Putnam
Convertible
Income-Growth
Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-03
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FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Fellow Shareholder:
It gives us great pleasure to report strong performance by Putnam
Convertible Income-Growth Trust during the six months ended April 30,
2003. The fund's results at net asset value were in line with its
benchmark index and ahead of its Lipper category average. You will find
the details on page 7.
The semiannual period represented one of those rare times when both the
equity and fixed-income markets were ascending, an optimal environment
for the convertible securities in which your fund invests. In the
following report, your fund's management team provides a detailed
discussion of the performance during the first half of fiscal 2003 and
the strategies it employed in achieving these results. We are also
encouraged to note that the management team believes that this favorable
economic environment may continue.
As we look back on one of the most challenging periods in recent
investment history, we would like you to know how much we appreciate
your continued confidence in Putnam. We believe those who maintain a
long-term focus and a diversified approach to investing should
eventually be rewarded for their fortitude.
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 18, 2003
REPORT FROM FUND MANAGEMENT
FUND HIGHLIGHTS
* Putnam Convertible Income-Growth Trust's class A shares posted a
return of 13.45% at net asset value for the semiannual period ended
April 30, 2003. Class A shares' return at public offering price was
6.94%.
* The fund's performance at net asset value was in line with that of
its benchmark, the Goldman Sachs Convertible 100 Index, which returned
13.61% for the period.
* Due to strong stock selection and aggressive positioning, the fund's
return at net asset value exceeded the average for its peer group, the
Lipper Convertible Securities Funds category, which was 11.16%.
* Index and Lipper results should be compared to fund performance at
net asset value. See the Performance Summary on page 7 for complete fund
performance, comparative performance, and Lipper data.
* PERFORMANCE COMMENTARY
For the first half of its 2003 fiscal year, Putnam Convertible
Income-Growth Trust took full advantage of a market environment that was
nearly ideal for convertible-bond investing. Convertible bonds are
hybrid securities that have characteristics of bonds and stocks. Thus,
they benefited as conditions boosted prices for fixed-income securities
steadily upward during the period, and again as equity prices, while
remaining quite volatile, closed the period with a sharp upward
correction. Our bullish outlook at the beginning of the period supported
a strategy of increasing the fund's equity sensitivity, or delta. This
relatively aggressive positioning proved rewarding as equities rallied
in April. Combined with strong results from individual holdings, it
enabled the fund to keep pace with its benchmark and outperform its
Lipper category.
Fund Profile
Putnam Convertible Income-Growth Trust pursues current income and
capital appreciation by investing primarily in convertible securities --
corporate bonds and preferred stocks that are convertible into common
stock. It may be an appropriate fund for investors who want to
participate in the potential capital gains of higher-growth sectors,
while also benefiting from fixed-income payments.
* MARKET OVERVIEW
When the fiscal period began, corporate bonds and preferred stocks were
wallowing near a market bottom. Investor sentiment had been battered by
news of corporate malfeasance, credit-rating downgrades, and lackluster
profits. Risk aversion was high and credit spreads (the difference in
yields between higher-risk investments and comparatively low-risk
Treasury bonds) were very wide. Since November, however, confidence has
begun returning gradually to the markets, rating agencies have become
less reactionary, and the availability of credit has improved. Over this
period, credit spreads have narrowed, reflecting investors' willingness
to accept a greater degree of risk. This benefited convertible bonds,
roughly half of which tend to be sub- investment-grade issues. In
general, the market also favored economically-sensitive securities. This
also helped convertible bonds, which are more frequently issued by
growing companies in cyclical industries. Lastly, the stock market
trended upward as earnings and profits showed improvement. This had a
positive effect on convertibles, which tend to move in tandem with their
underlying common stock. All told, this was a particularly favorable
period for your fund and its target investments.
MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 4/30/03
Equities
Goldman Sachs Convertible 100 Index 13.61%
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S&P 500 Index (broad market) 4.48%
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Russell 2000 Growth Index (small- to mid-cap growth stocks) 7.68%
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MSCI World Ex-U.S. Index (international equities) 2.59%
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Bonds
Citigroup World Government Bond Index
(global bonds in local currency) 9.73%
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Lehman Government Bond Index (U.S. government bonds) 3.10%
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CSFB High Yield Index (U.S. high-yield corporate bonds) 19.75%
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These indexes provide an overview of performance in different market
sectors for the six months ended 4/30/03.
* STRATEGY OVERVIEW
Fund performance reflected the success of a number of active strategies.
As noted earlier, we increased the fund's delta, or equity sensitivity,
based on our belief that conditions in the equity marketplace would
improve. The delta for convertible-fund indexes has drifted lower during
the three-year bear market, because many convertible issues are "busted"
- -- meaning that the underlying stock values have declined to such an
extent that the conversion feature of the bond is considered nearly
worthless. We deliberately positioned the fund to have a higher delta
than the benchmark index, so that when the market for equities
accelerated, the fund would benefit more than the benchmark. This
strategy worked according to plan.
We also took positions in a few special situations -- riskier bets that
we believed had enough upside potential to justify the added risk. We
took advantage of the research and expertise of Putnam's High Yield and
Specialty Growth investment teams to fully assess the risk and reward
equations before committing fund assets. A number of these positions
paid off handsomely, and are discussed in the following section.
A third strategy was to largely avoid the more defensive offerings of
the convertible-bond market. In our opinion, these large, higher-quality
convertibles have limited upside potential, and so are not in keeping
with our bullish attitude. We also established small positions in
high-yielding common stocks to provide exposure to industries not well
represented by convertibles.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED*
as of 10/31/02 as of 4/30/03
Financial 15.6% 16.5%
Technology 5.1% 14.4%
Consumer cyclicals 12.2% 13.8%
Health care 9.9% 11.6%
Utilities
and power 7.7% 8.9%
Footnote reads:
*This chart shows how the fund's top industry weightings have changed over
the last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
* HOW FUND HOLDINGS AFFECTED PERFORMANCE
Capital One Financial was among the key contributors to performance for
the period. The company's stock was trading at low levels due to
concerns about its strategy of extending credit to high-risk consumers.
We began the period with a large position in Capital One convertibles.
As the credit worries abated, the stock recovered and the convertibles
reflected this improvement. Similarly, Rite Aid convertibles appreciated
significantly as the underlying stock price rallied from very depressed
levels. This holding was also integral to the fund's success, as the
holding is among the top 20 largest positions.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS*
Simon Property Group, Inc.
Ser. B, $6.50 cum. cv. pfd.
Financial
Ford Motor Co. Capital Trust II
$3.25 cum. cv. pfd.
Consumer cyclicals
Freeport-McMoRan Copper &
Gold, Inc.
