-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C4ssBell9Oeq3RCUeZ+gLgxLuIrvPjcf5MWFeBPPObZL75eH1F8UVkXXa5PMPAuR olWn14zRr7EQwo53bUGpfA== 0000928816-98-000204.txt : 19980727 0000928816-98-000204.hdr.sgml : 19980727 ACCESSION NUMBER: 0000928816-98-000204 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980724 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INVESTMENT GRADE MUNICIPAL TRUST CENTRAL INDEX KEY: 0000855048 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046629611 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05901 FILM NUMBER: 98670925 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 MAIL ADDRESS: STREET 1: ONE POST OFFICE SQU CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 PUTNAM INVESTMENT GRADE MUNICIPAL TRUST Putnam Investment Grade Municipal Trust SEMIANNUAL REPORT May 31, 1998 [LOGO: BOSTON * LONDON * TOKYO] From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: The $1.3 trillion municipal bond market has become especially attractively priced relative to the Treasury market -- a condition that has not occurred since the flat-tax scare of 1996. Municipal bonds (as represented by 30-year insured municipals) are now offering almost 90% of the yield of long-term Treasury bonds. Since the typical level is 84%, this makes their current prices remarkably low. During the year, the Federal Reserve Board has remained on the sidelines in deference to the noninflationary economic environment and fears of the eventual impact of Asia's troubles on the United States. Within this relatively tranquil, yet cautious environment, Putnam Investment Grade Municipal Trust delivered what we promised: a steady stream of income exempt from federal taxes along with relatively low share price volatility. Your fund produced returns of 3.46% at net asset value and -2.09% at market price for the six months ended May 31, 1998. Please see pages 5 and 6 for more information. The first half of 1998 was also notable for its huge incremental supply, including the sale of the largest municipal bond issue in history -- $3.4 billion by the Long Island Power Authority (LIPA). Before the bonds were sold in May, investors worried that the increased supply would drag down prices; but because of the ongoing demand and prevailing attractive prices, the market easily absorbed this huge issue and the all-important supply/demand ratios have remained in balance. We were pleased to purchase $4 million of the LIPA bonds for your fund's portfolio. Your fund's significant position in the transportation industry has been bolstered by positive earnings that stem from strong passenger demand and low fuel prices, particularly in the airline sector. Standard & Poor's has raised the credit outlook for American Airlines to positive from stable. Other airline-related bonds in the portfolio include those backed by United Airlines and Continental Airlines. These bonds already carry positive credit outlooks, reflecting the industry's and each company's good health. While these holdings were viewed favorably at the end of the period, all holdings are subject to review and adjustment in accordance with the fund's investment strategy and may well vary in the future. The demand for cheaper electricity, combined with new power plant technology and federal legislation, set the stage for the deregulation of utilities several years ago. Since then, the restructuring of the utility industry has created some dynamic investment opportunities for the fund. For example, one of the fund's utility holdings, Nevada Power, has proposed a merger with Sierra Pacific Resources, which holds a higher credit rating from Moody's and S&P. This merger should help the lower-rated Nevada Power reduce costs and improve cash flow with the overall impact of enhancing investor security in its bonds. Also noteworthy is the unusually flat tax-exempt yield curve. The current spread between long-term and short-term yields is remarkably small. With 30-year bonds paying only a modest 30 to 40 basis points over 10-year bonds, investors are not sufficiently compensated for taking on the higher risk. For this reason, we have found the best value (attractive yield with minimal volatility) in the intermediate range of the yield curve -- anywhere from 8 to 15 years. Your fund's manager, Richard Wyke, remains focused on sustaining the fund's dividend level in a market in which higher yielding bonds are steadily called away. As he replaces the called bonds, his goal is to acquire bonds with at least four years of call protection. This strategy should help maintain a certain level of income even if interest rates continue to stay low or fall. [GRAPHIC OMITTED: PIE CHART OF CREDIT QUALITY OVERVIEW] CREDIT QUALITY OVERVIEW* B -- 2.7% Ba -- 5.2% Baa -- 30.1% A -- 12.0% VMIGI -- 0.5% Aaa -- 46.9% Aa -- 2.6% Footnote reads: * As a percentage of market value as of 5/31/98. A bond rated Baa or higher is considered investment grade. All ratings relfect Moody's descriptions, unless noted otherwise; percentages may include unrated bonds considered by Putnam Management to be of comparable quality. Ratings will vary over time. While interest rates may remain low, we believe that the inflation rate is the key economic variable to watch in the second half of 1998. Because we expect continued U.S. economic growth to be supported by consumer demand, low interest rates, and the wealth effect of a bull market, there is the potential for a rise in inflation. Consequently, this is not a good time to expose the portfolio to bonds with longer maturities and higher interest-rate risk. We believe that a cautious strategy will produce the best returns in the months ahead. