000 Jones Apparel Group, Inc. 144A cv. sr. notes zero %, 2021 3,491,865 12,600,000 Lowe's Cos., Inc. 144A cv. sr. notes zero %, 2021 8,537,382 10,220,000 TJX Cos., Inc. (The) 144A cv. sub. notes zero %, 2021 7,352,983 ------------- 30,281,118 Semiconductor (0.8%) - ------------------------------------------------------------------------------------------------------------------- 1,520,000 Advanced Energy Industries, Inc. cv. sub. notes 5 1/4s, 2006 1,483,900 3,986,000 Conexant Systems, Inc. cv. sub. notes 4s, 2007 1,873,420 3,041,000 LAM Research Corp. cv. sub. notes 5s, 2002 3,683,411 1,108,000 Photronics, Inc. cv. sub. notes 6s, 2004 1,260,350 ------------- 8,301,081 Software (6.0%) - ------------------------------------------------------------------------------------------------------------------- 4,000,000 Arbor Software Corp. cv. sub. notes 4 1/2s, 2005 3,260,000 4,084,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 3,221,255 4,600,000 BEA Systems, Inc. cv. sub. notes 4s, 2006 6,509,000 500,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2006 707,500 10,900,000 Citrix Systems, Inc. cv. sub. deb. zero %, 2019 5,490,875 5,332,000 I2 Technologies, Inc. cv. sub. notes 5 1/4s, 2006 4,492,210 5,500,000 Manugistics Group, Inc. cv. sub. notes 5s, 2007 5,644,375 6,000,000 Mercury Interactive Corp. cv. notes 4 3/4s, 2007 5,527,500 8,383,000 Network Associates, Inc. cv. sub. deb. zero %, 2018 3,405,594 1,300,000 NVIDIA Corp. cv. sub. notes 4 3/4s, 2007 1,506,375 1,500,000 Peregrine Systems, Inc. 144A cv. sub. notes 5 1/2s, 2007 1,895,625 2,500,000 Rational Software Corp. cv. sub. notes 5s, 2007 2,478,125 1,821,000 Rational Software Corp. 144A cv. sub. notes 5s, 2007 1,805,066 4,800,000 Siebel Systems, Inc. cv. sub. notes 5 1/2s, 2006 10,110,000 5,000,000 Veritas Software Corp. cv. disc. notes 1.856s, 2006 8,768,750 ------------- 64,822,250 Technology Services (1.0%) - ------------------------------------------------------------------------------------------------------------------- 1,430,000 BISYS Group, Inc. (The) 144A cv. notes 4s, 2006 1,437,150 2,967,000 CheckFree Holdings Corp. cv. company guaranty 6 1/2s, 2006 2,618,378 616,000 CheckFree Holdings Corp. 144A cv. sub. notes 6 1/2s, 2006 543,620 2,577,000 Safeguard Scientifics, Inc. cv. sub. notes 5s, 2006 1,439,899 2,975,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 5s, 2006 1,662,281 1,500,000 Silicon Graphics Corp. cv. sr. notes 5 1/4s, 2004 875,625 2,600,000 Telxon Corp. cv. sub. notes 5 3/4s, 2003 2,710,500 ------------- 11,287,453 Telecommunications (0.3%) - ------------------------------------------------------------------------------------------------------------------- 1,387,000 Aether Systems, Inc. cv. sub. notes 6s, 2005 783,655 5,000,000 At Home Corp. 144A cv. sub. notes 4 3/4s, 2006 2,300,000 950,000 Pinnacle Holdings, Inc. 144A cv. sub. notes 5 1/2s, 2007 541,500 ------------- 3,625,155 Textiles (0.1%) - ------------------------------------------------------------------------------------------------------------------- 1,186,000 Reebok International, Ltd. 144A cv. bonds 4 1/4s, 2021 1,209,720 Tobacco (0.5%) - ------------------------------------------------------------------------------------------------------------------- 6,085,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 5,035,338 Transaction Processing (0.8%) - ------------------------------------------------------------------------------------------------------------------- 8,230,000 National Data Corp. cv. sub. notes 5s, 2003 8,332,875 Waste Management (0.7%) - ------------------------------------------------------------------------------------------------------------------- 2,267,000 OHM Corp. cv. sub. deb. 8s, 2006 2,040,300 5,900,000 Waste Management, Inc. cv. sub. notes 4s, 2002 5,759,875 ------------- 7,800,175 ------------- Total Convertible Bonds and Notes (cost $757,932,687) $ 747,204,613 CONVERTIBLE PREFERRED STOCKS (19.5%) (a) NUMBER OF SHARES VALUE Aerospace and Defense (0.1%) - ------------------------------------------------------------------------------------------------------------------- 20,954 Coltech Capitial Trust $2.625 cv. pfd. $ 927,215 Airlines (0.1%) - ------------------------------------------------------------------------------------------------------------------- 13,061 Continental Airlines Finance 144A $3.00 cv. notes 684,070 Automotive (0.4%) - ------------------------------------------------------------------------------------------------------------------- 155,600 Tower Automotive Capital Trust 144A $3.375 cv. pfd. 3,928,900 Banking (0.5%) - ------------------------------------------------------------------------------------------------------------------- 69,572 CNB Capital Trust I $1.50 cum. cv. pfd. 2,565,468 69,350 Union Planters Corp. Ser. E, $2.00 cum. cv. pfd. 3,294,125 ------------- 5,859,593 Broadcasting (1.0%) - ------------------------------------------------------------------------------------------------------------------- 31,000 Cox Communications, Inc. $3.50 cv. pfd. 1,887,125 46,639 Emmis Broadcasting Corp. Ser. A, $3.125 cv. pfd. 1,859,730 16,801 Pegasus Communications Corp. Ser. C, $6.50 cum. cv. pfd. 854,751 1,110 Radio One, Inc. 144A 6.50% cv. pfd. 1,184,925 184,500 Sinclair Broadcast Group, Inc. $3.00 cv. pfd. 4,635,563 ------------- 10,422,094 Cable Television (0.1%) - ------------------------------------------------------------------------------------------------------------------- 13,000 Adelphia Communications Corp. Ser. D, 5.50% cum. cv. pfd. 1,508,000 Commercial and Consumer Services (0.1%) - ------------------------------------------------------------------------------------------------------------------- 53,600 Carriage Services Capital Trust 144A $3.50 cv. pfd. 1,072,000 Electric Utilities (1.1%) - ------------------------------------------------------------------------------------------------------------------- 98,613 Alliant Energy 144A $7.25 cv. pfd. 4,647,138 70,946 CMS Energy Corp. 8.75% cum. cv. pfd. 2,562,924 151,000 Duke Energy Corp. $2.06 cv. pfd. 4,394,100 ------------- 11,604,162 Electronics (0.3%) - ------------------------------------------------------------------------------------------------------------------- 58,331 Pioneer Standard Electronics $3.375 cv. pfd. 2,551,981 10,300 Titan Capital Trust 144A $2.875 cv. pfd. 298,700 ------------- 2,850,681 Energy (0.8%) - ------------------------------------------------------------------------------------------------------------------- 96,153 Evi, Inc. $2.50 cum. cv. pfd. 5,492,740 27,483 Hanover Compressor 144A $3.625 cv. pfd. 2,961,293 ------------- 8,454,033 Engineering & Construction (0.3%) - ------------------------------------------------------------------------------------------------------------------- 113,000 TXI Capital Trust I $2.75 cv. pfd. 3,262,875 Entertainment (--%) - ------------------------------------------------------------------------------------------------------------------- 14,000 Six Flags, Inc. $1.813 cum. cv. pfd. 441,000 Food (0.3%) - ------------------------------------------------------------------------------------------------------------------- 89,026 Suiza Capital Trust II $2.75 cv. pfd. 3,227,193 Health Care Services (0.9%) - ------------------------------------------------------------------------------------------------------------------- 33,726 Caremark RX Capital Trust I 144A $3.50 cv. pfd. 3,752,018 28,500 McKesson Financing Trust $2.50 cum. cv. pfd. 1,346,625 83,920 Owens & Minor Trust I Ser. A, $2.688 cum. cv. pfd. 4,814,910 ------------- 9,913,553 Household Furniture and Appliances (--%) - ------------------------------------------------------------------------------------------------------------------- 32,728 Metromedia International Group, Inc. $3.625 cum. cv. pfd. 564,558 Insurance (1.1%) - ------------------------------------------------------------------------------------------------------------------- 34,300 ACE, Ltd. $4.125 cum. cv. pfd. 2,593,938 79,100 Metlife Capital Trust I $4.00 cv. pfd. 7,277,200 211,885 Philadelphia Consolidated Holding Corp. 0.50% cv. pfd. 2,410,192 ------------- 12,281,330 Metals (0.1%) - ------------------------------------------------------------------------------------------------------------------- 105,000 Freeport-McMoRan Copper & Gold Co., Inc. $1.75 cv. pfd. 1,627,500 Natural Gas Utilities (1.5%) - ------------------------------------------------------------------------------------------------------------------- 78,000 El Paso Corp. Capital Trust I $2.375 cv. pfd. 6,610,500 76,500 Enron Corp. $7.00 cv. pfd 3,126,938 74,991 NiSource, Inc. $3.875 cv. pfd. 3,946,401 182,300 Semco Capital Trust II 11.00% cum. cv. pfd. 2,255,963 ------------- 15,939,802 Oil & Gas (1.1%) - ------------------------------------------------------------------------------------------------------------------- 87,300 Kerr-McGee Corp. 5.50% cv. pfd. 4,670,550 41,400 Neuvo Financing I Ser. A, $2.875 cum. cv. pfd. 1,200,600 16,200 Newfield Financial Trust 1 $3.25 cum. cv. pfd. 919,350 91,400 Unocal Capital Trust $3.125 cum. cv. pfd. 4,809,925 ------------- 11,600,425 Paper & Forest Products (0.7%) - ------------------------------------------------------------------------------------------------------------------- 72,536 International Paper Co. $2.625 cv. pfd. 3,218,785 61,122 Owens-Illinois, Inc. $2.375 cv. pfd. 1,123,117 72,772 Sealed Air Corp. Ser. A, $1.00 cum. cv. pfd. 2,919,977 ------------- 7,261,879 Pharmaceuticals (1.1%) - ------------------------------------------------------------------------------------------------------------------- 50,814 Biovail Corp. $3.375 cv. pfd. (Canada) 3,518,870 2,311 Cephalon, Inc. $3.63 cv. pfd. 410,780 167,300 Pharmacia Corp. 6.50% cum. cv. pfd. 7,674,888 ------------- 11,604,538 Power Producers (2.2%) - ------------------------------------------------------------------------------------------------------------------- 101,800 AES Trust II $3.375 cv. pfd. 7,507,750 88,400 Calpine Capital Trust II 144A $2.75 cum. cv. pfd. 10,309,650 79,935 Mirant Trust I Ser. A, $3.125 cum. cv. pfd 6,554,670 ------------- 24,372,070 Publishing (1.7%) - ------------------------------------------------------------------------------------------------------------------- 303,713 Tribune Co. 6.25% cv. pfd. 5,732,583 101,400 Tribune Co. $2.00 cv. pfd. 12,294,750 ------------- 18,027,333 Railroads (0.9%) - ------------------------------------------------------------------------------------------------------------------- 86,387 Canadian National Railway Co. $2.625 cv. pfd. (Canada) 4,740,487 105,100 Union Pacific Capital Trust $3.125 cum. cv. pfd. 5,057,938 ------------- 9,798,425 Real Estate (1.0%) - ------------------------------------------------------------------------------------------------------------------- 65,487 Archstone Communities Trust Ser. A, $1.75 cum. cv. pfd. 2,275,673 122,336 Equity Residential Properties Trust Ser. E, $1.75 cv. pfd. 3,578,328 74,490 Tanger Factory Outlet Centers Ser. A, $0.545 cum. cv. pfd. 1,582,913 64,617 Vornado Realty Trust Ser. A, $3.25 cum. cv. pfd. 3,287,390 ------------- 10,724,304 Restaurants (0.1%) - ------------------------------------------------------------------------------------------------------------------- 25,148 Wendy's Financing Ser. A, $2.50 cv. pfd. 1,307,696 Retail (0.4%) - ------------------------------------------------------------------------------------------------------------------- 32,000 CVS Auto Common Exchange Trust 6.00% cv. pfd. 3,104,000 29,500 Dollar General Strypes Trust 8.50% cv. pfd. 947,688 ------------- 4,051,688 Shipping (0.2%) - ------------------------------------------------------------------------------------------------------------------- 