144A cv. sr. notes 7s, 2011
Basic materials
Tyco International Group SA
144A cv. company guaranty 234s, 2018
Luxembourg
Conglomerates
Union Pacific Capital Trust
$3.125 cum. cv. pfd.
Transportation
Hewlett-Packard Co.
cv. sub. notes zero %, 2017
Technology
Travelers Property Casualty Corp.
$1.125 cv. pfd.
Financial
Corning, Inc.
cv. debs. zero %, 2015
Technology
Xerox Corp.
144A $3.75 cv. pfd.
Technology
State Street Corp.
6.75% cv. pfd.
Financial
Footnote reads:
*These holdings represent 18.5% of the fund's net assets as of 4/30/03. The
fund's holdings will change over time.
Peregrine Systems, a software manufacturer, is reorganizing under
Chapter 11. It was our view that the company would stay in business and
make a complete recovery, because the reasons for its troubles stemmed
less from a flawed business model than from confusion over its
accounting, conducted by an outside team. Over the period, Peregrine
Systems made substantial gains, and the fund maintained its position.
As geopolitical events added to the level of uncertainty in the world,
investors poured assets into gold, which is deemed by many to be a safe
harbor in troubled times. The fund actively traded several convertible
bonds of Freeport-McMoRan Copper and Gold, which owns the world's
largest gold mine, located in Indonesia. The price of gold appreciated
significantly and helped boost the fund's return.
Among the fund's riskier positions, alluded to in the Strategy Overview
section, were Elan Corporation and Nextel, which we considered to be
special situations. In our opinion, the prospects for Elan Corporation,
a downtrodden pharmaceutical company, were improved by a team of
seasoned managers who had been appointed to prevent the company from
entering into bankruptcy. The turnaround proved beneficial to
shareholders.
As with Elan, the price of Nextel's convertibles got very depressed on a
yield-to-put, or yield-to-maturity basis. Yet, our research indicated
the issue had very attractive risk/reward characteristics. The fund had
a rather large stake in Nextel. This telecommunications company has been
winning more subscribers and exceeding earnings and profit expectations
with its DirectConnect product, which lets customers use their phones as
walkie-talkies, eliminating the time and focus required to dial numbers.
As of the end of the period, the holding had worked in the fund's favor.
In a period that was overwhelmingly positive for convertibles, the fund
had few holdings that dampened performance. Royal Dutch Petroleum common
stock, which we had purchased to enhance the portfolio's exposure to the
energy sector, declined during the period. However, your fund had a
relatively small position in the stock.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
* THE FUND'S MANAGEMENT TEAM
The fund is managed by the Putnam Large-Cap Value Team. The members of
the team are David L. King (Portfolio Leader), Michael Abata, Bart Geer,
Deborah Kuenstner, Cole Lannum, Christopher Miller, Jeanne Mockard, and
Hugh Mullin.
THE OUTLOOK FOR YOUR FUND
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
We are quite positive on the near-term prospects for your fund. The
three market factors that made the past six months so favorable for
convertibles -- a stronger stock market, narrowing credit spreads, and
leadership by cyclical stocks -- continue to influence the sector in a
positive way. We believe these favorable trends may remain in place for
the balance of the year. Investor interest in convertibles has grown,
while issuance has slowed somewhat, so that supply is not putting
downward pressure on prices.
The recently enacted Jobs and Growth Tax Relief Reconciliation Act of
2003 favors dividend income. Such tax reform therefore does not benefit
convertible investing, and may be a short-term negative for the fund, as
tax-favored dividends could render convertibles relatively less
attractive than equities. However, in our opinion, the impact of the tax
cuts, which are focused on small, individual investors, will not move
capital markets.
For the present, we expect to maintain the fund's relatively high equity
sensitivity, and believe that will prove beneficial in an accelerating
economy. Because convertible securities are sensitive to cyclical
changes, we anticipate having to reduce the equity sensitivity at some
point in the future, when market conditions are not as favorable. As
always, we strive to combine the potential for attractive returns with
an appropriate level of risk.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Lower-rated bonds
may offer higher yields in return for more risk.
PERFORMANCE SUMMARY
This section provides information about your fund's performance during
its semiannual period, which ended April 30, 2003. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Past performance does not
indicate future results. More recent returns may be less or more than
those shown. Investment return and principal value will fluctuate and
you may have a gain or a loss when you sell your shares. A profile of
your fund's strategy appears on the first page of this report. See pages
8 and 9 for definitions of some terms used in this section.
TOTAL RETURN FOR PERIODS ENDED 4/30/03
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
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6 months 13.45% 6.94% 12.99% 7.99% 13.01% 12.01% 13.10% 9.17%
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1 year -1.16 -6.82 -1.93 -6.65 -1.92 -2.86 -1.67 -5.10
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5 years -3.57 -9.12 -7.11 -8.30 -7.10 -7.10 -5.78 -9.10
Annual average -0.72 -1.89 -1.47 -1.72 -1.46 -1.46 -1.18 -1.89
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10 years 97.37 86.01 83.03 83.03 83.07 83.07 87.82 81.26
Annual average 7.04 6.40 6.23 6.23 6.23 6.23 6.51 6.13
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Annual average
(life of fund) 10.54 10.33 9.55 9.55 9.71 9.71 9.83 9.70
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Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B
share returns reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declining to 1% in the sixth
year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the
first year that is eliminated thereafter. Performance for class B, C,
and M shares before their inception is derived from the historical
performance of class A shares, adjusted for the applicable sales charge
(or CDSC) and higher operating expenses for such shares.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/03
Lipper
Goldman Sachs Convertible Securities
Convertible Funds category
Index average*
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6 months 13.61% 11.16%
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1 year 0.59 -1.43
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5 years 7.66 15.43
Annual average 1.49 2.76
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10 years 113.89 131.63
Annual average 7.90 8.54
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Annual average
(life of fund) --** 10.57
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*Over the 6-month and 1-, 5-, and 10-year periods ended 4/30/03, there were
65, 65, 45, and 21 funds, respectively, in this Lipper category.
