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0000928816-05-001632.txt : 200512290000928816-05-001632.hdr.sgml : 2005122920051229130945ACCESSION NUMBER:0000928816-05-001632CONFORMED SUBMISSION TYPE:N-CSRPUBLIC DOCUMENT COUNT:19CONFORMED PERIOD OF REPORT:20051031FILED AS OF DATE:20051229DATE AS OF CHANGE:20051229EFFECTIVENESS DATE:20051229

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:PUTNAM CONVERTIBLE INCOME GROWTH TRUSTCENTRAL INDEX KEY:0000081247IRS NUMBER:042493360STATE OF INCORPORATION:MAFISCAL YEAR END:1031

FILING VALUES:FORM TYPE:N-CSRSEC ACT:1940 ActSEC FILE NUMBER:811-02280FILM NUMBER:051290690

BUSINESS ADDRESS:STREET 1:ONE POST OFFICE SQSTREET 2:MAILSTOP A 14CITY:BOSTONSTATE:MAZIP:02109BUSINESS PHONE:6172921000

FORMER COMPANY:FORMER CONFORMED NAME:PUTNAM CONVERTIBLE FUNDDATE OF NAME CHANGE:19841212

FORMER COMPANY:FORMER CONFORMED NAME:PUTNAM CONVERTIBLE FUND INC /PRED/DATE OF NAME CHANGE:19821109

N-CSR1a_cig1.htmPUTNAM CONVERTIBLE INCOME-GROWTH TRUST

Item 1. Report toStockholders:
-------------------------------

The following is a copy of the report transmitted to stockholderspursuant
to the Rule 3oe-1 under the Investment Company Act of1940:

What makes Putnam different?

In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible moneymanagement.

THE PRUDENT MAN RULE

All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how menof prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to beinvested.

A time-honored tradition in money management

Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us.

A prudent approach to investing

We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meetits objectives.

Funds for every investment goal

We offer a broad range of mutual funds and other financial products so investors and their advisors can build diversified portfolios.

A commitment to doing whats right for investors

We have below-average expenses and stringent investor protections, and provide a wealth of information about the Putnam funds.

Industry-leading service

We help investors, along with their financial advisors, make informed investment decisions with confidence.

Putnam Convertible Income-Growth Trust 10 | 31 | 05 Annual Report Message from the Trustees 2 About the fund 4 Report from the fund managers 7 Performance 12 Expenses 15 Portfolio turnover 17 Risk 18 Your funds management 19 Terms and definitions 22 Trustee approval of management contract 24 Other information for shareholders 29 Financial statements 30 Federal tax information 56 Brokerage commissions 57 About the Trustees 58 Officers 64

Cover photograph: Postage stamps,private collection White-Packert Photography

Message from the Trustees

Dear Fellow Shareholder

During the period that ended October 31, 2005, domestic stocks advanced at a pace reflecting their long-term average returns, while bonds registered sub-par results. Outside theUnited States, most markets showed more impressive gains. Although U.S. economic growth proceeded at a steady pace, new concerns emerged. High energy prices, the Federal Reserve Boards program of interest-rate increases, and the impact of theunusually active 2005 hurricane season proved challenging to consumers and sparked brief bouts of volatility in finan-cial markets. Putnam Management believes that energy prices, interest rates, and the aftereffects of this years storms arelikely to continue to shape investment opportunities and risks in the months to come.

Amid the uncertainties of this environment, the professional research, diversification, and active management that mutual funds provide continue to make them an intelligentchoice for investors. We want you to know that Putnam Investments management team, under the leadership of Chief Executive Officer Ed Haldeman, continues to focus on investment performance and remains committed to putting the interests ofshareholders first. In keeping with these goals, we have redesigned and expanded our shareholder reports to make it easier for you to learn more about your fund. Furthermore, on page 24 we provide information about the 2005 approval by the Trusteesof your funds management contract with Putnam.

We would also like to take this opportunity to announce the retirement of one of your funds Trustees, Ronald J. Jackson, who has been an independent Trustee of the Putnamfunds since 1996. We thank him for his service.

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In the following pages, members of your funds management team discuss the funds performance and strategies, and their outlook for the months ahead. As always, wethank you for your support of the Putnam funds.

Putnam Convertible Income-Growth Trust:
seeking opportunities in bond/stock hybrids

The differences between bonds and stocks seemfairly clear-cut. Stocks provide an ownership stake in a company; bonds providea claim on the interest paid by a company or other entity on its debt. Stocksare traded on markets, and their value rises and falls with investor sentiment,company news, and economic conditions; bonds are issued by a government, agency,company, or public utility that promises to pay the bearer a fixed rate ofinterest at specified intervals and to return a set amount of money at aspecified end date (the maturity date). A bonds yield is often influenced byinterest-rate levels.

A third type of security, however, is a uniquehybrid of a stock and a bond. A convertible security offers a set rate ofinterest, like a bond; but unlike a bond, it has a built-in option that, undercertain circumstances, allows the investor toexchange (or convert) the security for a fixed number of shares of stock. Thisfeature offers the potential for capital appreciation, since the pre-setconversion price does not change as the underlying stocks price increases ordecreases.

Convertibles are issued by companies and canoffer greater returns than high-quality bonds -- but they also carry a greaterpotential for risk, such as the risk of corporate default or periodicilliquidity. Issuers range from large, well-known S&P 500 corporations, tosmall, rapidly growing companies, to companies in cyclically depressedindustries such as airlines, autos, and utilities.

Constructing a portfolio that maintains anappropriate balance of risk and return potential requires intensive research andanalysis. Putnams global equity and credit research

Putnam Convertible Income-Growth Trusts holdings have
spanned sectors and industries over time.

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analysts conduct rigorous fundamental andquantitative research to determine the true worth of the issuing companysbusiness. Putnam Convertible Income-Growth Trusts management team thenconstructs a portfolio that it believes offers the best return potential withoutundue risk.

This fund invests some orall of its assets in small and/or midsize companies. Such investments increasethe risk of greater price fluctuations. The fund may also have a significantportion of its holdings in bonds. Lower-rated bonds may offer higher yields inreturn for more risk. Mutual funds that invest in bonds are subject to certainrisks, including interest-rate risk, credit risk, and inflation risk. Asinterest rates rise, the prices of bonds fall. Long-term bonds are more exposedto interest-rate risk than short-term bonds. Unlike bonds, bond funds haveongoing fees and expenses.

The busted convertible

One kind of security in which your fund mayinvest is the busted convertible. Busted refers to a security whoseunderlying stock price has fallen signifi-cantly below the conversion price. Itbecomes much less sensitive to the volatility of the underlying stock and ismore bond-like, responding to interest-rate changes.

A bustedconvertible may pay a higher yield than other convertibles, but may also carry ahigher level of risk. (Some companies in this situation may eventually defaulton their bonds.) The objective of buying a busted convertible is to takeadvantage of a companys eventual turnaround despite its present challenges. Forexample, a company undergoing management turmoil may draw negative investorreactions, causing its stock price to tumble. However, if intensive researchdetermines that the management crisis is likely to be resolved, the fund managercould buy the security at a steep discount. The goal is to sell the security ata higher price when the credit improves or when the stockrevives.

Putnam Convertible Income-Growth Trust pursues current income and capitalappreciation by investing primarily in convertible securities -- corporate bondsand preferred stocks that are convertible into common stock. Its secondaryobjective is conservation of capital. It may be an appropriate fund forinvestors who want to participate in the potential capital gains ofhigher-growth sectors, while also benefiting from fixed-incomepayments.

Highlights

For the 12 months ended October 31, 2005, Putnam Convertible Income-Growth Trusts
class A shares returned 6.41% without sales charges.

