N-30D 1 SEMI ANNUAL REPORT Putnam Convertible Income-Growth Trust SEMIANNUAL REPORT April 30, 1994 [ARTWORK APPEARS HERE] [LOGO APPEARS HERE] Boston * London * Tokyo Performance highlights "Conservative investors may appreciate this fund's cost-conscious investment strategy, which adds an extra layer of downside safety without retarding total returns." --Morningstar Mutual Fund Values, 1/7/94 Performance should always be considered in light of a fund's investment strategy. Putnam Convertible Income-Growth Trust is designed for investors seeking current income and capital appreciation mainly through bonds and preferred stocks convertible into common stock, with capital conservation as a secondary objective. SEMIANNUAL RESULTS AT A GLANCE
Total return: Class A Class B Six months ended 4/30/94 NAV POP NAV CDSC (change in value plus reinvested earnings) -2.04% -7.66% -2.49% -7.09% Current return: NAV POP NAV (end of period) Current dividend rate1 5.10% 4.80% 4.67% Current 30-day SEC yield2 4.10 3.86 3.32 Share value: NAV POP NAV 10/31/93 $20.38 $21.62 $20.35 4/30/94 18.83 19.98 18.75 Distributions: Long-term No. Income capital gain Total Class A 2 $0.48 $0.68 $1.16 Class B 2 $0.442 $0.68 $1.122
Performance data represent past results. For performance over longer periods, see pages 8 and 9. POP assumes 5.75% maximum sales charge. CDSC assumes 5% maximum contingent deferred sales charge. 1Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2Based only on investment income, calculated per SEC guidelines. 2 [PHOTOGRAPH OF GEORGE PUTNAM From the Chairman APPEARS HERE] [C] KARSH, OTTAWA Dear Shareholder: Many shareholders have been asking us whether we think the volatility that hit the securities markets in February and March was a prelude to further decline during the rest of 1994. We have been pointing out that the recent adjustments in the markets are a natural occurrence at this stage of the economic recovery. Some volatility will likely continue for a while as investors digest new realities in areas such as interest rates, inflation, and the pace of the recovery. But the economy is still strong, interest rates remain historically low, and inflation appears under control. Overall prospects for the long term, in our view, are still positive. Seasoned investors know there will occasionally be periods of rough going. But experience has also taught them that long-term investment programs should rarely be altered in response to short-term events. In the report that follows, fund managers Hugh Mullin and Charles Pohl discuss the performance of Putnam Convertible Income-Growth Trust in this market environment. Respectfully yours, /S/ George Putnam George Putnam June 15, 1994 [C] Copyright 3 Report from the fund managers Hugh H. Mullin, lead manager Charles G. Pohl Intensifying volatility in the financial markets over the six months ended April 30, 1994, presented some challenges for Putnam Convertible Income-Growth Trust. Even so, the fund's strategy, which is to maintain a portfolio primarily of bonds and preferred stocks convertible into common stock, helped to reduce the impact of recent market volatility. While the fund's total return for the six months ended April 30, 1994, was negative, as were the returns of most other investments, the decline of net asset value was in line with that of the S&P 500/(R)/ and less than that of the Lehman Brothers Corporate Bond Index. (see table on page 8) TWO-PART STRATEGY HELPED CUSHION THE FUND Late in 1993, we recognized that the direction of short-term interest rates was likely to reverse, and the spread between short- and long-term rates could be expected to narrow. In anticipation of such a development, we employed a two- part strategy to position the fund more conservatively. We believed that many of the convertible securities issued during the second half of 1993 were priced somewhat aggressively and, consequently, had little potential for appreciation. For this reason, we avoided these overpriced issues, instead selecting holdings that represented a better value in the market. Also, we maintained a larger percentage of the fund's holdings in cash during the period. About 8% of the fund's holdings were in short-term cash equivalents at quarter's end. We believe this decision was to the fund's advantage, as it helped cushion the value of the portfolio during the recent volatility. CYCLICALS: EARLY VERSUS LATE Since the beginning of the current economic upswing, we have emphasized cyclical securities in the fund's portfolio. Cyclical 4 securities tend to perform well when the economy improves, either in the earlier or later stages of recovery. When selecting these securities, we identify them from among the two types: early and late. Early cyclicals, which are represented primarily by manufacturers of automobiles and consumer durables such as large appliances have, we believe, already provided their strongest performance. Therefore, we took profits on many of these holdings during the period. We believe that late cyclicals, however, have not yet appreciated fully in value, since they tend to perform best later in an economic recovery. We intend to hold these securities until we believe they are approaching peak valuations. An example of a late-cyclical convertible stock holding that we favor is Alumax, Inc. This aluminum producer operates low-cost smelting operations and stands to benefit from increased construction activity. HIGH-YIELDING CONVERTIBLES CONTINUE TO PERFORM WELL While they did not escape the widespread volatility of the financial markets during the last several months, high-yielding convertible bonds continued to outperform other fixed-income investments. We believe several factors continue to make these bonds attractive. [BAR GRAPH APPEARS HERE]
TOP FIVE INDUSTRY SECTORS* Insurance and finance................... 14.1% Oil and gas............................. 9.2% Consumer services....................... 6.7% Consumer nondurables.................... 6.2% Business equipment and services......... 5.7%
* Based on net assets on 4/30/94. 5 For example, the overall level of credit quality in the higher-yielding corporate sector has been improving over the last several years. Companies have routinely been trimming operating costs and increasing workplace efficiency. Also, a growing U.S. economy has helped strengthen the earnings of many companies. Improved earnings, in turn, have helped raise the quality ratings of these companies debt securities. A holding that we continue to favor is Fieldcrest Cannon, Inc., which manufactures and markets a wide range of bath and bedding products. Not only has the company improved its operating efficiency, it has also been able to penetrate the mass merchandising market by winning new business through large discount retail chains. OUTLOOK While the turmoil in the markets negatively affected fund performance during the past six months, it has also produced some attractive buying opportunities. We expect that many of the bank and insurance holdings we added to the portfolio stand to benefit in coming months, since we believe they represent good value at attractive prices. BankAmerica Corp., for example, represents a bank holding we believe will benefit as economic conditions in California, where the bank is based, continue to improve. We expect to maintain a large weighting in heavy cyclical and industrial holdings. If it appears likely that interest rates have peaked, we may consider reducing the portfolio's cash position and shifting assets back into the convertible market. 6 ---------------------------------------------------------------------- TOP 10 HOLDINGS (4/30/94)* ---------------------------------------------------------------------- SFP Pipeline Holdings, Inc. Common carrier, gasoline pipelines ---------------------------------------------------------------------- ADT Inc. Electronic security systems, vehicle auctions ---------------------------------------------------------------------- Cellular Communications, Inc. Cellular telephone services ---------------------------------------------------------------------- Burlington Northern, Inc. Railroad operator ---------------------------------------------------------------------- Westinghouse Electric Corp. Power systems, electronic systems, broadcasting ---------------------------------------------------------------------- Federated Department Stores Department store operator ---------------------------------------------------------------------- Albany International Corp. Producer of fabrics for papermaking machines ---------------------------------------------------------------------- First Bank Systems, Inc. Regional bank holding company ---------------------------------------------------------------------- Eastman Kodak Co. Photography, information systems, health care ---------------------------------------------------------------------- Chrysler Corp. Automobile production ---------------------------------------------------------------------- *These holdings represent 9.86% of the fund's assets. Portfolio holdings are subject to change. The fund invests in lower-rated higher-yielding securities, which pose a greater risk to principal than higher-rated securities. High-yield securities are rated lower than investment-grade securities because there is a greater possibility that negative changes in the issuer's business condition, or in general economic conditions, may hinder the issuer's ability to pay principal and interest on securities. The views expressed throughout the report are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings are viewed favorably as of April 30, 1994, there is no guarantee the fund will continue to hold these securities in the future. 7 Performance summary This section provides, at a glance, information about your fund's performance. 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 back into the fund. We show total return in two ways: On a cumulative long-term basis and how the fund might have grown each year, on average, over varying periods (see the tables below). For comparative purposes, we show how the fund performed relative to appropriate indexes and benchmarks. TOTAL RETURN FOR PERIODS ENDING 4/30/94