**The benchmark index was not in existence at the time of the fund's inception.
The index's inception was 12/31/84.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/03
Class A Class B Class C Class M
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Distributions
(number) 2 2 2 2
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Income $0.272 $0.225 $0.224 $0.240
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Capital gains -- -- -- --
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Total $0.272 $0.225 $0.224 $0.240
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Share value: NAV POP NAV NAV NAV POP
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10/31/02 $12.32 $13.07 $12.14 $12.27 $12.24 $12.68
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4/30/03 13.69 14.53 13.48 13.63 13.59 14.08
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Current return (end of period)
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Current
dividend
rate 1 3.97% 3.74% 3.32% 3.29% 3.53% 3.41%
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Current
30-day SEC
yield 2 4.45 4.19 3.72 3.72 3.96 3.82
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1 Most recent distribution, excluding capital gains, 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 3/31/03(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
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6 months 11.35% 4.92% 10.84% 5.84% 10.90% 9.90% 10.97% 7.09%
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1 year -7.92 -13.22 -8.60 -13.00 -8.59 -9.47 -8.38 -11.57
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5 years -7.91 -13.20 -11.30 -12.44 -11.28 -11.28 -10.02 -13.17
Annual average -1.63 -2.79 -2.37 -2.62 -2.37 -2.37 -2.09 -2.78
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10 years 87.23 76.45 73.67 73.67 73.68 73.68 78.14 71.94
Annual average 6.47 5.84 5.67 5.67 5.68 5.68 5.94 5.57
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Annual average
(life of fund) 10.39 10.17 9.39 9.39 9.56 9.56 9.67 9.55
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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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
COMPARATIVE INDEXES
Goldman Sachs Convertible 100 Index is an unmanaged index with a target
of 100 securities, including convertible bonds, preferreds, and
mandatory convertible securities. It includes reinvested dividends.
Citigroup World Government Bond Index is an unmanaged index of
government bonds from 14 countries.
Credit Suisse First Boston (CSFB) High Yield Index is an unmanaged index
of high-yield debt securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Morgan Stanley Capital International (MSCI) World Ex-U.S. Index is an
unmanaged index of developed and emerging markets (excluding the U.S.).
Russell 2000 Growth Index is an unmanaged index of those companies in
the Russell 2000 Index chosen for their growth orientation.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A NOTE ABOUT DUPLICATE MAILINGS
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, 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, as well as the accompanying Notes,
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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal 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, 2003 (Unaudited)
CONVERTIBLE BONDS AND NOTES (47.9%) (a)
PRINCIPAL AMOUNT VALUE
Basic Materials (2.0%)
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$14,500,000 Freeport-McMoRan Copper & Gold, Inc. 144A cv. sr. notes 7s, 2011 $15,206,875
Communication Services (2.1%)
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7,689,000 Nextel Communications, Inc. cv. sr. notes 4 3/4s, 2007 7,592,888
20,000,000 U.S. Cellular Corp. cv. Liquid Yield Option Notes (LYON)
zero %, 2015 7,725,000
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15,317,888
Conglomerates (2.7%)
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5,150,000 GenCorp, Inc. 144A cv. sub. notes 5 3/4s, 2007 4,622,125
15,000,000 Tyco International Group SA 144A cv. company guaranty 2 3/4s,
2018 (Luxembourg) 15,206,250
-------------
19,828,375
Consumer Cyclicals (8.7%)
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2,000,000 Baker (J.), Inc. cv. sr. sub. notes 7s, 2002 (In default) (NON) (DEF) 200,000
4,660,000 Charming Shoppes, Inc. 144A cv. bonds 4 3/4s, 2012 4,094,975
7,500,000 Hilton Hotels Corp. 144A cv. notes 3 3/8s, 2023 7,462,500
5,500,000 JC Penney Co., Inc. cv. sub. notes 5s, 2008 5,376,250
14,000,000 Liberty Media Corp. cv. sr. notes 3 1/2s, 2031 9,030,000
9,400,000 Lowe's Cos., Inc. cv. LYON zero %, 2021 7,332,000
4,000,000 Pep Boys (The) - Manny, Moe, & Jack cv. notes 4 1/4s, 2007 3,550,000
24,500,000 Royal Caribbean Cruises, Ltd. cv. bonds zero %, 2021 (Liberia) 10,887,310
9,800,000 TJX Cos., Inc. (The) cv. LYON zero %, 2021 7,840,000
8,200,000 TJX Cos., Inc. (The) 144A cv. LYON zero %, 2021 6,560,000
3,177,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 2,895,041
-------------
65,228,076
Consumer Staples (7.3%)
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19,800,000 Avon Products, Inc. cv. sr. notes zero %, 2020 10,716,750
4,720,000 CKE Restaurants, Inc. cv. sub. notes 4 1/4s, 2004 4,531,200
15,100,000 General Mills, Inc. 144A cv. sr. bonds zero %, 2022 10,702,125
EUR 3,985,000 Koninklijke Ahold NV cv. sub. notes 3s, 2003 (Netherlands) 1,915,822
NLG 1,072,000 Koninklijke Ahold NV cv. sub. notes 3s, 2003 (Netherlands) 515,373
$10,400,000 Rite Aid Corp. cv. notes 4 3/4s, 2006 10,114,000
7,210,000 Rite Aid Corp. 144A cv. sr. notes 4 3/4s, 2006 7,011,725
9,200,000 Service Corp. International cv. sub. notes 6 3/4s, 2008 8,866,500
-------------
54,373,495
Energy (0.7%)
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4,800,000 Pride International, Inc. 144A cv. sr. notes 2 1/2s, 2007 5,574,000
Financial (4.0%)
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5,100,000 Legg Mason, Inc. cv. LYON zero %, 2031 2,671,125
15,583,000 Legg Mason, Inc. 144A cv. LYON zero %, 2031 8,161,596
9,831,000 Providian Financial Corp. cv. sr. notes 3 1/4s, 2005 8,380,928
10,900,000 XL Capital, Ltd. cv. debs. zero %, 2021 (Cayman Islands) 6,935,125
3,300,000 Zenith National Insurance Corp. 144A cv. notes 5 3/4s, 2023 4,026,000
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30,174,774
Health Care (8.7%)
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3,600,000 Allergan, Inc. cv. sr. notes zero %, 2022 3,411,000
4,500,000 Allergan, Inc. 144A cv. sr. notes zero %, 2022 4,263,750
11,600,000 Alza Corp. cv. sub. debs. zero %, 2020 9,048,000
4,200,000 AmeriSource Health Corp. cv. company guaranty 5s, 2007 5,517,750
10,300,000 Amgen, Inc. cv. LYON zero %, 2032 7,995,375
7,860,000 Cephalon, Inc. 144A cv. sub. notes 2 1/2s, 2006 7,270,500
5,950,000 Charles River Laboratories, Inc. 144A cv. bonds 3 1/2s, 2022 6,165,688
12,300,000 Elan Finance Corp., Ltd. cv. LYON zero %, 2018 (Bermuda) 6,519,000
2,900,000 Genzyme Corp. (General Division) cv. sub. debs. 3s, 2021 2,907,250
2,200,000 Genzyme Corp. (General Division) 144A cv. sub. debs. 3s, 2021 2,205,500
6,000,000 King Pharmaceuticals, Inc. cv. sr. notes FRN 2 3/4s, 2021 5,175,000
4,000,000 Manor Care, Inc. 144A cv. sr. notes 2 1/8s, 2023 4,120,000
-------------
64,598,813
Technology (10.2%)
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9,200,000 Agilent Technologies, Inc. cv. debs. FRB 3s, 2021 8,866,500
5,084,000 Aspen Technology, Inc. cv. sub. debs. 5 1/4s, 2005 4,067,200
8,482,000 Computer Associates, Inc. 144A cv. sr. notes 5s, 2007 9,489,238
17,600,000 Corning, Inc. cv. debs. zero %, 2015 12,496,000
25,700,000 Hewlett-Packard Co. cv. sub. notes zero %, 2017 13,074,875
8,403,000 International Rectifier Corp. cv. sub. notes 4 1/4s, 2007 7,699,249
1,500,000 MSC.Software Corp. 144A cv. notes 2 1/2s, 2008 1,511,250
2,940,000 Network Associates, Inc. 144A cv. sub. notes 5 1/4s, 2006 3,123,750
11,100,000 Peregrine Systems, Inc. cv. sub. notes 5 1/2s, 2007 (In default) (NON) 6,493,500