57,900 CNF Trust I Ser. A, $2.50 cum. cv. pfd. 2,627,213 Telecommunications (1.4%) - ------------------------------------------------------------------------------------------------------------------- 53,821 Broadwing, Inc. Ser. B $3.375 cum cv. pfd. 2,583,408 33,800 Global Crossing, Ltd. 144A 7.00% cum. cv. pfd. (Bermuda) 4,005,300 116,500 Qwest Trends Trust 144A 5.75% cv. pfd. 8,169,563 ------------- 14,758,271 ------------- Total Convertible Preferred Stocks (cost $214,014,508) $ 210,702,401 COMMON STOCKS (8.9%) (a) NUMBER OF SHARES VALUE Banking (0.2%) - ------------------------------------------------------------------------------------------------------------------- 28,516 M&T Bank Corp. $ 2,040,320 Broadcasting (0.3%) - ------------------------------------------------------------------------------------------------------------------- 61,171 News Corp., Ltd. (The) ADR (Australia) 2,348,966 30,585 News Corp., Ltd. (The) ADR pfd. (Australia) 994,318 ------------- 3,343,284 Commercial and Consumer Services (0.8%) - ------------------------------------------------------------------------------------------------------------------- 476,400 Cendant Corp. (NON) 8,451,336 Conglomerates (1.1%) - ------------------------------------------------------------------------------------------------------------------- 214,100 Tyco International, Ltd. (Bermuda) 11,426,517 Electronics (0.5%) - ------------------------------------------------------------------------------------------------------------------- 108,000 Flextronics International, Ltd. (Singapore) (NON) 2,904,120 60,300 Linear Technology Corp. 2,896,812 ------------- 5,800,932 Energy (0.5%) - ------------------------------------------------------------------------------------------------------------------- 104,213 Baker Hughes, Inc. 4,094,529 25,400 Transocean Sedco Forex, Inc. 1,378,712 ------------- 5,473,241 Entertainment (0.3%) - ------------------------------------------------------------------------------------------------------------------- 158,503 Six Flags, Inc. (NON) 3,477,556 Health Care Services (0.8%) - ------------------------------------------------------------------------------------------------------------------- 113,500 HCA-The Healthcare Co. 4,392,450 104,200 Tenet Healthcare Corp. (NON) 4,651,488 ------------- 9,043,938 Insurance (0.3%) - ------------------------------------------------------------------------------------------------------------------- 74,600 ACE, Ltd. 2,663,220 Investment Banking/Brokerage (1.1%) - ------------------------------------------------------------------------------------------------------------------- 69,400 J.P. Morgan Chase & Co. 3,329,812 133,700 Morgan Stanley, Dean Witter & Co. 8,395,023 ------------- 11,724,835 Metals (0.3%) - ------------------------------------------------------------------------------------------------------------------- 83,100 Alcoa, Inc. 3,440,340 Natural Gas Utilities (0.9%) - ------------------------------------------------------------------------------------------------------------------- 132,900 Enron Corp. 8,335,488 50,000 NiSource, Inc. 1,488,500 ------------- 9,823,988 Oil & Gas (0.1%) - ------------------------------------------------------------------------------------------------------------------- 25,900 BP PLC ADR (United Kingdom) 1,400,672 Pharmaceuticals (0.2%) - ------------------------------------------------------------------------------------------------------------------- 22,700 Johnson & Johnson 2,190,096 Photography/Imaging (0.2%) - ------------------------------------------------------------------------------------------------------------------- 242,300 Xerox Corp. 2,190,392 Publishing (0.1%) - ------------------------------------------------------------------------------------------------------------------- 49,628 Reader's Digest Association, Inc. (The) Class A 1,372,214 Retail (0.4%) - ------------------------------------------------------------------------------------------------------------------- 29,700 Lowe's Cos., Inc. 1,871,100 188,714 Rite Aid Corp. (NON) 1,375,725 44,900 TJX Cos., Inc. (The) 1,406,717 ------------- 4,653,542 Semiconductor (0.5%) - ------------------------------------------------------------------------------------------------------------------- 126,000 Teradyne, Inc. (NON) 4,977,000 Software (0.3%) - ------------------------------------------------------------------------------------------------------------------- 123,900 Aspen Technology, Inc. (NON) 2,609,334 -------------- Total Common Stocks (cost $91,371,925) $ 96,102,757 UNITS (1.3%) (a) NUMBER OF UNITS VALUE - ------------------------------------------------------------------------------------------------------------------- 50,400 Dominion Resources, Inc. units cv. pfd. 9 1/2s, 2004 $ 3,281,040 210,500 Washington Mutual Capital Trust I 144A units cv. pfd. 5 3/8s, 2041 10,682,875 -------------- Total Units (cost $13,600,446) $ 13,963,915 PREFERRED STOCKS (--%) (a) (cost $599) NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------------------- 599 Trikon Technologies, Inc. Ser. H, 8.125% pfd. (PIK) $ 5,391 SHORT-TERM INVESTMENTS (--%) (a) (cost $117,000) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------- $ 117,000 Interest in $650,000,000 joint tri-party repurchase agreement dated April 30, 2001 with Credit Suisse First Boston due May 1, 2001 with respect to various U.S. Government obligations -- maturity value of $117,015 for an effective yield of 4.63% $ 117,000 - ------------------------------------------------------------------------------------------------------------------- Total Investments (cost $1,077,037,165) (b) $1,068,096,077 - ------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $1,081,236,855. (b) The aggregate identified cost on a