The funds benchmark, the Goldman Sachs Convertible 100 Index, returned 6.54% .

The average return for the funds Lipper category, Convertible Securities Funds, was 6.76% .

Additional fund performance, comparative performance, and Lipper data can be found in the
performance section beginning on page 12.

Performance Total return for class A shares for periods ended 10/31/05 Since the fund's inception (6/29/72), average annual return is 10.73% at NAV and 10.55% at POP. Average annual return Cumulative return NAV POP NAV POP 10 years 7.78% 7.19% 111.44% 100.29% 5 years 3.67 2.56 19.77 13.50 1 year 6.41 0.82 6.41 0.82

Data is historical. Pastperformance does not guarantee future results. More recent returns may be lessor more than those shown. Investment return and principal value will fluctuateand you may have a gain or a loss when you sell your shares. Performance assumesreinvestment of distributions and does not account for taxes. Returns at NAV donot reflect a sales charge of 5.25% . For the most recent month-end performance,visit www.putnam.com. A short-term trading fee of up to 2% mayapply.

6

Report from the fund managers

The year inreview

Your funds 2005 fiscal year was characterized by threedistinct phases of financial market performance. Initially, there was agenerally positive environment for the markets. Then came a sharp reversal frommid-March to May 2005, especially for fixed-income investments, as creditspreads (the difference in yield between higher- and lower-rated securities)widened dramatically. Lastly, an equity market rally that began in early summer2005 grew beyond the energy sector where it started and helped convertiblesecurities. In light of all the volatility, we are reasonably pleased with thefunds positive return, which was in line with that of its benchmark andslightly below the average return of similar funds as tracked by Lipper, basedon results at net asset value (NAV, or without sales charges).

Market overview

Convertible securities, which are hybridsecurities with features of both stocks and bonds, tend to mirror the trends ofthe stock market but are also influenced by the bond market. As weve stated,both stocks and bonds were volatile during the period. After a strongperformance in late 2004 following the presidential election, the stock marketweakened in the first quarter of 2005. Virtually all market sectors declined,with the exception of energy-related stocks, which had very strong performancedriven by high energy prices. The strength of the energy sector helped to boostthe overall return of the broad stock market. However, because so fewenergy companies issue convertible securities, theconvertibles market did not appreciably benefit from this trend. Then, inmid-March, the convertibles market reacted negatively when bond-rating agenciescited General Motors and Ford Motor Company for deteriorating credit quality.This hurt the convertibles market in two ways. First, credit spreads, or thedifference in yield between higher- and lower-quality securities, widenedsharply in response to this development. In addition, the convertibles marketwas negatively affected because GM and Ford are substantial participants. Rumorsof impending liquidations by large hedge

7

funds added to the troubles for the convertibles market during the first half of 2005.

Then, from early summer through the end of October 2005, the broad equity market gradually gathered positive momentum. While energy stocks stayed strong, basedin part on hurricane-related supply disruptions, the rally in stocks expanded to other areas within small- and mid-cap stocks as corporate profits remained solid and the market rebounded from its April lows. Many issuers at thismarket-capitalization level also issue convertibles, meaning that the convertible market participated in the rally, producing respectable gains by the end of the 12-month period.

Strategy overview

For the period, we continued to maintain a strategy of pursuing returns in excess of the benchmark by investing in what we believed were the most promisingsecurities, whether or not they were reflected in the benchmark. From November through early March, we did not find much opportunity to capitalize on narrowing credit spreads, which were already quite narrow by historical measures. As marketconditions shifted throughout the period, we reduced the number of holdings in the portfolio. This modest degree of consolidation was intended to focus the fund on those holdings in which we have the greatest confidence. We also modestly increasedthe portfolios equity sensitivity, which

Market sector performance

These indexes provide an overview of performance in different market sectors for the 12 months ended 10/31/05.

Equities

Goldman Sachs Convertible 100 Index (convertible securities)6.54%

S&P 500 Index (broad stock market)8.72%

Russell 2000 Growth Index (small-company growth stocks)10.91%

MSCI World Ex-U.S. Index (international stocks)18.47%

Bonds

Citigroup World Government Bond Index (global government bonds)-1.76%

Lehman Government Bond Index (U.S. Treasury and agency securities)0.94%

JP Morgan Global High Yield Index (global high-yield corporate bonds)4.18%

8

determines the extent to which it is likely tobe affected by significant changes in the equity market. We have improved theportfolios overall credit quality over the past 12 months, and expect tomaintain our current emphasis on higher-quality issues.

Your fundsholdings

The fund owns convertible bonds issued byTitan International, a global manufacturerof tires and wheels for off-road vehicles such as tractors and constructionequipment. Toward the end of the period, Titan announced that it is beingacquired by a private equity firm at a substantial premium. The announcementspurred a sharp rise in the companys securities prices,and we have begun to sell the funds holdings to take profits. This positionsignificantly added to performance during the period.

In addition, the fund benefited from itsposition in Sierra Pacific,Nevadas largest utility company. Sierra, along with most other western U.S.utilities, had been hurt by the Enron electricity/natural gas trading debaclethat came to light in 2001. Sierra Pacifics recovery has come later than otherwestern utilities but its stock price has almost quadrupled since it issuedconvertible notes in 2003. The utility made a tender offer for its convertibleissue in September, and we took advantage of it to convert the

9

position to common stock. Shortly thereafter, wesold the stock, closing out a very profitable position for the fund.

The biggest detractor from performance during thefiscal year was PinnacleAirlines, which is a feeder airline (transportingpassengers from smaller locales to larger cities served by the major airlines)for Northwest Airlines. Northwest declared bankruptcy in early September, andanother of its feeder airlines, Mesaba Aviation, did the same a month later.Pinnacle did not declare bankruptcy, but its stock was nonetheless hit hard onthe news of Northwests filing. It has been our judgment all along that Pinnacleis a much stronger company than either Northwest or Mesaba, and Northwestcannotreorganize in bankruptcy without Pinnacle Aircontinuing to feed it passengers. We have maintained our position in thissecurity, and we believe that Pinnacle remains a viable holding with a strongerbalance sheet than other airlines. Another factor in Pinnacles favor: Northwestwill probably downsize in bankruptcy, which could give Pinnacle the opportunityto explore relationships with other carriers.

Detractors from results for the period alsoincluded holdings in Flextronics Internationaland GatewayComputer. Flextronics, based in Singapore, is anelectronics manufacturer that provides various parts, including printed circuitboards, to other manufacturers. The companys growth and revenuesturned

Topholdings

This table shows the fund's top holdings, andthe percentage of the fund's net assets that each comprised, as of 10/31/05. Thefund's holdings will change over time.

Holding (percent of fund's net assets) Security information Sector or industry Masco Corp. (2.2%) cv. sr. notes Ser. B, Building materials zero %, 2031 Chubb Corp. (The) (2.0%) $1.75 cv. pfd. Insurance Devon Energy Corp. (2.0%) cv. debs. 4.9%, 2008 Oil and gas Northrop Grumman Corp. (2.0%) Ser. B, $7.00 cum. cv. pfd. Aerospace and defense Fannie Mae (2.0%) Ser. 04-1, 5.375% cv. pfd. Financial Schering-Plough Corp. (2.0%) $3.00 cv. pfd. Pharmaceuticals Liberty Media Corp. (1.7%) cv. sr. notes 3.5%, 2031 Broadcasting CSX Corp. (1.6%) cv. debs. zero %, 2021 Railroads Citigroup Funding, Inc. (1.6%) Ser. GNW zero % cum. cv. pfd. Investment banking/ brokerage Washington Mutual Capital Trust I (1.6%) $2.688 cum. cv. pfd. Banking

10

out to be weaker than we had expected. Gateway is the nations third-largest manufacturer of personal computers, but has faced intense competitivepressure to reduce prices, which has challenged its profitability. In recent years it has grown through aggressive acquisitions. Though Gateway and Flextronics are facing challenges, we believe they continue to offer long-term potential.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period discussed, are subject to reviewin accordance with the funds investment strategy, and may vary in the future.