2,577,000 Safeguard Scientifics, Inc. cv. sub. notes 5s, 2006 1,816,785
2,975,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 5s, 2006 2,097,375
10,000,000 Solectron Corp. cv. LYON zero %, 2020 5,412,500
-------------
76,148,222
Utilities & Power (1.5%)
- -------------------------------------------------------------------------------------------------------------------
3,000,000 Mirant Corp. cv. notes 2 1/2s, 2021 2,163,750
7,725,000 Sierra Pacific Resources 144A cv. notes 7 1/4s, 2010 9,028,594
-------------
11,192,344
-------------
Total Convertible Bonds and Notes (cost $350,402,835) $357,642,862
CONVERTIBLE PREFERRED STOCKS (45.9%) (a)
NUMBER OF SHARES VALUE
Basic Materials (2.7%)
- -------------------------------------------------------------------------------------------------------------------
83,300 Boise Cascade Corp. units $3.75 cv. pfd. $3,311,175
17,040 Hercules Trust II 6.50% units cum. cv. pfd. 9,968,400
326,900 Smurfit-Stone Container Corp. Ser. A, $1.75 cum. cv. pfd. 6,783,175
-------------
20,062,750
Capital Goods (4.5%)
- -------------------------------------------------------------------------------------------------------------------
75,000 Allied Waste Industries, Inc. $3.125 cum. cv. pfd. 3,900,000
89,000 Northrop Grumman Corp. Ser. B, $7.00 cum. cv. pfd. 10,924,750
307,000 Owens-Illinois, Inc. $2.375 cv. pfd. 7,866,875
63,771 Raytheon Co. units $4.125 cum. cv. pfd. 3,371,892
231,300 TXI Capital Trust I $2.75 cv. pfd. 7,083,563
-------------
33,147,080
Communication Services (2.0%)
- -------------------------------------------------------------------------------------------------------------------
175,100 ALLTEL Corp. units $3.875 cv. pfd. 8,426,688
294,600 Citizens Communications Co. units $1.688 cv. pfd. 6,702,150
41,000 Global Crossing, Ltd. 6.75% cum. cv. pfd. (Bermuda) (In default) (NON) 410
-------------
15,129,248
Consumer Cyclicals (4.2%)
- -------------------------------------------------------------------------------------------------------------------
353,000 Ford Motor Co. Capital Trust II $3.25 cum. cv. pfd. 15,443,750
7,400 Radio One, Inc. 6.50% cum. cv. pfd. 7,560,950
200,700 Sinclair Broadcast Group, Inc. Ser. D, $3.00 cv. pfd. 8,303,963
-------------
31,308,663
Consumer Staples (0.8%)
- -------------------------------------------------------------------------------------------------------------------
113,345 Suiza Capital Trust II $2.75 cv. pfd. 6,304,816
Energy (4.2%)
- -------------------------------------------------------------------------------------------------------------------
200,000 Arch Coal, Inc. $2.50 cum. cv. pfd. 11,325,000
101,000 Chesapeake Energy Corp. 144A $3.00 cv. pfd. 5,479,250
140,753 Weatherford International, Ltd. $2.50 cum. cv. pfd. 7,125,621
140,000 Western Gas Resources, Inc. $2.625 cum. cv. pfd. 7,420,000
-------------
31,349,871
Financial (10.6%)
- -------------------------------------------------------------------------------------------------------------------
149,900 ACE, Ltd. $4.125 cum. cv. pfd. 9,649,813
274,400 Capital One Financial Corp. units $3.125 cv. pfd. 10,118,532
119,300 Commerce Capital Trust II $2.975 cum. cv. pfd. 6,665,888
232,100 Host Marriott Financial Trust $3.375 cv. pfd. 8,877,825
161,800 Provident Finance Group units $2.25 cv. pfd. 3,923,650
156,000 Simon Property Group, Inc. Ser. B, $6.50 cum. cv. pfd. 15,463,500
60,350 State Street Corp. 6.75% cv. pfd. 11,485,812
514,800 Travelers Property Casualty Corp. $1.125 cv. pfd. 12,612,600
-------------
78,797,620
Health Care (2.1%)
- -------------------------------------------------------------------------------------------------------------------
95,500 Anthem, Inc. $3.00 cv. pfd. 8,022,000
174,300 Baxter International, Inc. $3.50 cv. pfd. 7,669,200
-------------
15,691,200
Technology (4.2%)
- -------------------------------------------------------------------------------------------------------------------
8,850 Lucent Technologies, Inc. 8.00% cv. pfd. 8,440,688
193,900 Solectron Corp. units $1.813 cv. pfd. 2,108,663
164,400 Titan Capital Trust $2.875 cum. cv. pfd. 8,261,100
187,400 Xerox Corp. 144A $3.75 cv. pfd. 12,391,825
-------------
31,202,276
Transportation (3.2%)
- -------------------------------------------------------------------------------------------------------------------
11,500 Kansas City Southern Industries, Inc. 144A 4.25% cum. cv. pfd. 5,867,910
140,000 Teekay Shipping Corp. $1.813 cv. pfd. (Marshall Islands) 3,692,500
285,585 Union Pacific Capital Trust $3.125 cum. cv. pfd. 14,671,929
-------------
24,232,339
Utilities & Power (7.4%)
- -------------------------------------------------------------------------------------------------------------------
65,100 CenterPoint Energy, Inc. 2.00% cv. pfd. 1,789,599
144,500 Cinergy Corp. units $4.75 cv. pfd. 8,236,500
136,900 Dominion Resources, Inc. units $4.75 cv. pfd. 7,717,738
113,400 El Paso Corp. $4.50 cv. pfd. 3,288,600
166,400 El Paso Energy Capital Trust I $2.375 cv. pfd. 4,139,200
148,000 FPL Group, Inc. units $4.25 cv. pfd. 8,343,500
96,300 FPL Group, Inc. units $4.00 cv. pfd. 5,224,275
144,000 ONEOK, Inc. units $2.125 cv. pfd. 3,942,000
358,600 Sempra Energy units $2.125 cv. pfd. 9,368,425
105,400 Sierra Pacific Resources units $4.50 cum. cv. pfd. 2,777,290
-------------
54,827,127
-------------
Total Convertible Preferred Stocks (cost $355,250,707) $342,052,990
COMMON STOCKS (5.1%) (a)
NUMBER OF SHARES VALUE
Conglomerates (0.4%)
- -------------------------------------------------------------------------------------------------------------------
209,000 Tyco International, Ltd. (Bermuda) $3,260,400
Consumer Cyclicals (0.9%)
- -------------------------------------------------------------------------------------------------------------------
291,000 JC Penney Co., Inc. (Holding Co.) 4,964,460
227,400 Pep Boys (The) -- Manny, Moe, & Jack 1,946,544
-------------
6,911,004
Consumer Staples (0.2%)
- -------------------------------------------------------------------------------------------------------------------
27,963 Dean Foods Co. (NON) 1,217,229
Energy (0.9%)
- -------------------------------------------------------------------------------------------------------------------
170,700 Royal Dutch Petroleum Co. ADR (Netherlands) 6,978,216
Financial (1.9%)
- -------------------------------------------------------------------------------------------------------------------
286,300 JPMorgan Chase & Co. 8,402,905
260,400 U.S. Bancorp 5,767,860
-------------
14,170,765
Health Care (0.8%)
- -------------------------------------------------------------------------------------------------------------------
95,400 Genzyme Corp. (NON) 3,842,712
133,200 King Pharmaceuticals, Inc. (NON) 1,679,652
-------------
5,522,364
-------------
Total Common Stocks (cost $41,487,539) $38,059,978
SHORT-TERM INVESTMENTS (1.8%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
$968,245 Short-term investments held as collateral for loaned
securities with yields ranging from 1.20% to 1.40%
and due dates ranging from May 1, 2003 to June 23, 2003 (d) $967,900
12,525,958 Short-term investments held in Putnam commingled
cash account with yields ranging from 1.18% to 2.625% and
due dates ranging from May 1, 2003 to June 16, 2003 (d) 12,525,958
-------------
Total Short-Term Investments (cost $13,493,858) $13,493,858
- -------------------------------------------------------------------------------------------------------------------
Total Investments (cost $760,634,939) $751,249,688
- -------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $745,879,081.
(DEF) Security is in default of principal and interest.
(NON) Non-income-producing security.
(d) See Note 1 to the financial statements.
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 custodian bank.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at April 30, 2003,
which are subject to change based on the terms of the security.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003 (Unaudited)
Assets