Lehman Bros. Class A Class B* S&P Corporate NAV POP NAV CDSC 500 Index Bond Index ======================================================================================================= 6 months -2.04% -7.66% -2.49% -7.09% -2.31% -5.07% ------------------------------------------------------------------------------------------------------- 1 year 6.82 0.67 -- -- 5.31 1.24 ------------------------------------------------------------------------------------------------------- 5 years 70.97 61.10 -- -- 70.40 63.27 Annual average 11.32 10.01 -- -- 11.25 10.30 ------------------------------------------------------------------------------------------------------- 10 years 219.61 201.27 -- -- 297.00 220.39 Annual average 12.32 11.66 -- -- 14.78 12.35 ------------------------------------------------------------------------------------------------------- Life of class B -- -- 2.81 -1.99 2.27 -1.27 -------------------------------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDING 3/31/94 (most recent calendar quarter)
Class A Class B* NAV POP NAV CDSC =========================================================================================== 6 months 0.87% -4.94% 0.48% -4.27% ------------------------------------------------------------------------------------------- 1 year 7.67 1.48 -- -- ------------------------------------------------------------------------------------------- 5 years 77.95 67.70 -- -- Annual average 12.22 10.89 -- -- ------------------------------------------------------------------------------------------- 10 years 225.08 206.29 -- -- Annual average 12.51 11.84 -- -- ------------------------------------------------------------------------------------------- Life of class B -- -- 3.85 -1.00 -------------------------------------------------------------------------------------------
*Effective July 15, 1993, the fund began offering class B shares. Performance of each share class will differ. Performance data represent past results. Investment returns and net asset value of the fund will fluctuate so an investor's shares, when sold, may be worth more or less than their original cost. Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions. 8 TERMS AND DEFINITIONS Class A fund shares may be subject to an initial sales charge. Class B fund shares may be subject to a sales charge on redemption. Net asset value (NAV) is the value of all fund assets, minus liabilities, divided by the number of outstanding shares. It does not include any initial or contingent deferred sales charges. Public offering price (POP) is the price of a fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the maximum 5.75% sales charge. Contingent deferred sales charge (CDSC) is applied on redemption of fund shares. Your fund's CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS Standard & Poor's 500 Index is an unmanaged list of large-capitalization common stocks and assumes reinvestment of all distributions. The index does not take into account brokerage commissions or other costs. The fund's portfolio contains securities that do not match those in the index. Lehman Brothers Corporate Bond Index is an unmanaged list of corporate bonds. The index reflects changes of market prices, assumes reinvestment of all interest payments, and does not take into account brokerage commissions or other costs. The index may include bonds different from those in the fund, and may pose different risks than the fund. 9 Life cycle investing As we move through life, our investment needs change. As these needs change, so does the way we allocate our assets. Here are some basic rules for setting up and maintaining an investment program and some examples of how assets might be allocated. DETERMINE YOUR INVESTMENT OBJECTIVES. Objectives may include a new home, college education expenses, or retirement. EVALUATE YOUR RISK TOLERANCE. Generally, risk tolerance is higher for younger investors with longer timelines and lower for older investors who may depend on their investment for current income. ALLOCATE YOUR INVESTABLE SAVINGS. Your investment advisor will help you determine how much of your investable dollars should be allocated to each investment category. CHOOSE THE APPROPRIATE PUTNAM FUNDS. Using Putnam's free exchange privilege, you can adjust your own Putnam portfolio of funds as your financial needs change -- without a service fee.* Look at the facing page for some ways you can allocate your assets, then turn the page to see how the Putnam Fund Selector(TM) can help you make your choices. *Putnam reserves the right to change or terminate the exchange privilege. In some cases, a sales charge may apply. See prospectus for details. 10 Four ways to allocate assets -------------------------------------------------------------------------------- SEEKING MAXIMUM GROWTH Risk tolerance: 30% - 40% Growth and Income [PIE CHART Generally 40% - 50% Growth APPEARS HERE] investors with a 5% - 20% Income or higher risk tax-free income tolerance (often in their 20s and early 30s) -------------------------------------------------------------------------------- SEEKING GROWTH AND SOME INCOME Risk tolerance: 40% - 50% Growth and Income [PIE CHART Generally 30% - 40% Growth APPEARS HERE] investors with a 10% - 30% Income or high to moderate tax-free income risk tolerance (often in their late 30s and early 40s) -------------------------------------------------------------------------------- SEEKING INCOME AND SOME GROWTH WITH PROTECTION AGAINST INFLATION Risk tolerance: 30% - 40% Growth and Income [PIE CHART Generally 10% - 20% Growth APPEARS HERE] investors with a 25% - 60% Income or moderate risk tax-free income tolerance (often in their late 40s and 50s) -------------------------------------------------------------------------------- SEEKING HIGH CURRENT INCOME AND PROTECTION AGAINST INFLATION Risk tolerance: 20% - 30% Growth and Income [PIE CHART Generally 5% - 10% Growth APPEARS HERE] investors with a 40% - 70% Income or moderate to low tax-free income risk tolerance (often over 60 and retired) 11 The Putnam Fund Selector(TM) The Putnam Fund Selector(TM) shows the many opportunities for investors within every investment strategy. All investors should first accumulate a base of conservative, cash-equivalent investments. Then, with the help of your investment advisor, diversify your portfolio by investing in the Putnam Family of Funds. [PYRAMID GRAPHIC] Risk/Reward PUTNAM GROWTH FUNDS PUTNAM GROWTH AND INCOME FUNDS PUTNAM INCOME OR TAX-FREE INCOME FUNDS MOST CONSERVATIVE INVESTMENTS 12 PUTNAM GROWTH FUNDS Asia Pacific Growth Fund Diversified Equity Trust Energy-Resources Trust Europe Growth Fund Global Growth Fund Health Sciences Trust Investors Fund New Opportunities Fund OTC Emerging Growth Fund Overseas Growth Fund Vista Fund Voyager Fund PUTNAM GROWTH AND INCOME FUNDS Convertible Income-Growth Trust Dividend Growth Fund Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Managed Income Trust Utilities Growth and Income Fund PUTNAM INCOME FUNDS Adjustable Rate U.S. Government Fund American Government Income Fund Balanced Government Fund Corporate Asset Trust Diversified Income Trust Federal Income Trust Global Governmental Income Trust High Yield Advantage Fund High Yield Trust Income Fund U.S. Government Income Trust PUTNAM TAX-FREE INCOME FUNDS Intermediate Tax Exempt Fund Municipal Income Fund Tax Exempt Income Fund Tax-Free High Yield Fund Tax-Free Insured Fund State tax-free income funds* Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and Pennsylvania LIFESTAGE(TM) FUNDS Putnam Asset Allocation Funds -- three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments to help maximize your return and reduce your risk. The three portfolios: Putnam Asset Allocation: Balanced Portfolio Putnam Asset Allocation: Conservative Portfolio Putnam Asset Allocation: Growth Portfolio MOST CONSERVATIVE INVESTMENTS+ Putnam money market funds: Daily Dividend Trust Tax Exempt Money Market Fund CDs and savings accounts++ * Not available in all states. + Relative to above. ++ Not offered by Putnam Investments. Certificates of deposit offer a fixed rate of return and may be insured, up to certain limits, by federal/state agencies. Savings accounts may also be insured up to certain limits. Please call your financial advisor or Putnam to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Read it carefully before you invest or send money. 13 Portfolio of investments owned April 30, 1994 (Unaudited) CONVERTIBLE BONDS(40.8%) (a)