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees July 15, 1998 Performance summary This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam Investment Grade Municipal Trust is designed for investors seeking a high level of current income, free from federal income tax, as is consistent with the preservation of capital. TOTAL RETURN FOR PERIODS ENDED 5/31/98 Lehman Bros. Municipal Market Bond Consumer NAV price Index Price Index - ------------------------------------------------------------------------------ 6 months 3.46% -2.09% 3.78% 0.80% - ------------------------------------------------------------------------------ 1 year 10.31 6.79 9.39 1.69 - ------------------------------------------------------------------------------ 5 years 35.82 49.57 38.53 12.90 Annual average 6.31 8.38 6.74 2.46 - ------------------------------------------------------------------------------ Life of fund (10/26/89) 109.29 124.48 96.00 29.62 Annual average 8.98 9.87 8.16 3.07 - ------------------------------------------------------------------------------ All returns assume reinvestment of distributions at NAV and represent past performance; they do not guarantee future results. They do not take into account any adjustment for taxes payable on reinvested distributions. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. PRICE AND DISTRIBUTION INFORMATION 6 months ended 5/31/98 - ------------------------------------------------------------------------------ Distributions (number) 6 - ------------------------------------------------------------------------------ Income $0.48 - ------------------------------------------------------------------------------ Total $0.48 - ------------------------------------------------------------------------------ Preferred shares Series A (1,400 shares) - ------------------------------------------------------------------------------ Income $1,875.71 - ------------------------------------------------------------------------------ Total $1,875.71 - ------------------------------------------------------------------------------ Share value (common shares) NAV Market price - ------------------------------------------------------------------------------ 11/30/97 $12.05 $14.750 - ------------------------------------------------------------------------------ 5/31/98 12.03 13.937 - ------------------------------------------------------------------------------ Current return (end of period) - ------------------------------------------------------------------------------ Current dividend rate1 7.98% 6.89% - ------------------------------------------------------------------------------ Taxable equivalent2 13.21 11.40 - ------------------------------------------------------------------------------ 1Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2Assumes maximum 39.6% combined federal and state tax rate. Results for investors subject to lower tax rates would not be as advantageous. TOTAL RETURN FOR PERIODS ENDED 6/30/98 (most recent calendar quarter) NAV Market price - ------------------------------------------------------------------------------ 6 months 2.20% 1.00% - ------------------------------------------------------------------------------ 1 year 9.09 8.64 - ------------------------------------------------------------------------------ 5 years 33.13 51.41 Annual average 5.89 8.65 - ------------------------------------------------------------------------------ Life of fund (10/26/89) 109.99 134.84 Annual average 8.92 10.34 - ------------------------------------------------------------------------------ Performance data represent past results and do not reflect future performance. Investment returns and principal value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. See first page of performance section for performance calculation method. TERMS AND DEFINITIONS Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities and the net assets allocated to remarketed preferred shares, divided by the number of outstanding shares. Market price is the current trading price of one share of the fund. Market prices are set by transactions between buyers and sellers on the New York Stock Exchange. COMPARATIVE BENCHMARKS Lehman Brothers Municipal Bond Index is an unmanaged list of long-term fixed-rate investment-grade tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index. Consumer Price Index (CPI ) is a commonly used measure of inflation; it does not represent an investment return.