- -------------------------------------------------------------------------------------------
Investments in securities, at value, including $941,441 of
securities on loan (identified cost $760,634,939) (Note 1) $751,249,688
- -------------------------------------------------------------------------------------------
Foreign currency (cost $14,686) (Note 1) 15,251
- -------------------------------------------------------------------------------------------
Dividends, interest and other receivables 4,203,527
- -------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 262,072
- -------------------------------------------------------------------------------------------
Receivable for securities sold 3,604,655
- -------------------------------------------------------------------------------------------
Total assets 759,335,193
Liabilities
- -------------------------------------------------------------------------------------------
Payable for securities purchased 9,959,375
- -------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 978,826
- -------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,086,360
- -------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 89,212
- -------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 88,447
- -------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,264
- -------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 215,690
- -------------------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 967,900
- -------------------------------------------------------------------------------------------
Other accrued expenses 69,038
- -------------------------------------------------------------------------------------------
Total liabilities 13,456,112
- -------------------------------------------------------------------------------------------
Net assets $745,879,081
Represented by
- -------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,065,913,011
- -------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 12,156,083
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (322,806,926)
- -------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (9,383,087)
- -------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares
outstanding $745,879,081
Computation of net asset value and offering price
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($583,318,783 divided by 42,615,216 shares) $13.69
- -------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.69)* $14.53
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($111,448,880 divided by 8,265,388 shares)** $13.48
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($5,004,822 divided by 367,206 shares)** $13.63
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($8,122,804 divided by 597,676 shares) $13.59
- -------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.59)* $14.08
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($37,983,792 divided by 2,774,739 shares) $13.69
- -------------------------------------------------------------------------------------------
* 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, 2003 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------------------
Dividends $11,707,702
- -------------------------------------------------------------------------------------------
Interest 8,926,677
- -------------------------------------------------------------------------------------------
Securities lending 972
- -------------------------------------------------------------------------------------------
Total investment income 20,635,351
Expenses:
- -------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,217,769
- -------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 550,854
- -------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,427
- -------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,715
- -------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 698,940
- -------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 541,572
- -------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 20,861
- -------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 26,258
- -------------------------------------------------------------------------------------------
Other 240,049
- -------------------------------------------------------------------------------------------
Total expenses 4,317,445
- -------------------------------------------------------------------------------------------
Expense reduction (Note 2) (52,624)
- -------------------------------------------------------------------------------------------
Net expenses 4,264,821
- -------------------------------------------------------------------------------------------
Net investment income 16,370,530
- -------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (965,687)
- -------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (5,240)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign
currencies during the period 2,164
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 74,970,829
- -------------------------------------------------------------------------------------------
Net gain on investments 74,002,066
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $90,372,596
- -------------------------------------------------------------------------------------------
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
2003* 2002
- -------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $16,370,530 $37,176,930
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (970,927) (83,205,311)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 74,972,993 26,922,375
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 90,372,596 (19,106,006)
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A (11,682,569) (29,018,776)
- -------------------------------------------------------------------------------------------------------
Class B (1,892,405) (5,058,851)
- -------------------------------------------------------------------------------------------------------
Class C (70,610) (189,339)
- -------------------------------------------------------------------------------------------------------
Class M (130,480) (346,365)
- -------------------------------------------------------------------------------------------------------
Class Y (824,052) (2,166,132)
- -------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (26,161,558) (108,800,476)
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 49,610,922 (164,685,945)
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 696,268,159 860,954,104
- -------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$12,156,083 and $10,385,669, respectively) $745,879,081 $696,268,159
- -------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.32 $13.32 $18.62 $20.26 $20.04 $23.22
- ------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income (a) .30 .63 (d) .75 .76 .75 .76
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.34 (1.01) (d) (4.27) .30 2.30 (1.02)
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.64 (.38) (3.52) 1.06 3.05 (.26)
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.27) (.62) (.62) (.77) (.81) (.79)
- ------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (1.16) (1.93) (2.02) (2.13)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.62) (1.78) (2.70) (2.83) (2.92)
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.69 $12.32 $13.32 $18.62 $20.26 $20.04
- ------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 13.45* (3.20) (19.85) 5.16 16.42 (1.37)
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $583,319 $542,156 $657,937 $933,703 $982,956 $1,056,693
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .54* 1.08 1.01 .97 .98 .97
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.32* 4.63 (d) 4.86 3.86 3.73 3.50
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.05* 116.36 207.64 176.66 54.74 92.76
- ------------------------------------------------------------------------------------------------------------------
* 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).