PRINCIPAL AMOUNT VALUE Consumer Services(6.0%) -------------------------------------------------------------------------------------------------------------------- $ 9,500,000 Cellular Communications, Inc. cv. sub. $ 7,208,125 deb. zero %, 1999 (b) 1,680,000 Cellular Communications, Inc. of Puerto 2,541,000 Rico cv. deb. 8 1/4s, 2000 3,000,000 Comcast Corp. cv. deb. 3 3/8s, 2005 2,490,000 13,000,000 Hollinger, Inc. Liquid Yield Option Note 4,355,000 (LYON), zero %, 2013 2,050,000 National Education Corp. cv. sub. deb. 6 1,332,500 1/2s, 2011 5,500,000 News America Holdings Inc. cv. LYON zero 2,310,000 %, 2013 (b) 1,360,000 Pharmaceutical Marketing cv. deb. 6 1/4s, 1,258,000 2003 (b) 4,000,000 Rogers Communications Inc. LYON, zero %, 1,380,000 2013 5,500,000 Rogers Communications cv. deb. 2s, 2005 3,306,875 2,000,000 Service Corp. International cv. sub. deb. 2,507,500 6 1/2s, 2001 4,634,000 Time-Warner, Inc. cv. deb. 8 3/4s, 2015 4,703,510 9,500,000 Time-Warner, Inc. cv. deb. LYON zero %, 2,885,625 2012 12,000,000 Turner Broadcasting System, Inc. cv. deb. 4,620,000 LYON, zero %, 2007 1,530,000 WMS Industries, Inc. cv. deb. 5 3/4s, 2002 1,545,300 ------------ 42,443,435 Retail(4.7%) -------------------------------------------------------------------------------------------------------------------- 2,000,000 Baker (J.) Inc. cv. deb. 7s, 2002 2,680,000 1,680,000 CML Group, Inc. cv. deb. 5 1/2s, 2003 1,310,400 6,500,000 Federated Department Stores cv. deb. 6s, 5,947,500 2004 3,750,000 Food Lion, Inc. cv. deb. 5s, 2003 (c) 3,581,250 2,500,000 Ingles Markets, Inc. cv. sub. deb. 10s, 2,756,250 2008 3,000,000 Kroger Co. cv. deb. 8 1/4s, 2011 3,120,000 4,250,000 Kroger Co. cv. deb. 6 3/8s, 1999 5,312,500 3,875,000 Lowes Co. cv. deb. 3s, 2003 5,337,813 2,000,000 Perry Drug Stores Inc. cv. sub. deb. 8 1,820,000 1/2s, 2010 1,000,000 Waban, Inc. cv. deb. 6 1/2s, 2002 920,000 ------------ 32,785,713 Consumer Non Durables(4.2%) -------------------------------------------------------------------------------------------------------------------- 6,500,000 ADT Inc. cv. deb. 6s, 2002 8,840,000 3,300,000 American Brands, Inc. cv. sub. deb. Ser. 3,778,500 AMB, 5 3/4s, 2005 15,000,000 Coleman Worldwide Corp. cv. LYON, zero %, 2013 3,750,000 1,715,000 Dibrell Brothers, Inc. cv. sub. deb. 7 1,680,700 3/4s, 2006 2,000,000 Dixie Yarns, Inc. cv. deb. 7s, 2012 1,520,000 2,250,000 Fieldcrest Cannon, Inc. cv. sub. deb. 6s, 2012 2,002,500 800,000 Guilford Mills Inc. Sinking Fund cv. sub. 746,000 deb. 6s, 2012 2,450,000 Interface Inc. Sinking Fund cv. deb. 8s, 2013 2,450,000 1,500,000 L.A. Gear, Inc. cv. sub. deb. 7 3/4s, 2002 1,177,500 4,055,000 Standard Commercial Corp. cv. sub. deb. 7 3,436,613 1/4s, 2007 ------------ 29,381,813 Insurance and Finance(4.2%) -------------------------------------------------------------------------------------------------------------------- 2,500,000 Aegon NV ADR euro. cv. sub. deb. 7s, 2001 (d) 3,312,500 2,500,000 Alexander & Alexander Services, Inc. cv. 2,550,000 sub. deb. 11s, 2007 3,000,000 Banamex euro cv. deb. 7s, 1999 3,300,000 5,050,000 Chubb Corp. euro. cv. deb. 6s, 1998 5,176,250 1,200,000 Industrial Credit & Investor India cv. 990,000 deb. 2 1/2s, 2000 (b) 1,500,000 Midlantic Corp. Inc. cv. sub. deb. 8 1,488,750 1/4s, 2010 5,000,000 NAC Re Corp. cv. deb. 5 1/4s, 2002 4,393,750 5,000,000 Old Republic International Corp. cv. sub. 5,162,500 deb. 5 3/4s, 2002 1,335,000 Re Capital Inc. cv. deb. 5 1/2s, 2000 1,293,281
14
CONVERTIBLE BONDS PRINCIPAL AMOUNT VALUE Insurance and Finance(continued) -------------------------------------------------------------------------------------------------------------------- $ 1,570,000 Trenwick Group, Inc. cv. deb. 6s, 1999 $ 1,546,450 ------------ 29,213,481 Business Equipment and Services(3.8%) -------------------------------------------------------------------------------------------------------------------- 5,250,000 Conner Peripherals Inc. cv. sub. deb. 4,613,437 6 1/2s, 2002 6,000,000 Data General Corp. cv. sub. deb. 7 3/4s, 2001 5,100,000 3,415,000 EMC Corp. cv. deb. 4 1/4s, 2001 3,585,750 6,000,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 3,615,000 1,500,000 Quantum Corp. cv. deb. 6 3/8s, 2002 1,650,000 2,000,000 Seagate Technology Inc. cv. sub. deb. 1,765,000 6 3/4s, 2012 1,200,000 Sterling Software, Inc. cv. deb. 5 3/4s, 2003 1,386,000 4,250,000 Unisys Corp. cv. sub. notes 8 1/4s, 2000 4,930,000 ------------ 26,645,187 Oil and Gas(3.5%) -------------------------------------------------------------------------------------------------------------------- 1,000,000 Cross Timbers Oil Co. cv. deb. 5 1/4s, 2003 870,000 4,000,000 Pennzoil cv. deb. 6 1/2s, 2003 4,540,000 3,000,000 Pennzoil cv. 4 3/4s, 2003 2,685,000 9,000,000 SFP Pipeline Holdings Inc. variable rate 11,250,000 exch. deb. 9.67s, 2010 1,000,000 Seacor Holdings cv. deb. 6s, 2003 1,000,000 4,500,000 Wainoco Oil Corp. cv. sub. deb. 7 3/4s, 2014 4,218,750 ------------ 24,563,750 Electronics and Electrical Equipment(3.0%) -------------------------------------------------------------------------------------------------------------------- 1,560,000 Computer Products, Inc. cv. sub. deb. 1,597,050 9 1/2s, 1997 1,500,000 M/A Com. Inc. cv. sub. deb. 9 1/4s, 2006 1,432,500 6,915,000 Motorola Inc. LYON, zero %, 2013 4,304,587 2,000,000 Network Equipment Technologies Inc. cv. 1,510,000 sub. deb. 7 1/4s, 2014 4,460,000 Richardsons Electronics Ltd. cv. sub. 3,545,700 deb. 7 1/4s, 2006 2,500,000 Siemens A.G. cv. units, ADR, 8s, 2002 (d) 3,525,000 3,285,000 Solectron Corp. cv. sub. LYON, zero %, 2012 1,995,638 1,000,000 Thermo Electron Corp. cv. deb. 6 3/4s, 2001 1,645,000 1,410,000 Thermo Instruments Corp. cv. deb. 3 3/4s, 2000 1,417,050 ------------ 20,972,525 Health Care(1.5%) -------------------------------------------------------------------------------------------------------------------- 1,495,000 Abbey Healthcare Group cv. deb. 6 1/2s, 1,474,444 2002 (b) 4,200,000 Cabot Medical Corp. cv. deb. 7 1/2s, 1999 3,937,500 1,000,000 Hillhaven Corp. (The) cv. sub. deb. 1,320,000 7 3/4s, 2002 1,775,000 Integrated Health Services, Inc. cv. sub. 1,994,656 deb. 6s, 2003 1,415,000 Quantum Health Resources Inc. cv. deb. 1,667,931 4 3/4s, 2000 ------------ 10,394,531 Environmental Control(1.4%) -------------------------------------------------------------------------------------------------------------------- 2,300,000 Enclean, Inc. cv. sub. deb. 7 1/2s, 2001 2,432,250 2,500,000 OHM Corp. cv. sub. deb. 8s, 2006 2,431,250 15,000,000 Waste Management Inc. cv. sub. LYON, zero %, 2012 5,193,750 ------------ 10,057,250 Real Estate(1.2%) -------------------------------------------------------------------------------------------------------------------- 1,400,000 Burnham Pacific Properties, Inc. cv. deb. 1,552,250 8 1/2s, 2002 1,795,000 Camden Property Trust cv. deb. 7.33s, 2002 1,821,925
15
CONVERTIBLE BONDS PRINCIPAL AMOUNT VALUE Real Estate(continued) -------------------------------------------------------------------------------------------------------------------- $ 2,000,000 LTC Properties, Inc. cv. deb. 9 3/4s, 2004 $ 2,650,000 1,750,000 Southwestern Property Trust cv. deb. 8s, 2003 2,310,000 ------------ 8,334,175 Food and Beverages(1.1%) -------------------------------------------------------------------------------------------------------------------- 1,500,000 Chiquita Brands International cv. deb. 1,350,000 7s, 2001 3,300,000 Flagstar Corp. cv. jr. sub. deb. 10s, 2014 2,854,500 1,500,000 J. Seagram & Sons, Ltd. LYON, zero %, 2006 815,625 1,950,000 Wendy's International, Inc. cv. deb. 7s, 2006 3,003,000 ------------ 8,023,125 Basic Industrial Products(1.0%) -------------------------------------------------------------------------------------------------------------------- 6,500,000 Albany International Corp. Ser. US, cv. 5,833,750 deb. 5 1/4s, 2002 600,000 Dart & Kraft Inc. cv. deb. 7 3/4s, 1998 1,206,000 ------------ 7,039,750 Transportation(0.8%) -------------------------------------------------------------------------------------------------------------------- 4,000,000 Alaska Air Group, Inc. cv. deb. zero %, 2006 1,540,000 1,500,000 Delta Air Lines, Inc. cv. sub. notes 1,089,375 3.23s, 2003 2,000,000 Greyhound Lines, Inc. cv. deb. 8 1/2s, 2007 2,072,500 1,500,000 Hudson General Corp. cv. sub. deb. 7s, 2011 1,211,250 ------------ 5,913,125 Building and Construction(0.8%) -------------------------------------------------------------------------------------------------------------------- 2,000,000 Empresas ICA Sociedad cv. deb. 5s, 2004 1,740,000 1,200,000 Medusa Corp. cv. deb. 6s, 2003 1,170,000 1,800,000 Nortek, Inc. sr. cv. deb. 7 1/2s, 2006 1,424,250 1,805,000 U.S. Home Corp. cv. deb. 4 7/8s, 2005 1,441,743 ------------ 5,775,993 Forest Products(0.7%) -------------------------------------------------------------------------------------------------------------------- 5,000,000 International Paper Co. cv. euro. deb. 5 5,187,500 3/4s, 2002 Aerospace and Defense(0.7%) -------------------------------------------------------------------------------------------------------------------- 4,500,000 GenCorp Inc. cv. deb. 8s, 2002 4,770,000 150,000 UNC Inc. cv. sub. deb. 7 1/2s, 2006 141,000 ------------ 4,911,000 Consumer Durable Goods(0.5%) -------------------------------------------------------------------------------------------------------------------- 8,000,000 Whirpool Corp. cv. LYON, zero %, 2011 3,400,000 Metals and Mining(0.4%) -------------------------------------------------------------------------------------------------------------------- 750,000 Essar Gujarat Ltd. cv. bonds 5 1/2s, 1998 (b) 990,000 5,000,000 Freeport-McMoran, Inc. cv. deb. zero %, 2006 1,681,250 ------------ 2,671,250 Automotive(0.4%) -------------------------------------------------------------------------------------------------------------------- 1,000,000 Arvin Industries, Inc. cv. deb. 7 1/2s, 2014 1,066,250 1,590,000 Titan Wheel International Inc. cv. sub. 1,534,350 deb. 4 3/4s, 2000 ------------ 2,600,600