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 managementteams plans for responding to them.

We are reasonably optimistic about the prospects for convertible securities over the coming months because we believe their recent rally was drivenmainly by an underlying rally in common stocks. Convertible securities still appear to be attractively priced. In addition, with short-term interest rates rising, convertible financing is becoming more expensive for potential issuers. As a result,new issuance has receded and market prices could benefit from a perception of scarcity in the convertibles market.

Going forward, we will continue to adhere to our long-term strategy, which has produced healthy returns when the stock market was strong, andcompetitive returns when the stock market was weak. We believe that by emphasizing credit quality and equity sensitivity in our composition of the funds portfolio, it will be well positioned to take advantage of the markets opportunitiesin the foreseeable future.

The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice.

The fund invests some or all of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations.Lower-rated bonds may offer higher yields in return for more risk. This fund may have a significant portion of its holdings in bonds. Mutual funds that invest in bonds are subject to certain risks, including interest-rate risk, credit risk, andinflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses.

11

Your fundsperformance

This section shows your funds performanceduring its fiscal year, which ended October 31, 2005. In accordance withregulatory requirements, we also include performance for the most currentcalendar quarter-end. Performance should always be considered in light of afunds investment strategy. Data represents past performance. Past performancedoes not guarantee future results. More recent returns may be less or more thanthose shown. Investment return and principal value will fluctuate, and you mayhave a gain or a loss when you sell your shares. For the most recent month-endperformance, please visit www.putnam.com or call Putnam at 1-800-225-1581. ClassY shares are generally only available to corporate and institutional clients.See the Terms and Definitions section in this report for definitions of theshare classes offered by your fund.

Fund performance Total return for periods ended 10/31/05 Class A Class B Class C Class M Class R Class Y (inception dates) (6/29/72) (7/15/93) (7/26/99) (3/13/95) (12/1/03) (12/30/98) NAV POP NAV CDSC NAV CDSC NAV POP NAV NAV
Annual average (life of fund) 10.73% 10.55% 9.75% 9.75% 9.90% 9.90% 10.03% 9.91% 10.46% 10.79% 10 years 111.44 100.29 96.20 96.20 96.14 96.14 101.24 94.23 106.21 115.10 Annual average 7.78 7.19 6.97 6.97 6.97 6.97 7.24 6.86 7.51 7.96 5 years 19.77 13.50 15.37 13.54 15.29 15.29 16.73 12.65 18.29 21.24 Annual average 3.67 2.56 2.90 2.57 2.89 2.89 3.14 2.41 3.42 3.93 1 year 6.41 0.82 5.61 0.61 5.60 4.60 5.79 2.07 6.07 6.68

Performance assumesreinvestment of distributions and does not account for taxes. Returns at publicoffering price (POP) for class A and M shares reflect a sales charge of 5.25%and 3.50%, respectively (which for class M shares does not reflect a reductionin sales charges that went into effect on April 1, 2005; if this reduction hadbeen in place for all periods indicated, returns would have been higher). ClassB 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 iseliminated thereafter. Class C shares reflect a 1% CDSC the first year that iseliminated thereafter. Class R and Y shares have no initial sales charge orCDSC. Performance for class B, C, M, R, and Y shares before their inception isderived from the historical performance of class A shares, adjusted for theapplicable sales charge (or CDSC) and, except for class Y shares, the higheroperating expenses for such shares.

A 2% short-term tradingfee may be applied to shares exchanged or sold within 5 days ofpurchase.

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Past performance does not indicate futureresults. At the end of the same time period, a $10,000 investment in the fundsclass B and class C shares would have been valued at $19,620 and $19,614,respectively, and no contingent deferred sales charges would apply. A $10,000investment in the funds class M shares would have been valued at $20,124($19,423 at public offering price). A $10,000 investment in the funds class Rand class Y shares would have been valued at $20,621 and $21,510, respectively.See first page of performance section for performance calculationmethod.

Comparative index returns For periods ended 10/31/05 Goldman Sachs Lipper Convertible Convertible Securities Funds 100 Index* category average
Annual average (life of fund, since 6/29/72) -- 10.63% 10 years 112.21% 127.14 Annual average 7.81 8.42 5 years 6.09 13.94 Annual average 1.19 2.49 1 year 6.54 6.76

* The inception date for the index was12/31/84.

Over the 1-, 5-, and 10-year periods ended10/31/05, there were 76, 56, and 33 funds, respectively, in this Lippercategory. Index and Lipper results should be compared to fund performance at netasset value.

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Fund price and distribution information For the 12-month period ended 10/31/05

Class A Class B Class C Class M Class R Class Y Distributions (number) 4 4 4 4 4 4 Income $0.528 $0.394 $0.411 $0.441 $0.493 $0.572 Capital gains -- -- -- -- -- -- Total $0.528 $0.394 $0.411 $0.441 $0.493 0.572 Share value: NAV POP NAV NAV NAV POP NAV NAV 10/31/04 $16.60 $17.52 $16.34 $16.50 $16.48 $17.08 $16.60 $16.60 10/31/05 17.13 18.08 16.86 17.01 16.99 17.56* 17.11 17.13 Current yield (end of period) Current dividend rate1 3.08% 2.92% 2.33% 2.40% 2.59% 2.51% 2.88% 3.34 Current 30-day SEC yield2 2.65 2.51 1.91 1.91 2.16 2.09 2.41 2.90

*Reflects a reduction insales charges that took effect on April 1, 2005.

1 Most recentdistribution, excluding capital gains, annualized and divided by NAV or POP atend of period.

2 Based only on investment income, calculated using SECguidelines.

Fund performancefor most recent calendar quarter

Total return for periods ended9/30/05

Class A Class B Class C Class M Class R Class Y (inception dates) (6/29/72) (7/15/93) (7/26/99) (3/13/95) (12/1/03) (12/30/98) NAV POP NAV CDSC NAV CDSC NAV POP NAV NAV Annual average (life of fund) 10.83% 10.65% 9.85% 9.85% 10.00% 10.00% 10.13% 10.01% 10.55% 10.88% 10 years 111.81 100.65 96.50 96.50 96.58 96.58 101.86 94.75 106.66 115.48 Annual average 7.79 7.21 6.99 6.99 6.99 6.99 7.28 6.89 7.53 7.98 5 years 17.91 11.71 13.56 11.75 13.57 13.57 15.04 10.98 16.50 19.35 Annual average 3.35 2.24 2.58 2.25 2.58 2.58 2.84 2.11 3.10 3.60 1 year 9.24 3.53 8.46 3.46 8.49 7.49 8.76 4.97 8.96 9.52

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Your funds expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using theinformation below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shownin this section and would have resulted in higher total expenses. For more information, see your funds prospectus or talk to your financial advisor.

Review your funds expenses

The table below shows the expenses you would have paid on a $1,000 investment in Putnam Convertible Income-Growth Trust from May 1, 2005, toOctober 31, 2005. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returnsand expenses.