(d) As required, effective November 1, 2001, the fund adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on its fixed-income securities.
The effects from this change for the year ended October 31, 2002 were a
decrease to net investment income per share of $0.02, a decrease to net
realized and unrealized losses per share of $0.02 and a decrease to the
ratio of net investment income to average net assets of 0.13%. The above
per share information, ratios, and supplemental data for the periods
prior to November 1, 2001 have not been reinstated to reflect this
change in presentation (Note 5).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.14 $13.13 $18.37 $20.02 $19.83 $23.01
- ------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income (a) .25 .52 (d) .63 .61 .60 .59
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.32 (.99) (d) (4.21) .29 2.27 (1.01)
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.57 (.47) (3.58) .90 2.87 (.42)
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.52) (.50) (.62) (.66) (.63)
- ------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (1.16) (1.93) (2.02) (2.13)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.52) (1.66) (2.55) (2.68) (2.76)
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.48 $12.14 $13.13 $18.37 $20.02 $19.83
- ------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 12.99* (3.91) (20.46) 4.38 15.58 (2.11)
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $111,449 $106,343 $143,286 $235,897 $291,017 $289,652
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .92* 1.83 1.76 1.72 1.73 1.72
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.95* 3.88 (d) 4.09 3.11 2.99 2.74
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.05* 116.36 207.64 176.66 54.74 92.76
- ------------------------------------------------------------------------------------------------------------------
* 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).
(d) As required, effective November 1, 2001, the fund adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on its fixed-income securities.
The effects from this change for the year ended October 31, 2002 were a
decrease to net investment income per share of $0.02, a decrease to net
realized and unrealized losses per share of $0.02 and a decrease to the
ratio of net investment income to average net assets of 0.13%. The above
per share information, ratios, and supplemental data for the periods
prior to November 1, 2001 have not been reinstated to reflect this
change in presentation (Note 5).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS C
- -----------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 July 26, 1999+
operating performance (Unaudited) Year ended October 31 to October 31
- -----------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.27 $13.26 $18.55 $20.23 $20.85
- -----------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------
Net investment income (a) .25 .52 (d) .64 .61 .20
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.33 (.99) (d) (4.27) .31 (.59)
- -----------------------------------------------------------------------------------------------------
Total from
investment operations 1.58 (.47) (3.63) .92 (.39)
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
From net
investment income (.22) (.52) (.50) (.67) (.23)
- -----------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (1.16) (1.93) --
- -----------------------------------------------------------------------------------------------------
Total distributions (.22) (.52) (1.66) (2.60) (.23)
- -----------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.63 $12.27 $13.26 $18.55 $20.23
- -----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 13.01* (3.87) (20.51) 4.45 (1.87)*
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,005 $3,999 $4,825 $5,545 $661
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .92* 1.83 1.76 1.72 .47*
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.94* 3.87 (d) 4.12 3.17 1.12*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.05* 116.36 207.64 176.66 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).
(d) As required, effective November 1, 2001, the fund adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on its fixed-income securities.
The effects from this change for the year ended October 31, 2002 were a
decrease to net investment income per share of $0.02, a decrease to net
realized and unrealized losses per share of $0.02 and a decrease to the
ratio of net investment income to average net assets of 0.13%. The above
per share information, ratios, and supplemental data for the periods
prior to November 1, 2001 have not been reinstated to reflect this
change in presentation (Note 5).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.24 $13.23 $18.50 $20.13 $19.92 $23.08
- ------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income (a) .27 .56 (d) .67 .66 .65 .65
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.32 (1.00) (d) (4.24) .31 2.28 (1.00)
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.59 (.44) (3.57) .97 2.93 (.35)
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.24) (.55) (.54) (.67) (.70) (.68)
- ------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (1.16) (1.93) (2.02) (2.13)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.55) (1.70) (2.60) (2.72) (2.81)
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.59 $12.24 $13.23 $18.50 $20.13 $19.92
- ------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 13.10* (3.65) (20.27) 4.73 15.87 (1.75)
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $8,123 $6,861 $9,345 $15,370 $16,338 $18,081
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .79* 1.58 1.51 1.47 1.48 1.47
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.07* 4.13 (d) 4.34 3.36 3.23 2.99
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.05* 116.36 207.64 176.66 54.74 92.76
- ------------------------------------------------------------------------------------------------------------------
* 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).
(d) As required, effective November 1, 2001, the fund adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on its fixed-income securities.
The effects from this change for the year ended October 31, 2002 were a
decrease to net investment income per share of $0.02, a decrease to net
realized and unrealized losses per share of $0.02 and a decrease to the
ratio of net investment income to average net assets of 0.13%. The above
per share information, ratios, and supplemental data for the periods
prior to November 1, 2001 have not been reinstated to reflect this
change in presentation (Note 5).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS Y
- -----------------------------------------------------------------------------------------------------
Six months For the period
ended December 30,
Per-share April 30 1998+
operating performance (Unaudited) Year ended October 31 to October 31
- -----------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $12.32 $13.32 $18.63 $20.26 $19.32
- -----------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------
Net investment income (a) .32 .66 (d) .79 .81 .72
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.34 (1.00) (d) (4.28) .31 .98
- -----------------------------------------------------------------------------------------------------
Total from
investment operations 1.66 (.34) (3.49) 1.12 1.70
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
From net
investment income (.29) (.66) (.66) (.82) (.76)
- -----------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (1.16) (1.93) --
- -----------------------------------------------------------------------------------------------------
Total distributions (.29) (.66) (1.82) (2.75) (.76)
- -----------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.69 $12.32 $13.32 $18.63 $20.26
- -----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 13.59* (2.96) (19.68) 5.49 8.87*
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $37,984 $36,910 $45,561 $59,214 $63,425
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .42* .83 .76 .72 .61*
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.45* 4.87 (d) 5.12 4.11 3.43*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 42.05* 116.36 207.64 176.66 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).