tax basis is $1,092,906,346, resulting in gross unrealized appreciation and depreciation of $56,882,955 and $81,693,224, respectively, or net unrealized depreciation of $24,810,269. (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. The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2001 (Unaudited) Assets - ------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $1,077,037,165) (Note 1) $1,068,096,077 - ------------------------------------------------------------------------------------------- Cash 6,553,885 - ------------------------------------------------------------------------------------------- Dividends, interest and other receivables 8,006,904 - ------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 1,406,291 - ------------------------------------------------------------------------------------------- Receivable for securities sold 50,968,711 - ------------------------------------------------------------------------------------------- Total assets 1,135,031,868 Liabilities - ------------------------------------------------------------------------------------------- Payable for securities purchased 50,189,237 - ------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 1,490,643 - ------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 1,556,896 - ------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 104,552 - ------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 64,821 - ------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 12,803 - ------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 325,727 - ------------------------------------------------------------------------------------------- Other accrued expenses 50,334 - ------------------------------------------------------------------------------------------- Total liabilities 53,795,013 - ------------------------------------------------------------------------------------------- Net assets $1,081,236,855 Represented by - ------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $1,269,911,898 - ------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 7,492,868 - ------------------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (187,226,823) - ------------------------------------------------------------------------------------------- Net unrealized depreciation of investments (8,941,088) - ------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $1,081,236,855 Computation of net asset value and offering price - ------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($820,685,929 divided by 52,553,740 shares) $15.62 - ------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $15.62)* $16.57 - ------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($190,084,736 divided by 12,348,217 shares)** $15.39 - ------------------------------------------------------------------------------------------- Net asset value and offering price per class C share ($5,644,722 divided by 363,161 shares)** $15.54 - ------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($11,710,790 divided by 755,238 shares) $15.51 - ------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of 15.51)* $16.07 - ------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($53,110,678 divided by 3,400,312 shares) $15.62 - ------------------------------------------------------------------------------------------- * 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.
STATEMENT OF OPERATIONS Six months ended April 30, 2001 (Unaudited) Investment income: - ------------------------------------------------------------------------------------------- Interest $ 22,942,107 - ------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $4,300) 10,979,632 - ------------------------------------------------------------------------------------------- Total investment income 33,921,739 Expenses: - ------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 3,275,699 - ------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 661,389 - ------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 26,180 - ------------------------------------------------------------------------------------------- Administrative services (Note 2) 15,757 - ------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,046,386 - ------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 1,016,881 - ------------------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 27,877 - ------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 47,326 - ------------------------------------------------------------------------------------------- Other 221,975 - ------------------------------------------------------------------------------------------- Total expenses 6,339,470 - ------------------------------------------------------------------------------------------- Expense reduction (Note 2) (261,289) - ------------------------------------------------------------------------------------------- Net expenses 6,078,181 - ------------------------------------------------------------------------------------------- Net investment income 27,843,558 - ------------------------------------------------------------------------------------------- Net realized loss on investments (Notes 1 and 3) (175,031,797) - ------------------------------------------------------------------------------------------- Net realized loss on futures contracts (Note 1) (1,645,149) - ------------------------------------------------------------------------------------------- Net realized gain on foreign currency transactions (Note 1) 3,889 - ------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 46,691,829 - ------------------------------------------------------------------------------------------- Net loss on investments (129,981,228) - ------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(102,137,670) - ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS Six months ended Year ended April 30 October 31 2001* 2000 - -------------------------------------------------------------------------------------------------- Decrease in net assets - -------------------------------------------------------------------------------------------------- Operations: - -------------------------------------------------------------------------------------------------- Net investment income $ 27,843,558 $ 50,428,707 - -------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments and foreign currency transactions (176,673,057) 75,732,525 - -------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments 46,691,829 (55,064,789) - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (102,137,670) 71,096,443 - -------------------------------------------------------------------------------------------------- Distributions to shareholders (Note 1): - -------------------------------------------------------------------------------------------------- From net investment income Class A (19,010,238) (38,466,746) - -------------------------------------------------------------------------------------------------- Class B (3,931,535) (8,623,570) - -------------------------------------------------------------------------------------------------- Class C (106,249) (90,474) - -------------------------------------------------------------------------------------------------- Class M (253,417) (563,913) - -------------------------------------------------------------------------------------------------- Class Y (1,298,086) (2,592,872) - -------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (53,459,214) (92,671,101) - -------------------------------------------------------------------------------------------------- Class B (13,548,879) (26,708,331) - -------------------------------------------------------------------------------------------------- Class C (332,481) (118,538) - -------------------------------------------------------------------------------------------------- Class M (832,384) (1,567,379) - -------------------------------------------------------------------------------------------------- Class Y (3,421,849) (5,932,817) - -------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 29,840,185 1,570,846 - -------------------------------------------------------------------------------------------------- Total decrease in net assets (168,491,817) (104,668,452) Net assets - -------------------------------------------------------------------------------------------------- Beginning of period 1,249,728,672 1,354,397,124 - -------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $7,492,868 and $4,248,835, respectively) $1,081,236,855 $1,249,728,672 - -------------------------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
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 - ------------------------------------------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.62 $20.26 $20.04 $23.22 $21.24 $19.42 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (a) .41 .76 .75 .76 .78 .81 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (1.95) .30 2.30 (1.02) 3.70 2.70 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (1.54) 1.06 3.05 (.26) 4.48 3.51 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.38) (.77) (.75) (.76) (.87) (.98) - ------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- -- (.06) (.03) (.06) -- - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.08) (1.93) (2.02) (2.13) (1.57) (.71) - ------------------------------------------------------------------------------------------------------------------ Total distributions (1.46) (2.70) (2.83) (2.92) (2.50) (1.69) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $15.62 $18.62 $20.26 $20.04 $23.22 $21.24 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (8.17)* 5.16 16.42 (1.37) 22.86 18.99 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $820,686 $933,703 $982,956 $1,056,693 $1,168,470 $898,486 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .50* .97 .98 .97 1.03 1.06 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 2.55* 3.86 3.73 3.50 3.56 3.99 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 107.21* 176.66 54.74 92.76 70.74 61.43 - ------------------------------------------------------------------------------------------------------------------ * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
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 - ------------------------------------------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.37 $20.02 $19.83 $23.01 $21.09 $19.30 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (a) .35 .61 .60 .59 .63 .66 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (1.94) .29 2.27 (1.01) 3.64 2.68 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (1.59) .90 2.87 (.42) 4.27 3.34 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.31) (.62) (.60) (.61) (.73) (.84) - ------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- -- (.06) (.02) (.05) -- - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.08) (1.93) (2.02) (2.13) (1.57) (.71) - ------------------------------------------------------------------------------------------------------------------ Total distributions (1.39) (2.55) (2.68) (2.76) (2.35) (1.55) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $15.39 $18.37 $20.02 $19.83 $23.01 $21.09 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (8.55)* 4.38 15.58 (2.11) 21.89 18.14 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $190,085 $235,897 $291,017 $289,652 $257,163 $146,127 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .87* 1.72 1.73 1.72 1.78 1.81 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 2.16* 3.11 2.99 2.74 2.78 3.26 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 107.21* 