16
CONVERTIBLE BONDS PRINCIPAL AMOUNT VALUE Chemicals(0.3%) -------------------------------------------------------------------------------------------------------------------- $ 2,000,000 Quantum Chemical Corp. cv. exch. sub. $ 2,023,750 deb. 6s, 2011 Conglomerates(0.3%) -------------------------------------------------------------------------------------------------------------------- 1,500,000 Fuqua Industries, Inc. cv. deb. 6 1/2s, 2002 1,065,000 1,000,000 WorldCorp, Inc. cv. deb. 7s, 2004 785,000 ------------ 1,850,000 Utilities(0.2%) -------------------------------------------------------------------------------------------------------------------- 1,000,000 Century Telephone Inc. cv. deb. 6s, 2007 (b) 1,065,000 Telephone Utilities(0.1%) -------------------------------------------------------------------------------------------------------------------- 400,000 Compania de Telefono de Chile cv. bonds, 502,000 4 1/2s, 2003 ------------ Total Convertible Bonds (cost $272,943,776) $285,754,953 CONVERTIBLE PREFERRED STOCKS(26.2%) (a) NUMBER OF SHARES VALUE Insurance and Finance(6.8%) -------------------------------------------------------------------------------------------------------------------- 50,000 Banc One Corp. Ser. C, $7.00 cv. pfd. $ 3,000,000 90,000 BankAmerica Corp. Ser. G, $3.25 cv. pfd. 4,837,500 38,000 Chemical Banking Corp. $5.00 cv. pfd. 2,660,000 40,000 Citicorp Ser. 13, $5.375, cv. pfd. 4,220,000 91,000 First Bank System, Inc. Ser. 91-A, 5,824,000 $3.5625, cv. pfd. 100,000 First USA, Inc. $6.25, cv. pfd. 3,912,500 30,000 Peoples Bank Ser. A, $4.25 cv. pfd. 1,987,500 75,000 Republic New York Corp. $3.375 cv. pfd. 4,153,125 26,100 Roosevelt Financial Group $3.25 cv. pfd. 1,657,350 57,400 Southern National Corp. Ser A, $1.6875 1,722,000 cv. pfd. 135,000 SunAmerica Inc. Ser. D, $2.78 cv. pfd. 5,197,500 86,500 USF&G Corp. Ser. C, $5.00 cv. pfd. 5,071,063 41,400 USF&G Corp. Ser. A, $4.10 cv. pfd. 2,044,125 33,500 Union Planters Corp. Ser. E, $2.00 cv. pfd. 1,214,375 ------------ 47,501,038 Metals and Mining(3.9%) -------------------------------------------------------------------------------------------------------------------- 36,666 Alumax, Inc. Ser. A, $4.00 cv. pfd. 3,923,262 65,000 Armco, Inc. $3.625 cv. pfd. 3,055,000 39,600 Bethlehem Steel Corp. $5.00 cum. cv. pfd. 2,143,350 13,333 Cyprus Amax Minerals Ser. A, $4.00 cv. pfd. 866,645 160,000 Freeport-McMoran Copper Co., Inc. 3,800,000 stepped-coupon $1.25 cv. pfd. 80,000 Freeport-McMoran, Inc. $8.75 cv. pfd. (b) 3,860,000 71,050 Kaiser Aluminum Corp. Prides $0.97 cv. pfd. 666,094 60,750 Pittston Corp. $6.25 cv. pfd. 2,475,563 55,000 Quanex Corp. $1.72 cv. pfd. 1,278,750 35,000 Reynolds Metals Co. $3.31 cv. pfd. 1,614,375 60,000 Wheeling-Pittsburgh Corp. $3.25 cv. pfd. 3,600,000 ------------ 27,283,039 Oil and Gas(2.9%) -------------------------------------------------------------------------------------------------------------------- 85,500 Chiles Offshore Corp. $1.50 ARP cv. pfd. 1,945,125 62,560 Energy Services, Inc. $1.50 cum. cv. pfd. 1,814,240
17
CONVERTIBLE PREFERRED STOCKS NUMBER OF SHARES VALUE Oil and Gas(continued) -------------------------------------------------------------------------------------------------------------------- 65,000 Grant Geophysical, Inc. $2.4375 $ 715,000 cv. pfd. 105,085 McDermott International, Inc. 4,282,213 Ser. C, $2.875 cum. cv. pfd. (b) 33,500 Reading & Bates Corp. $1.625 837,500 cv. pfd. 75,520 Santa Fe Energy Resources, Inc. 1,406,560 $1.40 cv. pfd. 35,400 Tejas Gas Corp. $2.65 cv. pfd. 1,654,950 77,000 Unocal Corp. $3.50 cv. pfd. 4,109,875 71,000 Western Gas Resources $2.625 cv. pfd. 3,301,500 ------------ 20,066,963 Transportation(2.4%) -------------------------------------------------------------------------------------------------------------------- 73,725 AMR Corp. Ser. A, $3.00 cv. 3,391,350 pfd. (c) 36,700 Arkansas Best Corp. Ser. A, 1,559,750 $2.875 cv. pfd. 105,500 Burlington Northern, Inc. Ser. 6,936,625 A, $3.125 cv. pfd. 55,000 Delta Air Lines, Inc. Ser. C, 2,695,000 $3.50 cv. pfd. 20,000 Sea Containers Ltd. $4.00 cv. pfd. 970,000 12,000 UAL Corp. Ser. A, $6.25 cv. 1,012,500 pfd., 2000 (b) ------------ 16,565,225 Real Estate(1.7%) -------------------------------------------------------------------------------------------------------------------- 15,000 Catellus Development Corp. Ser. 701,250 A, $3.75 cv. pfd. 195,000 Property Trust America Ser. A, 5,313,750 $1.75 cv. pfd. 67,950 Rouse Co. ser. A, $3.25 cv. pfd. 3,567,375 72,090 Tanger Factory Outlet Centers 2,090,610 $1.575 cv. pfd. , 2000 ------------ 11,672,985 Automotive(1.5%) -------------------------------------------------------------------------------------------------------------------- 40,250 Chrysler Corp. Ser. A, $4.625 5,383,437 dep. shs. cv. pfd. (b) 52,500 Ford Motor Co. Ser. A, $4.20 cv. pfd. 5,066,250 ------------ 10,449,687 Business Equipment and Services(1.2%) -------------------------------------------------------------------------------------------------------------------- 75,000 Alco Standard Corp. Ser. AA, 4,687,500 $2.375 cv. pfd. 95,000 Unisys Corp. Ser. A, $3.75 cv. pfd. 3,788,125 ------------ 8,475,625 Forest Products(1.2%) -------------------------------------------------------------------------------------------------------------------- 245,000 Boise Cascade Corp. Ser. G, 5,022,500 $1.58 cv. pfd. 150,000 Bowater, Inc. Prides $1.645 cv. pfd. 3,375,000 ------------ 8,397,500 Food and Beverages(1.1%) -------------------------------------------------------------------------------------------------------------------- 80,000 Chiquita Brands International 3,660,000 $5.75 cv. pfd. 133,100 ConAgra, Inc. $1.6875 cv. pfd. 4,092,825 ------------ 7,752,825 Electronics and Electrical Equipment(0.9%) -------------------------------------------------------------------------------------------------------------------- 517,000 Westinghouse Electric Ser. C, 6,397,875 $1.30 cv. pfd. Health Care(0.8%) -------------------------------------------------------------------------------------------------------------------- 70,000 Beverly Enterprises, Inc. $2.75 4,077,500 cv. pfd. 60,000 Maxicare Health Plans, Inc. 1,830,000 Ser. A, $2.25 cv. pfd. , 2000 (b) ------------ 5,907,500
18
CONVERTIBLE PREFERRED STOCKS NUMBER OF SHARES VALUE Basic Industrial Products(0.8%) -------------------------------------------------------------------------------------------------------------------- 43,000 AGCO Corp. $1.625 cv. pfd. $ 2,553,125 130,000 Cooper Industries Inc. $1.60 3,103,750 cv. pfd. ------------ 5,656,875 Consumer Non-Durables(0.4%) -------------------------------------------------------------------------------------------------------------------- 34,900 Fieldcrest Cannon, Inc. Ser. A, 2,233,600 $3.00 cv. pfd. (b) 54,200 Galoob (Lewis) Toys, Inc. $1.70 643,625 cv. pfd. (c) ------------ 2,877,225 Retail(0.2%) -------------------------------------------------------------------------------------------------------------------- 32,000 Sears, Roebuck & Co. $3.75 cv. pfd. 1,740,000 Energy-Related(0.2%) -------------------------------------------------------------------------------------------------------------------- 13,000 Maxus Energy Corp. $4.00 cv. pfd. 531,375 20,000 Offshore Pipelines, Inc. $2.25 795,000 cum. cv. pfd. ------------ 1,326,375 Building and Construction(0.2%) -------------------------------------------------------------------------------------------------------------------- 24,800 Southdown, Inc. $2.875 cv. 1,190,400 pfd., 2000 ------------ Total Convertible Preferred Stocks (cost $184,072,827) $183,261,137 COMMON STOCKS(22.6%) (a) NUMBER OF SHARES VALUE Insurance and Finance(3.1%) -------------------------------------------------------------------------------------------------------------------- 20,000 AON Corp. $ 927,500 30,000 Aetna Life & Casualty Co. 1,560,000 11,000 American Express Co. 325,875 36,300 Banc One Corp. 1,197,900 25,000 BankAmerica Corp. 1,081,250 13,000 Bankers Trust New York Corp. 869,375 20,000 Beneficial Corp. 760,000 22,800 CIGNA Corp. 1,333,800 20,000 Chase Manhattan Corp. 680,000 50,000 Comerica Inc. 1,400,000 44,000 CoreStates Financial Corp. 1,166,000 35,000 First Bank Systems, Inc. 1,211,875 20,000 First Fidelity Bancorp 927,500 9,800 First Interstate Bancorp 781,550 63,000 Great Western Financial Corp. 1,023,750 35,000 Household International, Inc. 1,098,125 27,000 Lincoln National Corp. 1,029,375 35,000 MBNA Corp. 875,000 18,000 Morgan (J.P.) & Co., Inc. 1,107,000 60,000 National City Corp. 1,605,000 9,700 St. Paul Cos., Inc. 769,937 ------------ 21,730,812
19