(d) As required, effective November 1, 2001, the fund adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on its fixed-income securities.
The effects from this change for the year ended October 31, 2002 were a
decrease to net investment income per share of $0.02, a decrease to net
realized and unrealized losses per share of $0.02 and a decrease to the
ratio of net investment income to average net assets of 0.13%. The above
per share information, ratios, and supplemental data for the periods
prior to November 1, 2001 have not been reinstated to reflect this
change in presentation (Note 5).
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
April 30, 2003 (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.
Capital conservation is the fund's 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 and class M 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 certain
eligible purchasers including certain defined contribution plans
(including corporate IRAs), certain college savings plans, bank trust
departments and trust companies.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with 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 valued at the last reported sales price on its
principal exchange, or official closing price for certain markets. If no
sales are reported -- as in the case of some securities traded
over-the-counter -- a security is valued at its last reported bid price.
Market quotations are not considered to be readily available for certain
debt obligations; such investments are valued at market value on the
basis of valuations furnished by an independent pricing service or
dealers, approved by the Trustees. Such services or dealers determine
valuations for normal institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships, generally recognized by
institutional traders, between securities. For foreign investments, if
trading or events occurring in other markets after the close of the
principal exchange in which the foreign investments are traded are
expected to materially affect the value of the investments, then those
investments are valued, taking into consideration these events, at their
fair value following procedures approved by the Trustees. 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 valued at amortized cost, which
approximates fair value. Other investments, including restricted
securities, are valued at fair value following procedures approved by
the Trustees.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having
maturities of up to 397 days for collateral received under security
lending arrangements and up to 90 days for other cash investments.
C) Security transactions and related investment income Security
transactions are recorded 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
recognized on the ex-dividend date except that certain dividends from
foreign securities are recognized 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. All premiums/discounts are
amortized/accreted on a yield-to-maturity basis.
D) 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 earned 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, currency gains and losses realized
between the trade and settlement dates on securities transactions 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.
E) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents, the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the Statement of operations. At April 30, 2003, the value of
securities loaned amounted to $941,441. The fund received cash
collateral of $967,900, which is pooled with collateral of other Putnam
funds into 45 issuers of high-grade short-term investments.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and that
borrowings not exceed prospectus limitations. For the six months ended
April 30, 2003, the fund had no borrowings against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At October 31, 2002, the fund had a capital loss carryover of
approximately $320,724,000 available to the extent allowed by tax law to
offset future net capital gains, if any. The amount of the carryover and
the expiration dates are:
Loss Carryover Expiration
- -------------- ------------------
$233,997,000 October 31, 2009
86,727,000 October 31, 2010
The aggregate identified cost on a tax basis is $761,746,904, resulting
in gross unrealized appreciation and depreciation of $40,181,373 and
$50,678,589, respectively, or net unrealized depreciation of
$10,497,216.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, 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
Putnam Management is paid for management and investment advisory
services 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 wholly-owned subsidiary of Putnam,
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, 2003,
the fund's expenses were reduced by $52,624 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,162 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, 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 of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net
assets attributable to class A, class B, class C and class M shares,
respectively. The Trustees have approved payment by the fund at the
annual rates 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, 2003, Putnam Retail Management, acting as
underwriter, received net commissions of $29,303 and $3,778 from the sale of
class A and class M shares, respectively, and received $75,286 and $274 in
contingent deferred sales charges from redemptions of class B and class C
shares, respectively. A deferred sales charge of up to 1.00% and 0.65% is
assessed on certain redemptions of class A and class M shares, respectively.
For the six months ended April 30, 2003, Putnam Retail Management, acting as
underwriter, received $745 and no monies on class A and class M redemptions,
respectively.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2003, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $297,281,034 and $321,951,305, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At April 30, 2003, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2003
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,856,737 $37,223,968
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 778,115 10,145,255
- ---------------------------------------------------------------------------
3,634,852 47,369,223
Shares repurchased (5,015,455) (65,375,284)
- ---------------------------------------------------------------------------
Net decrease (1,380,603) $(18,006,061)
- ---------------------------------------------------------------------------
Year ended October 31, 2002
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 6,534,382 $89,725,320
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 1,835,743 24,996,347
- ---------------------------------------------------------------------------
8,370,125 114,721,667
Shares repurchased (13,778,345) (187,104,341)
- ---------------------------------------------------------------------------
Net decrease (5,408,220) $(72,382,674)
- ---------------------------------------------------------------------------
Six months ended April 30, 2003
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 965,275 $12,352,718
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 118,366 1,521,296
- ---------------------------------------------------------------------------
1,083,641 13,874,014
Shares repurchased (1,574,910) (20,197,482)
- ---------------------------------------------------------------------------
Net decrease (491,269) $(6,323,468)
- ---------------------------------------------------------------------------
Year ended October 31, 2002
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 1,645,985 $22,280,547
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 302,106 4,067,147
- ---------------------------------------------------------------------------
1,948,091 26,347,694
Shares repurchased (4,104,224) (55,044,538)
- ---------------------------------------------------------------------------
Net decrease (2,156,133) $(28,696,844)
- ---------------------------------------------------------------------------
Six months ended April 30, 2003
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 101,559 $1,332,284
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 4,867 63,217
- ---------------------------------------------------------------------------
106,426 1,395,501
Shares repurchased (65,092) (847,854)
- ---------------------------------------------------------------------------
Net increase 41,334 $547,647
- ---------------------------------------------------------------------------
Year ended October 31, 2002
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 128,968 $1,759,658
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 11,771 159,893
- ---------------------------------------------------------------------------
140,739 1,919,551
Shares repurchased (178,634) (2,348,407)
- ---------------------------------------------------------------------------
Net decrease (37,895) $(428,856)
- ---------------------------------------------------------------------------
Six months ended April 30, 2003
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 110,351 $1,459,652
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 8,573 111,019
- ---------------------------------------------------------------------------
118,924 1,570,671
Shares repurchased (81,864) (1,058,899)
- ---------------------------------------------------------------------------
Net increase 37,060 $511,772
- ---------------------------------------------------------------------------
Year ended October 31, 2002
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 55,184 $725,947
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 21,874 296,308
- ---------------------------------------------------------------------------
77,058 1,022,255
Shares repurchased (222,977) (2,971,186)
- ---------------------------------------------------------------------------
Net decrease (145,919) $(1,948,931)
- ---------------------------------------------------------------------------
Six months ended April 30, 2003
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 128,095 $1,676,709
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 63,261 824,052
- ---------------------------------------------------------------------------
191,356 2,500,761
Shares repurchased (411,630) (5,392,209)
- ---------------------------------------------------------------------------
Net decrease (220,274) $(2,891,448)
- ---------------------------------------------------------------------------
Year ended October 31, 2002
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 386,244 $5,353,424
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions 158,959 2,166,132
- ---------------------------------------------------------------------------
545,203 7,519,556
Shares repurchased (970,674) (12,862,727)
- ---------------------------------------------------------------------------
Net decrease (425,471) $(5,343,171)
- ---------------------------------------------------------------------------
Note 5
New accounting pronouncement
As required, the fund has adopted the provisions of the AICPA Audit and
Accounting Guide, Audits of Investment Companies. This Guide requires
that the fund amortize premiums and accrete discounts on all
fixed-income securities, and classify as interest income gains and
losses realized on paydowns on mortgage-backed securities. Prior to
November 1, 2001, the fund did not amortize premiums for certain
fixed-income securities and characterized as realized gains and losses
paydowns on mortgage-backed securities. Adopting these accounting
principles did not affect the fund's net asset value, but did change the
classification of certain amounts between interest income and realized
and unrealized gain/loss in the Statement of operations. The adoption of
this principle for the year ended October 31, 2002 was to decrease net
investment income by $1,044,496, increase net unrealized appreciation by
$806,485 and decrease net realized losses by $238,011. The Statement of
changes in net assets and Financial highlights for prior periods have
not been restated to reflect this change in presentation.