176.66 54.74 92.76 70.74 61.43 - ------------------------------------------------------------------------------------------------------------------ * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS C - --------------------------------------------------------------------------- Six months ended For the period Per-share April 30 Year ended July 26, 1999+ operating performance (Unaudited) October 31 to October 31 - --------------------------------------------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------- Net asset value, beginning of period $18.55 $20.23 $20.85 - --------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------- Net investment income (a) .36 .61 .20 - --------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.97) .31 (.59) - --------------------------------------------------------------------------- Total from investment operations (1.61) .92 (.39) - --------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------- From net investment income (.32) (.67) (.20) - --------------------------------------------------------------------------- In excess of net investment income -- -- (.03) - --------------------------------------------------------------------------- From net realized gain on investments (1.08) (1.93) -- - --------------------------------------------------------------------------- Total distributions (1.40) (2.60) (.23) - --------------------------------------------------------------------------- Net asset value, end of period $15.54 $18.55 $20.23 - --------------------------------------------------------------------------- Total return at net asset value (%)(b) (8.61)* 4.45 (1.87)* - --------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------- Net assets, end of period (in thousands) $5,645 $5,545 $661 - --------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .87* 1.72 .47* - --------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.19* 3.17 1.12* - --------------------------------------------------------------------------- Portfolio turnover (%) 107.21* 176.66 54.74 - --------------------------------------------------------------------------- + Commencement of operations. * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share April 30 operating performance (Unaudited) Year ended October 31 - ------------------------------------------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.50 $20.13 $19.92 $23.08 $21.14 $19.37 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (a) .37 .66 .65 .65 .67 .73 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (1.95) .31 2.28 (1.00) 3.67 2.65 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (1.58) .97 2.93 (.35) 4.34 3.38 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.33) (.67) (.65) (.66) (.78) (.90) - ------------------------------------------------------------------------------------------------------------------ In excess of net investment income -- -- (.05) (.02) (.05) -- - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.08) (1.93) (2.02) (2.13) (1.57) (.71) - ------------------------------------------------------------------------------------------------------------------ Total distributions (1.41) (2.60) (2.72) (2.81) (2.40) (1.61) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $15.51 $18.50 $20.13 $19.92 $23.08 $21.14 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (8.43)* 4.73 15.87 (1.75) 22.24 18.30 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $11,711 $15,370 $16,338 $18,081 $14,719 $7,128 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .75* 1.47 1.48 1.47 1.53 1.54 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 2.28* 3.36 3.23 2.99 3.04 3.55 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 107.21* 176.66 54.74 92.76 70.74 61.43 - ------------------------------------------------------------------------------------------------------------------ * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS Y - --------------------------------------------------------------------------- Six months ended For the period Per-share April 30 Year ended Dec. 30, 1998+ operating performance (Unaudited) October 31 to October 31 - --------------------------------------------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------- Net asset value, beginning of period $18.63 $20.26 $19.32 - --------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------- Net investment income (a) .44 .81 .72 - --------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.97) .31 .98 - --------------------------------------------------------------------------- Total from investment operations (1.53) 1.12 1.70 - --------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------- From net investment income (.40) (.82) (.72) - --------------------------------------------------------------------------- In excess of net investment income -- -- (.04) - --------------------------------------------------------------------------- From net realized gain on investments (1.08) (1.93) -- - --------------------------------------------------------------------------- Total distributions (1.48) (2.75) (.76) - --------------------------------------------------------------------------- Net asset value, end of period $15.62 $18.63 $20.26 - --------------------------------------------------------------------------- Total return at net asset value (%)(b) (8.10)* 5.49 8.87* - --------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------- Net assets, end of period (in thousands) $53,111 $59,214 $63,425 - --------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .37* .72 .61* - --------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.68* 4.11 3.43* - --------------------------------------------------------------------------- Portfolio turnover (%) 107.21* 176.66 54.74 - --------------------------------------------------------------------------- + Commencement of operations. * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