Class AClass BClass CClass MClass RClass Y

Expenses paid per $1,000*$ 5.38$ 9.28$ 9.27$ 7.97$ 6.68$ 4.07

Ending value (after expenses)$1,071.20$1,067.40$1,066.70$1,067.70$1,069.50$1,072.60

* Expenses for each share class are calculated using the funds annualized expense ratio for each class, which represents the ongoingexpenses as a percentage of net assets for the six months ended 10/31/05. The expense ratio may differ for each share class (see the table at the bottom of the next page). Expenses are calculated by multiplying the expense ratio by the averageaccount value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended October 31, 2005, use the calculation method below. To find the value of yourinvestment on May 1, 2005, go to www.putnam.com and log on to your account. Click on the Transaction History tab in your Daily Statement and enter 05/01/2005 in both the from and to fields. Alternatively, callPutnam at 1-800-225-1581.

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Compare expenses using the SECs method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table belowshows your funds expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of otherfunds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during theperiod.

Class AClass BClass CClass MClass RClass Y

Expenses paid per $1,000*$ 5.24$ 9.05$ 9.05$ 7.78$6.51$ 3.97

Ending value (after expenses)$1,020.01$1,016.23$1,016.23$1,017.49$1,018.75$1,021.27

* Expenses for each share class are calculated using the funds annualized expense ratio for each class, which represents the ongoingexpenses as a percentage of net assets for the six months ended 10/31/05. The expense ratio may differ for each share class (see the table at the bottom of this page). Expenses are calculated by multiplying the expense ratio by the average accountvalue for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Compare expenses using industry averages

You can also compare your funds expenses with the average of its peer group, as defined by Lipper, an independent fund-rating agency that ranksfunds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your funds net assets have been used to pay ongoing expenses during theperiod.

Class AClass BClass CClass MClass RClass Y

Your fund's annualized

expense ratio1.03%1.78%1.78%1.53%1.28%0.78%

Average annualized expense

ratio for Lipper peer group1.18%1.93%1.93%1.68%1.43%0.93%

For the funds most recent fiscal half year; may differ from expense ratios based on one-year data in the financialhighlights.

Simple average of the expenses of all front-end load funds in the funds Lipper peer group, calculated in accordance withLippers standard method for comparing fund expenses (excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses). This average reflects each funds expenses forits most recent fiscal year available to Lipper as of 9/30/05. To facilitate comparison, Putnam has adjusted this average to reflect the 12b-1 fees carried by each class of shares other than class Y shares, which do not incur 12b-1 fees. The peergroup may include funds that are significantly smaller or larger than the fund, which may limit the comparability of the funds expenses to the simple average, which typically is higher than the asset-weighted average.

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Your funds
portfolio turnover

Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies,and markets. Portfolio turnover is a measure of how often a funds managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fundsassets within a one-year period. Funds with high turnover may be more likely to generate capital gains and dividends that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissionsand other transaction costs, which may detract from performance.

Funds that invest in bonds or other fixed-income instruments may have higher turnover than funds that invest only in stocks. Short-term bond fundstend to have higher turnover than longer-term bond funds, because shorter-term bonds will mature or be sold more frequently than longer-term bonds. You can use the table below to compare your funds turnover with the average turnover for fundsin its Lipper category.

Turnover comparisons

Percentage of holdings that change every year

20052004200320022001

Putnam Convertible

Income-Growth Trust66%53%94%116%208%

Lipper Convertible Securities

Funds category average78%93%95%105%123%

Turnover data for the fund is calculated based on the fund's fiscal-year period, which ends on October 31. Turnover data for the fund's Lippercategory is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund'sportfolio turnover rate to the Lipper average. Comparative data for 2005 is based on information available as of 9/30/05.

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Your funds risk

This risk comparison is designed to help youunderstand how your fund compares with other funds. The comparison utilizes arisk measure developed by Morningstar, an independent fund-rating agency. Thisrisk measure is referred to as the funds Overall Morningstar Risk.

Your funds OverallMorningstarRisk

Your funds Overall Morningstar Risk is shownalongside that of the average fund in its broad asset class, as determined byMorningstar. The risk bar broadens the comparison by translating the fundsOverall Morningstar Risk into a percentile, which is based on the funds rankingamong all funds rated by Morningstar as of September 30, 2005. A higher OverallMorningstar Risk generally indicates that a funds monthly returns have variedmore widely.

Morningstar determines afunds Overall Morningstar Risk by assessing variations in the funds monthlyreturns -- with an emphasis on downside variations -- over 3-, 5-, and 10-yearperiods, if available. Those measures are weighted and averaged to produce thefunds Overall Morningstar Risk. The information shown is provided for thefunds class A shares only; information for other classes may vary. OverallMorningstar Risk is based on historical data and does not indicate futureresults. Morningstar does notpurport to measure the risk associated with a current investment in a fund,either on an absolute basis or on a relative basis. Low Overall Morningstar Riskdoes not mean that you cannot lose money on an investment in a fund. Copyright2004 Morningstar, Inc. All Rights Reserved. The information contained herein (1)is proprietary to Morningstar and/or its content providers; (2) may not becopied or distributed; and (3) is not warranted to be accurate, complete, ortimely. Neither Morningstar nor its content providers are responsible for anydamages or losses arising from any use of this information.

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Your funds management

Your fund is managed by the members of thePutnam Large-Cap Value Team. David King is the Portfolio Leader of the fund. ThePortfolio Leader coordinates the teams management of the fund.

For a complete listing of the members of thePutnam Large-Cap Value Team, including those who are not Portfolio Leaders orPortfolio Members of your fund, visit Putnams Individual Investor Web site atwww.putnam.com.

Fund ownership by the Portfolio Leader The table below shows how much the funds current Portfolio Leader has invested in the fund (in dollar ranges). Information shown is as of October 31, 2005, and October 31, 2004. $1 $10,001 $50,001 $100,001 $500,001 $1,000,001 Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over David King 2005

Portfolio Leader 2004

19

Fund manager compensation

The total 2004 fund manager compensation that is attributable to your fund is approximately $330,000. This amount includes a portion of 2004compensation paid by Putnam Management to the fund manager listed in this section for his portfolio management responsibilities, calculated based on the fund assets he manages taken as a percentage of the total assets he manages. The compensationamount also includes a portion of the 2004 compensation paid to the Group Chief Investment Officer of the funds broader investment category for his oversight responsibilities, calculated based on the fund assets he oversees taken as apercentage of the total assets he oversees. This amount does not include compensation of other personnel involved in research, trading, administration, systems, compliance, or fund operations; nor does it include non-compensation costs. Thesepercentages are determined as of the funds fiscal period-end. For personnel who joined Putnam Management during or after 2004, the calculation reflects annualized 2004 compensation or an estimate of 2005 compensation, as applicable.

Other Putnam funds managed by the Portfolio Leader

David King is also a Portfolio Leader of Putnam High Income Securities Fund and Putnam New Value Fund, and a Portfolio Member of The Putnam Fund forGrowth and Income. He may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate.

Changes in your funds Portfolio Leader and Portfolio Members

During the year ended October 31, 2005, Portfolio Member George Maris left your funds management team.

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Fund ownership byPutnams Executive Board

The table below shows how much the members ofPutnams Executive Board have invested in the fund (in dollar ranges).Information shown is as of October 31, 2005, and October 31, 2004.

$1 $10,001 $50,001 $100,001 Year $0 $10,000 $50,000 $100,000 and over
Philippe Bibi 2005

Chief Technology Officer 2004

Joshua Brooks 2005

Deputy Head of Investments N/A William Connolly 2005

Head of Retail Management N/A Kevin Cronin 2005

Head of Investments

2004

Charles Haldeman, Jr. 2005

President and CEO 2004

Amrit Kanwal 2005

Chief Financial Officer 2004

Steven Krichmar 2005

Chief of Operations

2004

Francis McNamara, III 2005

General Counsel 2004

Richard Robie, III 2005

Chief Administrative Officer 2004

Edward Shadek 2005

Deputy Head of Investments N/A Sandra Whiston 2005

Head of Institutional Management N/A

N/A indicates theindividual was not a member of Putnam's Executive Board as of10/31/04.