COMMON STOCKS NUMBER OF SHARES VALUE Oil and Gas(2.8%) -------------------------------------------------------------------------------------------------------------------- 26,000 British Petroleum Co. PLC ADR (d) $ 1,820,000 25,000 Chevron Corp. 2,225,000 45,000 Exxon Corp. 2,829,375 21,000 Imperial Oil Ltd. 664,125 40,000 McDermott International, Inc. 850,000 22,000 Mobil Corp. 1,721,500 30,000 Phillips Petroleum Co. 937,500 26,300 Royal Dutch Petroleum Co. ADR (d) 2,866,700 40,000 Sonat, Inc. 1,215,000 25,300 Tenneco Inc. 1,296,625 23,400 Texaco Inc. 1,506,375 40,000 Unocal Corp. 1,105,000 35,000 Williams Cos., Inc. 901,250 ------------ 19,938,450 Utilities(2.3%) -------------------------------------------------------------------------------------------------------------------- 30,000 American Telephone & Telegraph Co. 1,533,750 26,000 Ameritech Corp. 1,023,750 18,000 BellSouth Corp. 1,095,750 10,000 Detroit Edison Co. 270,000 22,000 Entergy Corp. 673,750 66,300 GTE Corp. 2,096,737 34,000 NYNEX Corp. 1,236,750 39,900 Northeast Utilities 992,513 25,000 PSI Resources, Inc. 559,375 25,000 Pacific Telesis Group 800,000 20,000 SCE Corp. 320,000 31,600 Southwestern Bell Corp. 1,311,400 40,000 Sprint Corp. 1,470,000 20,000 Telefonos de Mexico S.A., Ser. 1,177,500 L, ADR (d) 10,000 Texas Utilities Co. 352,500 24,000 US WEST, Inc. 978,000 ------------ 15,891,775 Health Care(1.8%) -------------------------------------------------------------------------------------------------------------------- 20,000 American Cyanamid Co. 940,000 30,000 American Home Products Corp. 1,732,500 49,700 Baxter International, Inc. 1,136,887 20,000 Bristol-Myers Squibb Co. 1,077,500 25,000 Lilly (Eli) & Co. 1,231,250 10,800 McKesson Corp. 718,200 27,500 Merck & Co., Inc. 814,687 15,550 Pfizer, Inc. 917,450 35,000 SmithKline Beecham PLC ADS (d) 953,750 51,000 Syntex Corp. 771,375 35,000 Upjohn Co. 936,250 21,000 Warner-Lambert Co. 1,425,375 ------------ 12,655,224 Consumer Non-Durables(1.6%) -------------------------------------------------------------------------------------------------------------------- 28,000 American Brands, Inc. 948,500 23,300 Avon Products, Inc. 1,383,437 20,000 Clorox Co. 1,010,000
20
COMMON STOCKS NUMBER OF SHARES VALUE Consumer Non-Durables(continued) -------------------------------------------------------------------------------------------------------------------- 20,000 Dial Corp. (The) $ 940,000 25,200 Kimberly-Clark Corp. 1,382,850 80,000 Philip Morris Cos., Inc. 4,360,000 1,100 Tambrands Inc. 40,563 45,000 Universal Corp. 826,875 ------------ 10,892,225 Chemicals(1.4%) -------------------------------------------------------------------------------------------------------------------- 27,550 Dow Chemical Co. 1,728,763 20,000 du Pont (E.I.) de Nemours & 1,142,500 Co., Ltd. 7,500 Eastman Chemical Co. 333,750 30,000 Grace (W.R.) & Co. 1,222,500 34,175 Lubrizol Corp. 1,234,572 31,000 Olin Corp. 1,584,875 10,000 PPG Industries Inc. 757,500 40,000 Union Carbide Corp. 1,055,000 30,000 Witco Chemical Corp. 877,500 ------------ 9,936,960 Automotive(1.1%) -------------------------------------------------------------------------------------------------------------------- 30,000 Chrysler Corp. 1,436,250 14,025 Daimler Benz AKT-ADR (d) 767,869 25,000 Ford Motor Co. 1,459,375 35,000 General Motors Corp. 1,986,250 25,000 Genuine Parts Co. 890,625 25,000 Johnson Controls Inc. 1,231,250 ------------ 7,771,619 Conglomerates(0.9%) -------------------------------------------------------------------------------------------------------------------- 16,000 ITT Corp. 1,436,000 35,000 Ogden Corp. 743,750 25,100 TRW, Inc. 1,637,775 25,000 Textron, Inc. 1,318,750 15,000 United Technologies Corp. 956,250 ------------ 6,092,525 Electronics and Electrical Equipment(0.8%) -------------------------------------------------------------------------------------------------------------------- 15,000 Emerson Electric Co. 873,750 26,000 General Electric Co. 2,473,250 14,900 Harris Corp. 653,737 31,500 Vishay Intertechnology, Inc. 1,114,313 63,000 Westinghouse Electric Corp. 732,375 ------------ 5,847,425 Retail(0.8%) -------------------------------------------------------------------------------------------------------------------- 90,000 K Mart Corp. 1,485,000 30,000 Limited Inc. (The) 577,500 18,300 Penney (J.C.) Co., Inc. 992,775 35,000 Sears, Roebuck & Co. 1,645,000 60,000 Woolworth Corp. 997,500 ------------ 5,697,775
21
COMMON STOCKS NUMBER OF SHARES VALUE Photography(0.8%) -------------------------------------------------------------------------------------------------------------------- 133,744 Eastman Kodak Co. $ 5,550,376 Consumer Services(0.7%) -------------------------------------------------------------------------------------------------------------------- 24,600 Block (H & R), Inc. 1,045,500 15,000 Dun & Bradstreet Corp. 881,250 18,000 McGraw-Hill, Inc. 1,172,250 40,000 Times Mirror Co. Class A 1,265,000 14,000 Tribune Co. 889,000 ------------ 5,253,000 Business Equipment and Services(0.7%) -------------------------------------------------------------------------------------------------------------------- 33,000 IBM Corp. 1,889,250 33,000 Xerox Corp. 3,262,875 ------------ 5,152,125 Forest Products(0.6%) -------------------------------------------------------------------------------------------------------------------- 35,000 Boise Cascade Corp. 752,500 12,000 International Paper Co. 783,000 25,000 Mead Corporation 1,053,125 25,000 Potlatch Corp. 1,018,750 4,000 Rayonier, Inc. 113,000 10,300 Union Camp Corp. 457,063 ------------ 4,177,438 Transportation(0.5%) -------------------------------------------------------------------------------------------------------------------- 16,000 Burlington Northern, Inc. 906,000 6,000 CSX Corp. 467,250 20,000 Illinois Central Corp. 687,500 15,000 Norfolk Southern Corp. 958,125 10,000 Union Pacific Corp. 590,000 ------------ 3,608,875 Metals and Mining(0.5%) -------------------------------------------------------------------------------------------------------------------- 15,000 Aluminum Co. of America 1,020,000 50,000 Freeport-McMoran, Inc. 956,250 40,000 Freeport-McMoran, Inc. Class A 950,000 20,000 Lukens, Inc. (Delaware) 620,000 ------------ 3,546,250 Food and Beverages(0.5%) -------------------------------------------------------------------------------------------------------------------- 10,000 Anheuser-Busch Cos., Inc. 541,250 19,300 CPC International Inc. 931,225 18,000 Quaker Oats Co. (The) 1,158,750 30,000 Seagram Co. Ltd. 881,250 ------------ 3,512,475 Aerospace and Defense(0.5%) -------------------------------------------------------------------------------------------------------------------- 60,000 GenCorp Inc. 840,000 25,000 Northrop Corp. 956,250 35,350 Rockwell International Corp. 1,378,650 ------------ 3,174,900
22
COMMON STOCKS NUMBER OF SHARES VALUE Basic Industrial Products(0.4%) -------------------------------------------------------------------------------------------------------------------- 30,000 Ball Corp. $ 806,250 30,000 General Signal Corp. 982,500 20,000 Sundstrand Corp. 950,000 ------------ 2,738,750 Real Estate(0.4%) -------------------------------------------------------------------------------------------------------------------- 15,800 Federal Realty Investment Trust 389,075 55,000 National Health Investors, Inc. 1,526,250 10,000 Nationwide Health Properties, Inc. 395,000 25,000 Webb (Del.) Corp. 393,750 ------------ 2,704,075 Telecommunications(0.2%) -------------------------------------------------------------------------------------------------------------------- 25,000 Airtouch Communications 615,625 50,000 Comsat Corp. 1,062,500 ------------ 1,678,125 Environmental Control(0.1%) -------------------------------------------------------------------------------------------------------------------- 33,700 Browning-Ferris Industries, Inc. 985,725 Energy-Related(0.1%) -------------------------------------------------------------------------------------------------------------------- 40,000 Westcoast Energy, Inc. 690,000 ------------ Total Common Stocks (cost $154,204,598) $159,226,904 FOREIGN BONDS AND NOTES(0.3%)(a)(d) (cost $2,030,770) PRINCIPAL AMOUNT VALUE $ 3,700,000 SKF Corp. cv. LYON, zero %, 2002 $ 2,354,125 ------------ SHORT-TERM INVESTMENTS(8.1%)(a) PRINCIPAL AMOUNT Value $10,000,000 American Telephone & Telegraph 3.78s, May 27, 1994 $ 9,972,700 5,000,000 Ciesco 3.72s, May 5, 1994 4,997,934 10,000,000 Corporate Receivables Corp. 3.75s, May 5, 1994 9,995,833 10,000,000 Household Finance Corp., 3.73s, May 19, 1994 9,981,350 21,971,000 Interest in $504,971,000 repurchase agreement dated April 29, 1994 with Kidder Peabody & Co., Inc., due May 2, 1994 with respect to various U.S. Treasury obligations--maturity value of $21,977,500 for an effective yield of 3.55% 21,975,334 ------------ Total Short-Term Investments (cost $56,923,151) $ 56,923,151 ------------ Total Investments (cost $670,175,122)(e) $687,520,270 ============
23 Notes -------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $701,827,115, which correspond to a net asset value per class A and class B share of $18.83 and $18.75, respectively. (b) Securities 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. At April 30, 1994 these securities were valued at $26,679,194 or 3.8% of net assets. (c) Non-income-producing security. (d) Securities whose values are determined or significantly influenced by trading on exchanges not in the United States or Canada. ADR or ADS after the name of a foreign holding stands for American Depository Receipt or American Depository Shares, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. (e) The aggregate identified cost on a tax basis is $670,223,684, resulting in gross unrealized appreciation and depreciation of $63,759,895 and $46,463,309, respectively, or net unrealized appreciation of $17,296,586. The accompanying notes are an integral part of these financial statements. 24 Statement of assets and liabilities April 30, 1994 (Unaudited)