NOTES TO FINANCIAL STATEMENTS April 30, 2001 (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 to provide, with equal emphasis, 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, LLC ("Putnam Management"), the fund's manager, a wholly-owned subsidiary of Putnam Investments, LLC. 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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sales price on its principal exchange, or if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value. Other investments, including restricted securities, are stated at fair value following procedures approved by the Trustees. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by an independent pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Discounts on zero coupon bonds and original issue discount bonds are accreted according to the yield-to-maturity basis. Any premium resulting from the purchase of bonds is amortized on a yield-to-maturity basis. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. F) 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. G) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended April 30, 2001, the fund had no borrowings against the line of credit. H) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. I) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.65% of the first $500 million of average net assets, 0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and 0.38% thereafter. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. The fund also reduced expenses through brokerage service arrangements. For the six months ended April 30, 2001, the fund's expenses were reduced by $261,289 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $1,607 has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as a Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam Investments, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management 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 to an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets attributable to class A, class B, class C and class M shares, respectively. For the six months ended April 30, 2001, Putnam Retail Management, acting as underwriter received net commissions of $67,626 and $1,175 from the sale of class A and class M shares, respectively, and received $188,553 and $2,954 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 six months ended April 30, 2001, Putnam Retail Management, acting as underwriter received $408 on class A redemptions. Note 3 Purchases and sales of securities During the six months ended April 30, 2001, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $1,192,194,365 and $1,242,045,448, respectively. There were no purchases and sales of U.S. government obligations. Note 4 Capital shares At April 30, 2001, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended April 30, 2001 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 3,642,728 $ 56,944,020 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,141,226 64,346,015 - --------------------------------------------------------------------------- 7,783,954 121,290,035 Shares repurchased (5,375,733) (86,360,418) - --------------------------------------------------------------------------- Net increase 2,408,221 $ 34,929,617 - --------------------------------------------------------------------------- Year ended October 31, 2000 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 7,152,407 $ 141,639,579 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,528,472 105,567,078 - --------------------------------------------------------------------------- 12,680,879 247,206,657 Shares repurchased (11,057,921) (217,722,604) - --------------------------------------------------------------------------- Net increase 1,622,958 $ 29,484,053 - --------------------------------------------------------------------------- Six months ended April 30, 2001 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 1,050,880 $ 16,952,316 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 948,358 14,552,648 - --------------------------------------------------------------------------- 1,999,238 31,504,964 Shares repurchased (2,489,301) (39,746,430) - --------------------------------------------------------------------------- Net decrease (490,063) $ (8,241,466) - --------------------------------------------------------------------------- Year ended October 31, 2000 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 3,203,179 $ 62,683,312 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,428,194 26,917,469 - --------------------------------------------------------------------------- 4,631,373 89,600,781 Shares repurchased (6,331,558) (123,771,531) - --------------------------------------------------------------------------- Net decrease (1,700,185) $ (34,170,750) - --------------------------------------------------------------------------- Six months ended April 30, 2001 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 120,230 $ 1,967,785 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 25,523 395,053 - --------------------------------------------------------------------------- 145,753 2,362,838 Shares repurchased (81,566) (1,291,654) - --------------------------------------------------------------------------- Net increase 64,187 $ 1,071,184 - --------------------------------------------------------------------------- Year ended October 31, 2000 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 275,873 $5,387,080 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,780 110,897 - --------------------------------------------------------------------------- 281,653 5,497,977 Shares repurchased (15,330) (297,819) - --------------------------------------------------------------------------- Net increase 266,323 $5,200,158 - --------------------------------------------------------------------------- Six months ended April 30, 2001 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 51,375 $ 815,546 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 63,484 981,054 - --------------------------------------------------------------------------- 114,859 1,796,600 Shares repurchased (190,641) (3,135,226) - --------------------------------------------------------------------------- Net decrease (75,782) $(1,338,626) - --------------------------------------------------------------------------- Year ended October 31, 2000 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 163,110 $ 3,224,637 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 90,543 1,717,662 - --------------------------------------------------------------------------- 253,653 4,942,299 Shares repurchased (234,303) (4,570,644) - --------------------------------------------------------------------------- Net increase 19,350 $ 371,655 - --------------------------------------------------------------------------- Six months ended April 30, 2001 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 226,416 $ 3,536,832 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 296,249 4,719,935 - --------------------------------------------------------------------------- 522,665 8,256,767 Shares repurchased (300,895) (4,837,291) - --------------------------------------------------------------------------- Net increase 221,770 $ 3,419,476 - --------------------------------------------------------------------------- Year ended October 31, 2000 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 342,916 $ 7,420,675 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 475,801 8,525,689 - --------------------------------------------------------------------------- 818,717 15,946,364 Shares repurchased (770,533) (15,260,634) - --------------------------------------------------------------------------- Net increase 48,184 $ 685,730 - --------------------------------------------------------------------------- Note 5 New accounting pronouncement In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after December 15, 2000. The revised Guide will require the fund to amortize premium and accrete discount on all fixed-income securities, and classify as interest income gains and losses realized on pay downs on mortgage-backed securities which are presently included in realized gain/loss. Adopting these accounting principles will not affect the fund's net asset value, but will change the classification of certain amounts between interest income and realized and unrealized gain/loss in the Statement of operations. The fund has not yet quantified the impact, if any, resulting from the adoption of this principle on the financial statements. FUND INFORMATION WEB SITE www.putnaminvestments.com INVESTMENT MANAGER Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Retail Management One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES John A. Hill, Chairman Jameson Adkins Baxter Hans H. Estin Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam, III President Charles E. Porter Executive Vice President and Treasurer Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President Brett C. Browchuk Vice President Edward T. Shadek, Jr. Vice President Dolores S. Bamford Vice President and Fund Manager James A. Polk Vice President and Fund Manager Richard A. Monaghan Vice President Richard G. Leibovitch Vice President John R. Verani Vice President This report is for the information of shareholders of Putnam Convertible Income-Growth Trust. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary and Putnam's Quarterly Ranking Summary. For more information or to request a prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam Investments' Web site: www.putnaminvestments.com. NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - --------------------- PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS - --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminvestments.com SA019-72167 008/223/920 6/01 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - ---------------------------------------------------------------------------- Putnam Convertible Income-Growth Trust Supplement to semiannual Report dated 4/30/01 The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to defined contribution plans investing $150 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A, B, C, and M shares, which are discussed more extensively in the annual report. SEMIANNUAL RESULTS AT A GLANCE - ---------------------------------------------------------------------------- Total return for periods ended 4/30/01 NAV 6 months -8.10% 1 year -9.89 5 years 43.95 Annual average 7.56 10 years 196.17 Annual average 11.47 Life of fund (since class A inception, 6/29/72) Annual average 11.50 Share value NAV 10/31/00 $18.63 4/30/01 $15.62 - ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total Short Long 2 $0.398 $0.523 $0.557 $1.478 - ---------------------------------------------------------------------------- Please note that past performance is not indicative of future results. More recent returns may be more or less than those shown. Returns shown for class Y shares for periods prior to their inception are derived from the historical performance of class A shares, and are not adjusted to reflect the initial sales charge currently applicable to class A shares. These returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, typically are lower than the operating expenses applicable to class A shares. All returns assume reinvestment of distributions at net asset value. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. -----END PRIVACY-ENHANCED MESSAGE-----