21

Terms and definitions

Importantterms

Total return shows how the value of the funds shares changed over time,assuming you held the shares through the entire period and reinvested alldistributions 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. NAV is calculatedby dividing the net assets of each class of shares by the number of outstandingshares in the class.

Public offering price (POP) is the price of a mutual fund share plus the maximum salescharge levied at the time of purchase. POP performance figures shown here assumethe 5.25% maximum sales charge for class A shares and 3.50% for class M shares(since reduced to 3.25%) .

Contingentdeferred sales charge (CDSC) is a charge applied atthe time of the redemption of class B or C shares and assumes redemption at theend of the period. Your funds class B CDSC declines from a 5% maximum duringthe first year to 1% during the sixth year. After the sixth year, the CDSC nolonger applies. The CDSC for class C shares is 1% for one year afterpurchase.

Shareclasses

Class A shares aregenerally subject to an initial sales charge and no sales charge on redemption(except on certain redemptions of shares bought without an initial salescharge).

Class B shares maybe subject to a sales charge upon redemption.

Class C shares arenot subject to an initial sales charge and are subject to a contingent deferredsales charge only if the shares are redeemed during the first year.

Class M shares havea lower initial sales charge and a higher 12b-1 fee than class A shares and nosales charge on redemption (except on certain redemptions of shares boughtwithout an initial sales charge).

Class R shares arenot subject to an initial sales charge or CDSC and are available only to certaindefined contribution plans.

Class Y shares arenot subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They areonly available to eligible purchasers, including eligible defined contributionplans or corporate IRAs.

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Comparative indexes

Citigroup World Government Bond Index isan unmanaged index of global investment-grade fixed-income securities.

Goldman Sachs Convertible 100 Index is anunmanaged index of convertible and convertible preferred securities.

JP Morgan Global High Yield Index is anunmanaged index of global high-yield fixed-income securities.

Lehman Government Bond Index is anunmanaged index of U.S. Treasury and agency securities.

Morgan Stanley Capital International (MSCI) World Ex-U.S. Index is an unmanaged index of equity securities from developed countries, excluding the United States.

Russell 2000 Growth Index is an unmanagedindex of those companies in the small-cap Russell 2000 Index chosen for their growth orientation.

S&P 500 Index is an unmanaged index ofcommon 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. Youcannot invest directly in an index.

Lipper is a third-party industry-rankingentity that ranks mutual funds. Lipper rankings are based on total return at net asset value and do not reflect sales charges. Funds are ranked among other funds with similar current investment styles or objectives as determined by Lipper. Lippercategory averages reflect performance trends for funds within a category.

23

Trustee approval of
management contract

Generalconclusions

The Board of Trustees of the Putnam fundsoversees the management of each fund and, as required by law, determinesannually whether to approve the continuance of your funds management contractwith Putnam Management. In this regard, the Board of Trustees, with theassistance of its Contract Committee consisting solely of Trustees who are notinterested persons (as such term is defined in the Investment Company Act of1940, as amended) of the Putnam funds (the Independent Trustees), requests andevaluates all information it deems reasonably necessary under the circumstances.Over the course of several months beginning in March and ending in June 2005,the Contract Committee met five times to consider the information provided byPutnam Management and other information developed with the assistance of theBoards independent counsel and independent staff. The Contract Committeereviewed and discussed key aspects of this information with all of theIndependent Trustees. Upon completion of this review, the Contract Committeerecommended and the Independent Trustees approved the continuance of your fundsmanagement contract, effective July 1, 2005.

This approval was based on the following conclusions:

That the fee schedule currently in effect for your fund represents reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such services, and

That such fee schedule represents an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensiveconsideration of all information provided to the Trustees and were not theresult of any single factor. Some of the factors that figured particularly inthe Trustees deliberations and how the Trustees considered these factors aredescribed below, although individual Trustees may have evaluated the informationpresented differently, giving different weights to various factors. It is alsoimportant to recognize that the fee arrangements for your fund and the otherPutnam funds are the result of many years of review and discussion between theIndependent Trustees and Putnam Management, that certain aspects of sucharrangements may receive greater scrutiny in some years than others, and thatthe Trustees conclusions may be based, in part, on their consideration of thesesame arrangements in prior years.

Model fee schedulesand categories; total expenses

The Trustees review of the management fees andtotal expenses of the Putnam funds focused on three major themes:

24

Consistency. The Trustees, working in cooperation with Putnam Management, have developed and implemented a series of model fee schedules for the Putnam funds designed to ensure that each funds management fee is consistent with the fees for similar funds in the Putnam family of funds and compares favorably with fees paid by competitive funds sponsored by other investment advisors. Under this approach, each Putnam fund is assigned to one of several fee categories based on a combination of factors, including competitive fees and perceived difficulty of manage- ment, and a common fee schedule is implemented for all funds in a given fee category. The Trustees reviewed the model fee schedule currently in effect for your fund, including fee levels and breakpoints, and the assignment of the fund to a particular fee category under this structure.
(Breakpoints refer to reductions in fee rates that apply to additional assets once specified asset levels are reached.) The Trustees concluded that no changes should be made in the funds current fee schedule at this time.

Competitiveness. The Trustees also reviewed comparative fee and expense information for competitive funds, which indicated that, in a custom peer group of competitive funds selected by Lipper Inc., your fund ranked in the 45th percentile in management fees and in the 45th percentile in total expenses (less any applicable 12b-1 fees) as of December 31, 2004 (the first percentile being the least expensive funds and the 100th percentile being the most expensive funds). (Because the funds custom peer group is smaller than the funds broad Lipper Inc. peer group, this expense comparison may differ from the Lipper peer expense information found elsewhere in this report.) The Trustees noted that expense ratios for a number of Putnam funds, which show the percentage of fund assets used to pay for management and administrative services, distribution (12b-1) fees and other expenses, had been increasing recently as a result of declining net assets and the natural operation of fee breakpoints. They noted that such expense ratio increases were currently being controlled by expense limitations implemented in January 2004 and which Putnam Management, in consultation with the Contract Committee, has committed to maintain at least through 2006. The Trustees expressed their intention to monitor this information closely to ensure that fees and expenses of the Putnam funds continue to meet evolving competitive standards.

Economies of scale. The Trustees concluded that the fee schedule currently in effect for your fund represents an appropriate sharing of economies of scale at current asset levels. Your fund currently has the benefit of breakpoints in its management fee that provide shareholders with significant economies of scale, which means that the effective management fee rate of a fund (as a percentage of fund assets) declines as a fund grows in size and crosses specified asset thresholds. The Trustees examined the existing breakpoint structure of the Putnam funds management fees in light of competitive industry practices. The Trustees considered various possible modifications to the Putnam Funds current breakpoint structure, but ulti- mately concluded that the current breakpoint structure continues to serve the interests of fund shareholders. Accordingly, the Trustees continue to believe that the fee schedules

25

currently in effect for the funds represent an appropriate sharing of economies of scale at current asset levels. The Trustees noted that significantredemptions in many Putnam funds, together with significant changes in the cost structure of Putnam Management, have altered the economics of Putnam Managements business in significant ways. In view of these changes, the Trustees intend toconsider whether a greater sharing of the economies of scale by fund shareholders would be appropriate if and when aggregate assets in the Putnam funds begin to experience meaningful growth.