SERVICES FOR SHAREHOLDERS
HELP YOUR INVESTMENT GROW
Set up a program for systematic investing with as little as $25 a month
from a Putnam fund or from your own savings or checking account.
(Regular investing does not guarantee a profit or protect against loss
in a declining market.)
SWITCH FUNDS EASILY
You can move money from one Putnam fund to another within the same class
of shares without a service charge. (This privilege is subject to change
or termination.)
ACCESS YOUR MONEY EASILY
You can have checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares. Class B and class C shares carry a sales
charge that is applied to certain withdrawals.
HOW TO BUY ADDITIONAL SHARES
You may buy shares through your financial advisor or directly from
Putnam. To open an account by mail, send a check made payable to the
name of the fund along with a completed fund application. To add to an
existing account, complete the investment slip found at the top of your
Confirmation of Activity statement and return it with a check payable to
your fund.
VISIT US AT WWW.PUTNAMINVESTMENTS.COM
A secure section of our Web site contains complete information on your
account, including balances and transactions, updated daily. You may
also conduct transactions, such as exchanges, additional investments,
and address changes. Log on today to get your password.
USE OUR TOLL-FREE NUMBER
1-800-225-1581 Ask a helpful Putnam representative or your financial
advisor for details about any of these or other services, or see your
prospectus.
[PHOTO OMITTED: SAMUEL PUTNAM]
PUTNAM IS A LEADER IN GLOBAL MONEY MANAGEMENT
Putnam Investments traces its heritage to the early 19th century when
ship captains hired trustees to manage their money while they were away
at sea. In a landmark 1830 decision that involved one such trustee,
Massachusetts Supreme Judicial Court Justice Samuel Putnam established
The Prudent Man Rule, a legal foundation for responsible money
management. In 1937, his great-great grandson founded Putnam with The
George Putnam Fund of Boston, the first fund to offer a balanced
portfolio of stocks and bonds. Today, Putnam Investments is one of the
largest investment management firms in the world, and this balanced
approach remains the foundation of everything we do.
With over 65 years of experience, Putnam has nearly $251 billion in
assets under management, over 100 mutual funds, over 13 million
shareholder accounts, and nearly 3,000 institutional and 401(k) clients.
(Information as of 12/31/02.)
We're one of the largest mutual fund companies in the United States.
Putnam has won the DALBAR award for service twelve times in the past
thirteen years. Putnam offers products in every investment category,
including growth, value, and blend as well as international and fixed
income.
Teamwork is a cornerstone of Putnam's investment philosophy. Our funds
are managed by teams in a collaborative environment that promotes an
active exchange of information.
Putnam's disciplined investment philosophy is based on style
consistency. We aim for less volatility over the short term and strong,
consistent performance over time. Our truth in labeling approach helps
us adhere to every fund's stated objective, style, and risk positioning.
We are committed to helping financial advisors provide sound, sensible
guidance, information, and expertise to help investors reach their
financial goals.
FUND INFORMATION
ABOUT PUTNAM INVESTMENTS
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
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
Charles B. Curtis
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, Treasurer
and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and Principal
Executive Officer
Steven D. Krichmar
Vice President and Principal
Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Brett C. Browchuk
Vice President
Charles E. Haldeman, Jr.
Vice President
Lawrence J. Lasser
Vice President
Beth S. Mazor
Vice President
Richard A. Monaghan
Vice President
Stephen M. Oristaglio
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President
Deborah Kuenstner
Vice President
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Convertible
Income-Growth Trust. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance Summary
and Putnam's Quarterly Ranking Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581. The fund's
Statement of Additional Information contains additional information
about the fund's Trustees and is available without charge upon request
by calling 1-800-225-1581.
Visit www.putnaminvestments.com or call a representative at 1-800-225-1581.
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
SA019-88656 008/223/2ND/920/2LG 6/03
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust
Supplement to Semiannual Report dated 4/30/03
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 clients that meet the
eligibility requirements specified in the fund's prospectus for such
shares. Performance of class Y shares, which do not incur a front-end
load, a distribution fee, or a contingent deferred sales charge, will
differ from the performance of class A, B, C, M, and R shares, which are
discussed more extensively in the annual report.
RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return for periods ended 4/30/03
NAV
6 months 13.59%
1 year -0.91
5 years -2.52
Annual average -0.51
10 years 99.53
Annual average 7.15
Life of fund (since class A inception, 6/29/72)
Annual average 10.58
Share value: NAV
10/31/02 $12.32
4/30/03 $13.69
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
2 $0.288 -- $0.288
- ----------------------------------------------------------------------------
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.
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Controls and Procedures:
- --------------------------------
The registrant's principal executive officer and principal financial
officers have concluded, based on their evaluation of the effectiveness
of the design and operation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report
on Form N-CSR, that the design and operation of such procedures are
effective to provide reasonable assurance that information required to
be disclosed by the investment company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in
the Commission's rules and forms.
There have been no significant changes in the registrant's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits:
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(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: June 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Karnig H. Durgarian
---------------------------
Karnig H. Durgarian
Principal Executive Officer
Date: June 24, 2003
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Financial Officer
Date: June 24, 2003
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 24, 2003