Assets -------------------------------------------------------------------------------- Investments in securities, at value (identified cost $670,175,122) (Note 1) $687,520,270 -------------------------------------------------------------------------------- Cash 21,697 -------------------------------------------------------------------------------- Dividends, interest and other receivables 5,579,624 -------------------------------------------------------------------------------- Receivable for shares of the Fund sold 816,701 -------------------------------------------------------------------------------- Receivable for securities sold 12,267,311 -------------------------------------------------------------------------------- Total assets $706,205,603 Liabilities -------------------------------------------------------------------------------- Payable for shares of the Fund repurchased $ 893,417 -------------------------------------------------------------------------------- Payable for securities purchased 2,022,359 -------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 930,777 -------------------------------------------------------------------------------- Payable for administrative services (Note 2) 6,571 -------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 247 -------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 221,837 -------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 159,005 -------------------------------------------------------------------------------- Other accrued expenses 144,275 -------------------------------------------------------------------------------- Total liabilities 4,378,488 -------------------------------------------------------------------------------- Net assets $701,827,115 -------------------------------------------------------------------------------- Represented by Paid-in capital (Notes 1, 4 and 5) $639,574,891 Undistributed net investment income 6,016,438 Accumulated net realized gain on investment transactions 38,890,638 Unrealized appreciation of investments 17,345,148 -------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $701,827,115 -------------------------------------------------------------------------------- Computation of net asset value and offering price Net asset value and redemption price per class A share ($681,622,800 divided by 36,190,724 shares) $18.83 Offering price per class A share (100/94.25 of $18.83)* $19.98 ---------- Net asset value and offering price per class B share ($20,204,314 divided by 1,077,551 shares)** $18.75 --------------------------------------------------------------------------------
* 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. 25 Statement of operations Six months ended April 30, 1994 (Unaudited)
Investment income: ------------------------------------------------------------------- Interest $ 9,406,161 ------------------------------------------------------------------- Dividends (net of foreign tax of $13,202) 7,290,080 ------------------------------------------------------------------- Total investment income 16,696,241 Expenses: ------------------------------------------------------------------- Compensation of Manager (Note 2) $ 1,876,993 ------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 507,951 ------------------------------------------------------------------- Compensation of Trustees (Note 2) 12,860 ------------------------------------------------------------------- Reports to shareholders 87,082 ------------------------------------------------------------------- Auditing 9,724 ------------------------------------------------------------------- Legal 6,175 ------------------------------------------------------------------- Postage 112,957 ------------------------------------------------------------------- Distribution fees -- class A (Note 2) 871,817 ------------------------------------------------------------------- Distribution fees -- class B (Note 2) 66,592 ------------------------------------------------------------------- Administrative services (Note 2) 9,672 ------------------------------------------------------------------- Other expenses 35,487 ------------------------------------------------------------------- Total expenses 3,597,310 ------------------------------------------------------------------- Net investment income 13,098,931 ------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 31,107,926 ------------------------------------------------------------------- Net unrealized depreciation of investments during the period (59,309,438) ------------------------------------------------------------------- Net loss on investments (28,201,512) ------------------------------------------------------------------- Net decrease in net assets resulting from operations (15,102,581) -------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 26 Statement of changes of net assets
Six months ended Year ended April 30 October 31 ------------------------------------------------------------------------ 1994* 1993 Increase (decrease ) in net assets ------------------------------------------------------------------------ Operations: ------------------------------------------------------------------------ Net investment income $ 13,098,931 $ 30,096,658 ------------------------------------------------------------------------ Net realized gain on investments 31,107,926 64,470,361 ------------------------------------------------------------------------ Net realized loss on options -- (467,794) ------------------------------------------------------------------------ Net unrealized appreciation (depreciation) of investments and options (59,309,438) 35,257,250 ------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (15,102,581) 129,356,475 ------------------------------------------------------------------------ Undistributed net investment income included in price of shares sold and repurchased, net -- (7,565) Distributions to shareholders from: ------------------------------------------------------------------------ Net investment income--class A (16,890,089) (33,011,424) ------------------------------------------------------------------------ Net investment income--class B (317,630) (20,738) ------------------------------------------------------------------------ Net realized gain on investments--class A (23,377,526) -- ------------------------------------------------------------------------ Net realized gain on investments--class B (302,116) -- ------------------------------------------------------------------------ Increase from capital share transactions (Note 4) 45,409,187 16,225,598 ------------------------------------------------------------------------ Total increase (decrease) in net assets (10,580,755) 112,542,346 Net assets ------------------------------------------------------------------------ Beginning of period 712,407,870 599,865,524 ------------------------------------------------------------------------ End of period (including undistributed net investment income of $6,016,438 and $3,825,900, respectively) $701,827,115 $712,407,870 ------------------------------------------------------------------------
* Unaudited. The accompanying notes are an integral part of these financial statements. 27 Financial Highlights* (For a share outstanding throughout the period)
July 15, 1993 Six (commencement months ended of operations) to April 30 October 31 -------------------------------------------------------------------------------- 1994** 1993 -------------------------------------------------------------------------------- Class B -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 20.35 $19.53 -------------------------------------------------------------------------------- Investment Operations Net Investment Income .31 .23 -------------------------------------------------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments (.79) .82 -------------------------------------------------------------------------------- Total from Investment Operations (.48) 1.05 -------------------------------------------------------------------------------- Less Distributions from: Net Investment Income (a) (.44) (.23) -------------------------------------------------------------------------------- Net Realized Gain on Investments (.68) -- -------------------------------------------------------------------------------- Total Distributions (1.12) (.23) -------------------------------------------------------------------------------- Net Asset Value, End of Period $ 18.75 $20.35 -------------------------------------------------------------------------------- Total Investment Return at Net Asset Value (%) (b) (4.98)(c) 18.72(c) -------------------------------------------------------------------------------- Net Assets, End of Period (in thousands) $22,204 $4,439 ================================================================================ Ratio of Expenses to Average Net Assets (%) 1.96(c) 1.76(c) -------------------------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets (%) 2.84(c) 3.08(c) -------------------------------------------------------------------------------- Portfolio Turnover (%)*** 26.83(d) 66.63(d) --------------------------------------------------------------------------------
See page 29 for notes to Financial Highlights. 28