In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the servicesto be provided and profits to be realized by Putnam Management and its affiliates from the relationship with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to theinvestment management and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Managements revenues, expenses and profitability with respect to the funds management contracts,allocated on a fund-by-fund basis.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees evaluation of the quality ofservices provided by Putnam Management under your funds management contract. The Trustees were assisted in their review of the funds investment process and performance by the work of the Investment Oversight Committees of the Trustees,which meet on a regular monthly basis with the funds portfolio teams throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process as measured by the experience and skills ofthe individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel but also recognize that this doesnot guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing the funds performance with variousbenchmarks and with the performance of competitive funds. The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and continued todiscuss with senior management of Putnam Management the factors contributing to such underperformance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes inits investment personnel and processes and in the fund product line to address areas of underperformance. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluatewhether additional remedial changes are warranted.

26

In the case of your fund, the Trustees considered that your funds class A share performance at net asset value was in the following percentilesof its Lipper Inc. peer group for the one-, three-and five-year periods ended December 31, 2004 (the first percentile being the best-performing funds and the 100th percentile being the worst-performing funds):

One-year periodThree-year periodFive-year period

20th8th55th

(Because of the passage of time, these performance results may differ from the performance results for more recent periods shown elsewhere in thisreport.) As a general matter, the Trustees believe that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance problems. The Trustees believe that investors in the Putnamfunds have, in effect, placed their trust in the Putnam organization, under the oversight of the funds Trustees, to make appropriate decisions regarding the management of the funds. Based on the responsiveness of Putnam Management in therecent past to Trustee concerns about investment performance, the Trustees believe that it is preferable to seek change within Putnam Management to address performance shortcomings. In the Trustees view, the alternative of terminating amanagement contract and engaging a new investment advisor for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investment performance.

Brokerage and soft-dollar allocations; other benefits

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under themanagement contract with your fund. These include principally benefits related to brokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage is earmarked to pay for research services that may be utilizedby a funds investment advisor. The Trustees believe that soft-dollar credits and other potential benefits associated with the allocation of fund brokerage, which pertains mainly to funds investing in equity securities, represent assets of thefunds that should be used for the benefit of fund shareholders. This area has been marked by significant change in recent years. In July 2003, acting upon the Contract Committees recommendation, the Trustees directed that allocations ofbrokerage to reward firms that sell fund shares be discontinued no later than December 31, 2003. In addition, commencing in 2004, the allocation of brokerage commissions by Putnam Management to acquire research services from third-party serviceproviders has been significantly reduced, and continues at a modest level only to acquire research that is customarily not available for cash. The Trustees will continue to monitor the allocation of the funds brokerage to ensure that theprinciple of best price and execution remains paramount in the portfolio trading process.

27

The Trustees annual review of your funds management contract also included the review of its distributors contract and distributionplan with Putnam Retail Management Limited Partnership and the custodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company, all of which provide benefits to affiliates of Putnam Management.

Comparison of retail and institutional fee schedules

The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged byPutnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, etc. This information included comparison of such fees with fees charged to the funds, as well as a detailed assessment of thedifferences in the services provided to these two types of clients. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and the mutual funds are by no means uniform when examined by individual assetsectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact thatfee rates across all asset sectors are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutionalclients of the firm, but have not relied on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

28

Other information
for shareholders

Putnams policy on confidentiality

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders addresses, telephonenumbers, Social Security numbers, and the names of their financial advisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect theconfidentiality of your information, whether or not you currently own shares of our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorizedaccess to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. Inthose cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with ourPutnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial advisor, if youve listed one on your Putnam account. Ifyou would like clarification about our confidentiality policies or have any questions or concerns, please dont hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m.Eastern Time.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds proxy voting guidelines andprocedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2005, are available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on theSECs Web site, www.sec.gov. If you have questions about finding forms on the SECs Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds proxy voting guidelines and procedures at no charge by callingPutnams Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.Shareholders may obtain the funds Forms N-Q on the SECs Web site at www.sec.gov. In addition, the funds Forms N-Q may be reviewed and copied at the SECs public reference room in Washington, D.C. You may call the SEC at1-800-SEC-0330 for information about the SECs Web site or the operation of the public reference room.

29

Financial statements

A guide to financial statements

These sections of the report, as well as theaccompanying Notes, preceded by the Report of Independent Registered PublicAccounting Firm, constitute the funds financial statements.

The fundsportfolio lists all the fund'sinvestments and their values as of the last day of the reporting period.Holdings are organized by asset type and industry sector, country, or state toshow areas of concentration and diversification.

Statement of assets and liabilitiesshows how the funds net assets and share priceare determined. All investment and noninvestment assets are added together. Anyunpaid expenses and other liabilities are subtracted from this total. The resultis 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 withpreferred shares, the amount subtracted from total assets includes the netassets allocated to remarketed preferred shares.)

Statement of operations shows the funds net investment gain or loss. This is doneby first adding up all the funds earnings -- from dividends and interest income- -- and subtracting its operating expenses to determine net investment income (orloss). 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 orsubtracted from the net investment result to determine the funds net gain orloss for the fiscal year.

Statement of changes in net assets shows how the funds net assets were affected by the fundsnet investment gain or loss, by distributions to shareholders, and by changes inthe number of the funds shares. It lists distributions and their sources (netinvestment income or realized capital gains) over the current reporting periodand the most recent fiscal year-end. The distributions listed here may not matchthe sources listed in the Statement of operations because the distributions aredetermined on a tax basis and may be paid in a different period from the one inwhich they were earned.

Financialhighlights provide an overview ofthe funds investment results, per-share distributions, expense ratios, netinvestment income ratios, and portfolio turnover in one summary table,reflecting the five most recent reporting periods. In a semiannual report, thehighlight table also includes the current reporting period. For open-end funds,a separate table is provided for each share class.

30

Report of Independent Registered
Public AccountingFirm

The Board of Trustees and Shareholders
Putnam Convertible Income-Growth Trust:

We have audited the accompanying statement of assets andliabilities of Putnam Convertible Income-Growth Trust, including the fundsportfolio, as of October 31, 2005, and the related statement of operations forthe year then ended, the statements of changes in net assets for each of the twoyears in the period then ended and the financial highlights for each of the fiveyears or periods then ended. These financial statements and financial highlightsare the responsibility of the Funds management. Our responsibility is toexpress an opinion on these financial statements and financial highlights basedon our audits.

We conducted our audits in accordancewith the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform our audit to obtainreasonable assurance about whether the financial statements and financialhighlights are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. Our procedures included confirmation of securities owned as ofOctober 31, 2005 by correspondence with the custodian and brokers or by otherappropriate auditing procedures. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

In our opinion, the financialstatements and financial highlights referred to above present fairly, in allmaterial respects, the financial position of Putnam Convertible Income-GrowthTrust as of October 31, 2005, the results of its operations for the year thenended, the changes in its net assets for each of the two years in the periodthen ended, and the financial highlights for each of the five years or periodsthen ended in conformity with U.S. generally accepted accountingprinciples.

31

The fund's portfolio 10/31/05 CONVERTIBLE BONDS AND NOTES (62.4%)* Principal amount Value Advertising and Marketing Services (0.7%) Lamar Advertising Co. cv. sr. notes 2 7/8s, 2010 $ 4,900,000 $ 5,218,500 Aerospace and Defense (0.7%) United Industrial Corp./New York cv. sr. notes 3 3/4s, 2024 900,000 1,017,000 United Industrial Corp./New York 144A cv. sr. notes 3 3/4s, 2024 3,800,000 4,294,000 5,311,000 Airlines (2.1%) AMR Corp. cv. company guaranty 4 1/4s, 2023 3,900,000 3,529,500 Continental Airlines, Inc. cv. sr. unsub. notes 4 1/2s, 2007 4,300,000 3,687,250 Pinnacle Airlines Corp. cv. sr. notes 3 1/4s, 2025 9,800,000 6,921,250 14,138,000 Biotechnology (2.3%) Amylin Pharmaceuticals, Inc. 144A cv. sr. notes 2 1/2s, 2011 2,500,000 2,821,875 Amylin Pharmaceuticals, Inc. 144A cv. sr. notes 2 1/4s, 2008 1,700,000 1,986,875 Connetics Corp. 144A cv. sr. notes 2s, 2015 4,000,000 3,022,040 CV Therapeutics, Inc. cv. notes 3 1/4s, 2013 2,000,000 2,262,500 Encysive Pharmaceuticals, Inc. 144A cv. sr. notes 2 1/2s, 2012 2,500,000 2,403,125 MGI Pharma, Inc. 144A cv. sr. sub. notes stepped-coupon 1.682s (zero %, 3/2/11) 2024 5,350,000 3,377,188 15,873,603 Broadcasting (2.8%) Liberty Media Corp. cv. sr. notes 3 1/2s, 2031 12,100,000 11,737,000 Sinclair Broadcast Group, Inc. cv. bonds 6s, 2012 8,010,000 7,008,750 18,745,750 Building Materials (2.2%) Masco Corp. cv. sr. notes Ser. B, zero %, 2031 32,300,000 14,575,375 Business Services (0.6%) FTI Consulting, Inc. 144A cv. sr. sub. notes 3 3/4s, 2012 3,600,000 4,000,500 Cable Television (0.9%) Charter Communications, Inc. 144A cv. sr. notes 5 7/8s, 2009 8,425,000 6,150,250 Communications Equipment (2.9%) Andrew Corp. cv. sub. notes 3 1/4s, 2013 6,700,000 6,725,125 L-3 Communications Corp. 144A cv. bonds 3s, 2035 7,035,000 7,070,175 Lucent Technologies, Inc. cv. debs. Ser. A, 2 3/4s, 2023 5,500,000 5,761,250 19,556,550

32

CONVERTIBLE BONDS AND NOTES (62.4%)* continued

Principal amountValue

Computers (3.0%)

Anixter International, Inc. cv. Liquid Yield Option

Notes (LYON) Ser. * zero %, 2033$18,200,000$10,510,500

Cray, Inc. cv. sr. sub. notes 3s, 2024900,000522,000

Cray, Inc. 144A cv. sr. sub. notes 3s, 20244,600,0002,668,000

Gateway, Inc. 144A cv. sr. notes 2s, 20113,500,0002,445,625

Gateway, Inc. 144A cv. sr. notes 1 1/2s, 20092,500,0001,846,875

Open Solutions, Inc. 144A cv. sr. sub. notes

stepped-coupon 1.467s (zero %, 2/2/12) 2035 4,000,0002,070,000

20,063,000

Conglomerates (1.6%)

Tyco International Group SA cv. company

guaranty Ser. A, 2 3/4s, 2018 (Luxembourg)600,000702,000

Tyco International Group SA 144A cv. company

guaranty Ser. A, 2 3/4s, 2018 (Luxembourg)8,900,00010,413,000

11,115,000

Electric Utilities (1.0%)

CenterPoint Energy, Inc. cv. unsec. sub. notes FRN 2s, 2029204,9007,080,524

Electrical Equipment (1.3%)

WESCO International, Inc. 144A cv. debs. 2 5/8s, 20257,500,0008,587,500

Electronics (2.9%)

Agere Systems, Inc. cv.sub. notes 6 1/2s, 20097,300,0007,236,125

Flextronics International, Ltd. cv. sub. notes 1s, 2010 (Singapore)6,800,0005,899,000

Vishay Intertechnology, Inc. 144A cv. sub. notes 3 5/8s, 20237,300,0006,825,500

19,960,625

Energy (2.9%)

CAL Dive International, Inc. 144A cv. sr. notes 3 1/4s, 20256,000,0007,365,000

Halliburton Co. cv. sr. notes 3 1/8s, 20234,000,0006,610,000

Pride International, Inc. cv. sr. notes 3 1/4s, 20334,700,0005,875,000

19,850,000

Entertainment (1.9%)

Lions Gate Entertainment Corp.

144A cv. sr. bonds 3 5/8s, 2025 (Canada)5,800,0005,481,000

Regal Entertainment Group 144A cv. notes 3 3/4s, 20085,700,0007,039,500

12,520,500

Financial (1.0%)

PMI Group, Inc. (The) cv. debs. 2 1/2s, 20216,800,0006,970,000

Health Care Services (3.8%)

Manor Care, Inc. cv. company guaranty 2 5/8s, 20233,800,0004,811,750

Manor Care, Inc. 144A cv. company guaranty 2 5/8s, 20233,500,0004,431,875

Option Care, Inc. 144A cv. sr. notes 2 1/4s, 20243,500,0004,366,250

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CONVERTIBLE BONDS AND NOTES (62.4%)* continued Principal amount Value Health Care Services continued Per-Se Technologies, Inc. 144A cv. notes 3 1/4s, 2024 $ 3,500,000 $ 4,825,625 Universal Health Services, Inc. cv. debs. 0.426s, 2020 12,400,000 7,145,500 25,581,000 Investment Banking/Brokerage (1.1%) BlackRock, Inc. 144A cv. sr. notes 2 5/8s, 2035 6,900,000 7,253,625 Lodging/Tourism (1.9%) Hilton Hotels Corp. 144A cv. notes 3 3/8s, 2023 7,500,000 7,987,500 Scientific Games Corp. 144A cv. company guaranty 3/4s, 2024 4,400,000 5,049,000 13,036,500 Manufacturing (1.0%) Titan International, Inc. 144A cv. sr. notes 5 1/4s, 2009 4,600,000 6,831,000 Media (1.0%) Walt Disney Co. (The) cv. sr. notes 2 1/8s, 2023 6,800,000 6,893,500 Medical Technology (1.9%) Atherogenics, Inc. 144A cv. sr. notes 1 1/2s, 2012 3,720,000 2,892,300 Cytyc Corp. 144A cv. sr. notes 2 1/4s, 2024 3,650,000 3,796,000 EPIX Pharmaceuticals, Inc. cv. sr. notes 3s, 2024 3,300,000 2,532,750 EPIX Pharmaceuticals, Inc. 144A cv. sr. notes 3s, 2024 4,300,000 3,300,250 12,521,300 Oil & Gas (2.5%) Devon Energy Corp. cv. debs. 4.9s, 2008 11,900,000 13,655,250 McMoran Exploration Co. 144A cv. notes 6s, 2008 2,300,000 3,013,000 16,668,250 Pharmaceuticals (1.0%) Alza Corp. cv. sub. debs. zero %, 2020 8,000,000 6,880,000 Publishing (0.9%) Playboy Enterprises, Inc. 144A cv. sr. sub. notes 3s, 2025 6,000,000 6,375,000 Railroads (1.6%) CSX Corp. cv. debs. zero %, 2021 12,000,000 10,875,000 Restaurants (0.5%) CKE Restaurants, Inc. 144A cv. sub. notes 4s, 2023 2,000,000 3,040,000 Retail (4.8%) Dick's Sporting Goods, Inc. cv. sr. notes stepped-coupon 1.606s (zero %, 2/18/09) 2024 7,600,000 5,120,500 Lowe's Cos., Inc. cv. LYON zero %, 2021 8,200,000 8,200,000 Men's Wearhouse, Inc. (The) cv. sr. notes 3 1/8s, 2023 5,000,000 5,318,750 Nash Finch Co. 144A cv. sr. sub. notes stepped-coupon 1.631s (zero %, 3/15/13) 2035 8,500,000 3,389,375 Rite Aid Corp. cv. notes 4 3/4s, 2006 5,110,000 5,033,350