Eleven months Six ended months ended Year ended October April 30 October 31 31 -------------------------------------------------------------------------------------------------------- 1994** 1993 1992 1991 1990 1989 1988 1987 1986 1985 -------------------------------------------------------------------------------------------------------- Class A -------------------------------------------------------------------------------------------------------- $20.38 $17.60 $15.78 $12.12 $ 15.56 $14.42 $ 14.24 $16.44 $14.43 $12.73 -------------------------------------------------------------------------------------------------------- .37 .87 .89 .88 .95 .97 .88 .86 .93 .89 -------------------------------------------------------------------------------------------------------- (.76) 2.87 1.89 3.74 (3.35) 1.13 .87 (1.83) 2.47 1.68 -------------------------------------------------------------------------------------------------------- (.39) 3.74 2.78 4.62 (2.40) 2.10 1.75 (.97) 3.40 2.57 -------------------------------------------------------------------------------------------------------- (.48) (.96) (.96) (.96) (1.04) (.96) (.96) (.96) (.95) (.68) -------------------------------------------------------------------------------------------------------- (.68) -- -- -- -- -- (.61) (.27) (.44) (.19) -------------------------------------------------------------------------------------------------------- (1.16) (.96) (.96) (.96) (1.04) (.96) (1.57) (1.23) (1.39) (.87) -------------------------------------------------------------------------------------------------------- $18.83 $20.38 $17.60 $15.78 $ 12.12 $15.56 $ 14.42 $14.24 $16.44 $14.43 -------------------------------------------------------------------------------------------------------- (4.08)(c) 21.74 18.16 39.05 (16.46) 14.90 13.40 (7.00) 24.55 22.36(c) -------------------------------------------------------------------------------------------------------- ---- -- -- -- -- -- -- -- -- -- ======================================================================================================== .99(c) .96 1.11 1.15 1.12 .93 .92 .84 .83 .88(c) -------------------------------------------------------------------------------------------------------- 3.69(c) 4.55 5.32 6.07 6.37 6.32 6.12 4.91 5.54 6.21(c) -------------------------------------------------------------------------------------------------------- 26.83(d) 66.63 59.89 78.72 60.03 49.44 115.87 87.45 77.51 119.78(d) --------------------------------------------------------------------------------------------------------
* Financial highlights for periods ended through October 31, 1992 have been restated to conform with requirements issued by the SEC in April, 1993. As of November 1, 1993, the Fund discontinued the use of equalization accounting (see Note 1 of Notes to financial statements). ** Unaudited. *** Portfolio turnover calculation for fiscal 1985 and thereafter includes transactions in U.S. government securities with maturities greater than one year. Prior period portfolio turnover calculations excluded all U.S. government securities. (a) $0.017 of distributions from net investment income for the year ended October 31, 1990 represents return of capital for federal income tax purposes. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Annualized. (d) Not annualized. 29 Notes to financial statements April 30, 1994 (Unaudited) Note 1 Significant accounting policies The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund seeks current income and capital appreciation by investing primarily in bonds and preferred stocks convertible into common stock with capital preservation as a secondary objective. The Fund offers both class A and class B shares. The Fund commenced its public offering of class B shares on July 15, 1993. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end sales charge, but pay a higher ongoing distribution fee than class A shares, and may be subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. In addition, the Trustees declare separate dividends on each class of shares. Expenses of the Fund are borne pro- rata by the shareholders of both classes of shares, except that each class bears expenses unique to that class including the distribution fees applicable to such class. Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the Fund, if the Fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price, except that U.S. government obligations are stated at the mean between the last reported bid and asked prices. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair value following procedures approved by the Trustees. B Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund may transfer uninvested cash balances into a joint trading account, along with the cash of other registered investment companies managed by Putnam Investment Management, Inc. (Putnam Management), the Fund's Manager, a wholly-owned subsidiary of Putnam Investment Inc., and certain other accounts. 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. The Fund's Manager 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. 30 D Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis and 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. Discount on zero coupon bonds and stepped-coupon bonds is accreted according to the effective yield method. Certain securities held by the Fund pay interest in the form of additional securities; interest on such securities is recorded on the accrual basis at the lower of the coupon rate or market value of the securities to be received, and is allocated to the cost of the securities received on the payment date. E Option accounting principles When the Fund writes a call or put option, an amount equal to the premium received by the Fund is included in the Fund's "Statement of assets and liabilities" as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of an option is the last sale price or, in the absence of a sale, the last offering price. If an option expires on its stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security or currency the Fund purchases upon exercise of the option. The Fund writes covered call options; that is, options for which it holds the underlying security or its equivalent. Accordingly, the risk in writing a call option is that the Fund relinquishes the opportunity to profit if the market price of the underlying security increases and the option is exercised. In writing a put option, the Fund assumes the risk of incurring a loss if the market price of the underlying security decreases and the option is exercised. The premium paid by the Fund for the purchase of a call or put option is included in the Fund's "Statement of assets and liabilities" as an investment and subsequently "marked-to-market" to reflect the current market value of the option. If an option the Fund has purchased expires on the stipulated expiration date, the Fund realizes a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund realizes a gain or loss, depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a call option, the cost of the securities or currencies acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security or currency and the proceeds from such sale are decreased by the premium originally paid. Stock index options are similar to options on individual securities in that the purchaser of an index option acquires the right to buy, and the writer undertakes the obligation to sell, an index at a stated exercise price during 31 the term of the option. Instead of giving the right to take or make actual delivery of securities, the holder of a stock index option has the right to receive a cash "exercise settlement amount." This amount is equal to the amount by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of the exercise, multiplied by a fixed "index multiplier." The Fund writes options on stock indices only to the extent that it holds in its portfolio underlying securities, which, in the judgment of Putnam Management, correlate closely with the stock index. F Federal taxes It is the policy of the Fund to distribute all of its 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. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation of securities held and excise tax on income and capital gains. G Distributions to shareholders Distributions to shareholders are recorded by the Fund on the ex-dividend date. H Equalization Prior to November 1, 1993, the Fund used the accounting practice known as equalization to keep a continuing shareholder's per share interest in undistributed net investment income unaffected by sales or repurchases of Fund shares. This was accomplished by allocating a per share portion of the proceeds from sales and the costs of repurchases of shares to undistributed net investment income. As of November 1, 1993, the Fund discontinued using equalization. This change has no effect on the Fund's total net assets, net asset value per share, or its net increase (decrease) in net assets from operations and did not have a material effect on the per share amounts shown in the financial highlights. In Management's opinion, discontinuing the use of equalization will result in less distortion of undistributed net investment income as compared to income available for distribution for federal income tax purposes. The cumulative effect of this change was to decrease undistributed net investment income and increase paid-in-capital previously reported through October 31, 1993 by $20,838,803. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Management, the Fund's Manager, for management and investment advisory services is paid quarterly based on the average net assets of the Fund for the quarter. Such fee is based on the following annual rates: 0.7% of the first $100 million of average net assets, 0.6% of the next $100 million, 0.5% of the next $300 million, 0.45% of the next $500 million, and 0.425% of any amount over $1 billion, subject, under current law, to reduction in any year to the extent that expenses (exclusive of distribution fees brokerage, interest and taxes) of the Fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million and 1.5% of any amount over $100 million and by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of the Manager on the Fund's portfolio transactions. The Fund also reimburses the Manager 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 32 reimbursements is determined annually by the Trustees. For the six months ended April 30, 1994, the Fund paid $9,672 for these services. Trustees of the Fund receive an annual Trustee's fee of $1,550 and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of the Manager and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. Custodial functions for the Fund are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. Fees paid for these investor servicing and custodial functions for the six months ended April 30, 1994, amounted to $507,951. Investor servicing and custodian fees reported in the statement of operations for the six months ended April 30, 1994 have been reduced by credits allowed by PFTC. The Fund has adopted a distribution plan with respect to its class A shares (the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of Class A Plan is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services provided and expenses incurred by it in distributing class A shares. The Trustees have approved payment by the Fund to Putnam Mutual Funds Corp. at an annual rate of 0.25% of the Fund's average net assets attributable to class A shares. For the six months ended April 30, 1994, the Fund paid Putnam Mutual Funds Corp. distribution fees of $871,817 for class A shares. For the six months ended April 30, 1994, Putnam Mutual Funds Corp., acting as an underwriter, received net commissions of $104,394 from the sale of shares of the Fund. A deferred sales charge of up to 1.00% is assessed on certain redemptions of shares purchased as part of an investment of $1 million or more. For the six months ended April 30, 1994, Putnam Mutual Funds Corp., acting as an underwriter, received $512 on such redemptions. The Fund has adopted a separate distribution plan with respect to its class B shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Class B Plan is to compensate Putnam Mutual Funds Corp. for services provided and expenses incurred by it in distributing class B shares. The Class B Plan provides for payments by the Fund to Putnam Mutual Funds Corp. at an annual rate of up to 1.00% of the Fund's average net assets attributable to class B shares. Currently, the Trustees have limited payments by the Fund to .85% of such net assets. For the six months ended April 30, 1994, the Fund incurred fees of $66,592 for distribution of class B shares. Putnam Mutual Funds Corp. also receives the proceeds of contingent deferred sales charges levied on class B share redemptions within four years of purchase. The charge is based on declining rates, which begin at 3.0% of the net asset value of the redeemed shares. Putnam Mutual Funds Corp. received contingent deferred sales charges of $6,134 from such redemptions for the six months ended April 30, 1994. Note 3 Purchases and sales of securities During the six months ended April 30, 1994, purchases and sales of investment securities other than U.S. government obligations and short-term investments aggregated $183,203,183 and $171,132,611, respectively. There were no purchases or sales of U.S. 33 government obligations during the period. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At April 30, 1994, there was an unlimited number of shares of beneficial interest authorized divided into two classes, designated Class A and Class B capital stock. Transactions in capital shares were as follows: Six months ended April 30, 1994
Class A Shares Amount ------------------------------------------------------------------------------ Shares sold 2,591,108 $ 51,299,365 ------------------------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 1,770,539 34,454,010 ------------------------------------------------------------------------------ 4,361,647 85,753,375 ------------------------------------------------------------------------------ Shares repurchased (2,902,940) (57,422,791) ------------------------------------------------------------------------------ Portion represented by undistributed net investment income -- -- ------------------------------------------------------------------------------ Net increase 1,458,707 $ 28,330,584 ------------------------------------------------------------------------------ Year ended October 31, 1993 Class A Shares Amount ------------------------------------------------------------------------------ Shares sold 5,344,659 $ 101,965,330 ------------------------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 1,431,110 27,251,181 ------------------------------------------------------------------------------ 6,775,769 129,216,511 ------------------------------------------------------------------------------ Shares repurchased (6,135,647) (117,365,026) ------------------------------------------------------------------------------ Portion represented by undistributed net investment income -- 13,470 ------------------------------------------------------------------------------ Net increase 640,122 $ 11,864,955 ------------------------------------------------------------------------------ Six months ended April 30, 1994 Class B Shares Amount ------------------------------------------------------------------------------ Shares sold 1,030,716 $ 20,357,457 ------------------------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 25,240 490,792 ------------------------------------------------------------------------------ 1,055,956 20,848,249 ------------------------------------------------------------------------------ Shares repurchased (196,555) (3,769,646) ------------------------------------------------------------------------------ Portion represented by undistributed net investment income -- -- ------------------------------------------------------------------------------ Net increase 859,401 $ 17,078,603 ------------------------------------------------------------------------------ Year ended October 31, 1993 Class B Shares Amount ------------------------------------------------------------------------------ Shares sold 219,805 $4,400,196 ------------------------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 920 18,213 ------------------------------------------------------------------------------ 220,725 4,418,409 ------------------------------------------------------------------------------ Shares repurchased (2,575) (51,861) ------------------------------------------------------------------------------ Portion represented by undistributed net investment income -- (5,905) ------------------------------------------------------------------------------ Net increase 218,150 $4,360,643 ------------------------------------------------------------------------------
Note 5 Reclassification of Capital Accounts Effective November 1, 1993, Putnam Convertible Income-Growth Trust has adopted the provisions of Statement of Position 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain and Return of Capital distributions by Investment Companies (SOP). The SOP requires the Fund to report the undistributed net investment income (accumulated loss) and accumulated net realized gain (loss) accounts in such a manner as to approximate amounts available for future tax distributions (or to offset future realized capital gains). In implementing the SOP the Fund has reclassified $11,414,687 to decrease accumulated net realized gain, $27,138,129, to increase undistributed net investment income, with a decrease of $15,723,448 to additional paid-in- capital. These adjustments represent the cumulative amounts necessary to report these balances on a tax basis through October 31, 1993. These reclassifications which have no impact on the total net asset value of the Fund are primarily attributable to tax equalization which is treated differently in the computation of distributable income and capital gains under federal income tax rules and regulations versus generally accepted accounting principles. 34 Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Elizabeth T. Kennan Lawrence J. Lasser Donald S. Perkins Robert E. Patterson George Putnam, III A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C.Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Peter Carman Vice President Hugh H. Mullin Vice President and Fund Manager Charles G. Pohl Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul O'Neil Vice President John D. Hughes Vice President and Treasurer Beverly Marcus Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam Convertible Income- Growth Trust. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund. 35 PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 Bulk Rate U.S. Postage Paid Boston, MA Permit No. 53749 008/223-12456 GRAPHICS APPENDIX LIST ---------------------- Page Where Description of Graphic or Cross - Graphic Appears Reference --------------- --------------------------------- pg 11 4 Pie charts with slices corresponding to listed percentages. pg 12 Pyramid image listing categories of Funds Risk vs Reward with most conservative at Base.