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CONVERTIBLE BONDS AND NOTES (62.4%)* continued Principal amount Value Retail continued TJX Companies, Inc. (The) cv. LYON zero %, 2021 $ 3,700,000 $ 2,890,625 TJX Companies, Inc. (The) 144A cv. LYON zero %, 2021 2,900,000 2,265,625 32,218,225 Semiconductor Production Equipment (0.8%) Kulicke & Soffa Industries, Inc. cv. sub. notes 1/2s, 2008 7,300,000 5,283,375 Technology (0.8%) ON Semiconductor Corp. cv. sr. sub. notes zero %, 2024 7,500,000 5,400,000 Technology Services (4.5%) DST Systems, Inc. 144A cv. sr. notes Ser. A, 4 1/8s, 2023 7,300,000 9,289,250 Euronet Services, Inc. 144A cv. debs. 3 1/2s, 2025 3,400,000 3,319,250 Fair Isaac Corp. 144A cv. sr. notes 1 1/2s, 2023 7,500,000 8,100,000 Mercury Computer Systems, Inc. 144A cv. sr. notes 2s, 2024 3,000,000 2,685,000 Safeguard Scientifics, Inc. 144A cv. sr. notes 2 5/8s, 2024 10,500,000 7,402,500 30,796,000 Telecommunications (2.9%) American Tower Corp. cv. sr. notes 3s, 2012 4,300,000 5,616,875 Dobson Communications Corp. 144A cv. sr. notes 1 1/2s, 2025 7,000,000 6,501,250 NII Holdings, Inc. cv. sr. notes 2 7/8s, 2034 600,000 989,250 NII Holdings, Inc. 144A cv. sr. notes 2 7/8s, 2034 4,000,000 6,595,000 19,702,375 Textiles (0.6%) Armor Holdings, Inc. cv. sr. sub. notes stepped-coupon 2s (zero %, 11/1/11) 2024 4,000,000 4,105,000 Total convertible bonds and notes (cost $413,251,000) $ 423,176,827 CONVERTIBLE PREFERRED STOCKS (37.3%)* Shares Value Advertising and Marketing Services (0.4%) The Interpublic Group of Cos., Inc. Ser. B, 144A 5.25% cv. pfd. (S) 3,349 $ 3,346,488 Aerospace and Defense (2.0%) Northrop Grumman Corp. Ser. B, $7.00 cum. cv. pfd. 113,700 13,501,875 Automotive (0.8%) Ford Motor Company Capital Trust II $3.25 cum. cv. pfd. 165,000 5,259,375 Banking (2.9%) State Street Corp. 6.75% cv. pfd. 36,700 8,879,382 Washington Mutual Capital Trust I $2.688 cum. cv. pfd. 210,500 10,730,238 19,609,620 Beverage (0.5%) Constellation Brands, Inc. Ser. A, $1.438 cv. pfd. 100,500 3,567,750

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CONVERTIBLE PREFERRED STOCKS (37.3%)* continued Shares Value Broadcasting (0.6%) Emmis Communications Corp. Ser. A, $3.125 cum. cv. pfd. 88,000 $ 3,762,000 Building Materials (0.7%) TXI Capital Trust I $2.75 cv. pfd. 89,400 4,671,150 Chemicals (1.5%) Celanese Corp. $1.063 cum. cv. pfd. 130,100 3,431,388 Huntsman Corp. $2.50 cv. pfd. (S) 151,375 6,679,422 10,110,810 Electric Utilities (2.4%) FPL Group, Inc. $4.00 units cv. pfd. 130,000 8,433,750 Great Plains Energy, Inc. $2.00 cum. cv. pfd. 300,000 7,762,500 16,196,250 Financial (2.0%) Fannie Mae Ser. 04-1, 5.375% cv. pfd. 148 13,489,477 Forest Products and Packaging (1.0%) Smurfit-Stone Container Corp. Ser. A, $1.75 cum. cv. pfd. 326,900 6,578,863 Health Care Services (1.3%) Omnicare Capital Trust II Ser. B, $2.00 cv. pfd. 128,200 9,070,150 Insurance (7.5%) Chubb Corp. (The) $1.75 cv. pfd. (S) 407,600 13,705,550 Conseco, Inc. $1.38 cum. cv. pfd. 267,500 6,921,563 IPC Holdings, Ltd. 7.25% cv. pfd. (Bermuda) 152,300 4,259,831 MetLife, Inc. Ser. B, $1.594 cv. pfd. 376,700 10,312,163 Travelers Property Casualty Corp. $1.125 cv. pfd. (S) 357,100 8,856,080 XL Capital, Ltd. $1.625 cv. pfd. (Bermuda) 316,100 6,770,862 50,826,049 Investment Banking/Brokerage (3.2%) Citigroup Funding, Inc. Ser. GNW zero % cum. cv. pfd. 352,520 10,819,191 Lehman Brothers Holdings, Inc. $1.563 cv. pfd. 259,000 6,734,000 Merrill Lynch & Co. Ser. JNC, 6.75% cv. pfd. 102,940 3,911,720 21,464,911 Medical Technology (1.3%) Baxter International, Inc. $3.50 cv. pfd. 166,000 8,984,750 Metals (1.5%) Freeport-McMoRan Copper & Gold, Inc. 5.50% cv. pfd. 1,400 1,539,125 Freeport-McMoRan Copper & Gold, Inc. 144A 5.50% cv. pfd. 7,985 8,778,509 10,317,634

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CONVERTIBLE PREFERRED STOCKS (37.3%)* continued Shares Value Natural Gas Utilities (2.1%) El Paso Corp. 144A 4.99% cv. pfd. 6,550 $ 7,112,481 Southern Union Co. $2.875 cv. pfd. 54,290 3,881,735 Southern Union Co. $2.50 cv. pfd. 61,700 3,054,150 14,048,366 Oil & Gas (1.8%) Amerada Hess Corp. $3.50 cv. pfd. 51,300 5,463,450 Chesapeake Energy Corp. Ser. *, $5.00 cum. cv. pfd. 13,700 1,989,925 Chesapeake Energy Corp. 144A $5.00 cum. cv. pfd. 32,400 4,703,411 12,156,786 Pharmaceuticals (2.0%) Schering-Plough Corp. $3.00 cv. pfd. 253,700 13,350,963 Photography/Imaging (1.4%) Xerox Corp. 6.25% cv. pfd. 81,140 9,371,670 Retail (0.4%) Rite Aid Corp. zero % cum. cv. pfd. 142,200 2,981,934 Total convertible preferred stocks (cost $243,896,362) $ 252,666,871 SHORT-TERM INVESTMENTS (1.9%)* Principal amount/shares Value Putnam Prime Money Market Fund (e) 3,971,551 $ 3,971,551 Short-term investments held as collateral for loaned securities with yields ranging from 3.77% to 4.21% and due dates ranging from November 1, 2005 to December 9, 2005 (d) $9,245,016 9,242,700 Total short-term investments (cost $13,214,251) $ 13,214,251 TOTAL INVESTMENTS Total investments (cost $670,361,613) $ 689,057,949

* Percentages indicatedare based on net assets of $677,925,286.

(S) Securities on loan,in part or in entirety, at October 31, 2005.

++The interest rate and date shownparenthetically represent the new interest rate to be paid and the date the fundwill begin accruing interest at this rate.

(d) See Note 1 to thefinancial statements.

(e) See Note 5 to thefinancial statements regarding investments in Putnam Prime Money MarketFund.

144A after the name of asecurity represents those exempt from registration under Rule 144A of theSecurities Act of 1933. These securities may be resold in transactions exemptfrom registration, normally to qualified institutional buyers. The rates shownon Floating Rate Notes (FRN) are the current interest rates at October 31,2005.

The accompanying notesare an integral part of these financial statements.

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