Portfolio of investments owned May 31, 1998 (Unaudited) Key to Abbreviations AMBAC -- AMBAC Indemnity Corporation COP -- Certificate of Participation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance GNMA Coll. -- Government National Mortgage Association Collateralized G.O. Bonds -- General Obligation Bonds IFB -- Inverse Floating Rate Bonds MBIA -- Municipal Bond Investors Assurance Corporation MUNICIPAL BONDS AND NOTES (98.5%) (a) PRINCIPAL AMOUNT RATINGS (RAT) VALUE Alabama (1.6%) - ------------------------------------------------------------------------------------------------------------------------------- $ 5,500,000 Gadsden East, Med. Clinic Board Rev. Bonds (Baptist Hosp. of Gadsden Inc.), Ser. A, 7.8s, 11/1/21 BBB $ 6,235,625 California (9.1%) - ------------------------------------------------------------------------------------------------------------------------------- 2,000,000 Anaheim, Pub. Fin. Auth. Tax Allocation Rev. Bonds MBIA, 8.95s, 12/28/18 Aaa 2,570,000 1,800,000 CA State, Econ. Dev. Fin. Auth. Rev. Bonds (Volk Enterprises, Inc.) 3.75s, 6/1/21 A-1+ 1,800,000 4,650,000 CA State U. IFB, AMBAC, 9.71s, 11/1/21 (acquired various dates from 8/5/91 to 8/31/94, cost $4,659,603) (RES) Aaa 5,440,500 5,200,000 Central Valley Fin. Auth. Rev. Bonds (Carson Ice), 6s, 7/1/09 BBB- 5,505,500 Los Angeles Cnty., Metro. Trans. Auth. Sales Tax Rev. Bonds, MBIA 3,235,000 1st Tier Lien, Ser. A, 5 3/4s, 7/1/11 Aaa 3,509,975 3,030,000 2nd Tier Lien, 5 5/8s, 7/1/11 Aaa 3,261,038 4,425,000 Los Angeles, Regl. Arpt. Impt. Corp. Lease Rev. Bonds (Continental Airlines), 9s, 8/1/17 B+ 4,543,856 1,400,000 Orange Cnty., Local Trans. Auth. IFB, FGIC, 7.911s, 2/14/11 (acquired 2/6/96, cost $1,474,153) (RES) Aaa 1,641,500 2,550,000 Orange Cnty., Pub. Fac. Corp. COP (Solid Waste Management), 7 7/8s, 12/1/13 Baa 2,652,765 4,625,000 San Diego, Pub. Fac. Fin. Auth. Swr. Rev. Bonds, FGIC, 5s, 5/15/25 Aaa 4,497,813 ------------ 35,422,947 Colorado (8.7%) - ------------------------------------------------------------------------------------------------------------------------------- CO Hsg. Fin. Auth. Rev. Bonds (Single Fam.) 2,000,000 Ser. B-2, 7s, 5/1/26 Aa2 2,272,500 1,000,000 Ser. B-3, 6.8s, 11/1/28 Aa2 1,135,000 Denver, City & Cnty. Arpt. Rev. Bonds 265,000 Prerefunded, Ser. A, 8 3/4s, 11/15/23 Aaa 308,394 735,000 Ser. A, 8 3/4s, 11/15/23 Baa1 846,169 410,000 Prerefunded, Ser. A, 8 1/2s, 11/15/23 Aaa 459,200 4,365,000 Ser. A, 8 1/2s, 11/15/23 Baa1 4,839,694 420,000 Prerefunded, Ser. A, 8 1/4s, 11/15/12 Aaa 467,775 4,480,000 Ser. A, 8 1/4s, 11/15/12 Baa1 4,956,000 1,380,000 Prerefunded, Ser. A, 8s, 11/15/25 Aaa 1,549,050 3,820,000 Ser. A, 8s, 11/15/25 Baa1 4,240,200 1,670,000 Prerefunded, Ser. D, 7 3/4s, 11/15/21 Aaa 1,891,275 3,000,000 Ser. D, 7 3/4s, 11/15/13 Baa1 3,802,500 6,330,000 Ser. D, 7 3/4s, 11/15/21 Baa1 7,073,775 ------------ 33,841,532 Connecticut (1.8%) - ------------------------------------------------------------------------------------------------------------------------------- 4,825,000 CT State Dev. Auth. Poll. Control Rev. Bonds (New England Power Co.), 7 1/4s, 10/15/15 A+ 5,114,500 2,000,000 CT State Res. Recvy. Auth. Muni. Rev. Bonds (Bridgeport Service Fee), Ser. A, 7 1/2s, 1/1/09 A- 2,071,780 ------------ 7,186,280 District of Columbia (0.7%) - ------------------------------------------------------------------------------------------------------------------------------- 2,500,000 DC Rev. Bonds (Georgetown U.), Ser. B, 7.15s, 4/1/21 A1 2,605,375 Florida (3.7%) - ------------------------------------------------------------------------------------------------------------------------------- 11,065,000 Broward Cnty., Resource Recvy. Rev. Bonds (SES Broward Cnty. LP South), 7.95s, 12/1/08 A 11,936,369 2,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds (FL Crushed Stone Co.), 8 1/2s, 12/1/14 B+/P 2,335,000 ------------ 14,271,369 Georgia (2.9%) - ------------------------------------------------------------------------------------------------------------------------------- 4,000,000 Burke Cnty., Dev. Auth. Poll. Control Rev. Bonds (Oglethorpe Pwr. Co.), MBIA, 8s, 1/1/22 Aaa 4,725,000 4,800,000 De Kalb Cnty., Muni. Hsg. Auth. Rev. Bonds (Briarcliff Park Apts.), Ser. A, 7 1/2s, 4/1/17 BBB+/P 5,226,000 1,000,000 GA Med. Ctr. Hosp. Auth. IFB (Columbus Regl. Hlth. Care Syst.), Ser. B, MBIA, 8.698s, 8/1/10 Aaa 1,182,500 ------------ 11,133,500 Hawaii (1.7%) - ------------------------------------------------------------------------------------------------------------------------------- 5,500,000 HI State Dept. of Budget & Fin. Special Purpose Mtge. IFB, 9.081s, 11/1/21 Aaa 6,441,875 Illinois (0.7%) - ------------------------------------------------------------------------------------------------------------------------------- 2,385,000 Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa2 2,671,200 Indiana (1.2%) - ------------------------------------------------------------------------------------------------------------------------------- 465,000 Indiana Bond Bank Note (Special Loan Program), Ser. B, 8 1/2s, 2/1/18 A+ 477,127 3,000,000 Indianapolis Indl. Arpt. Auth. Special Fac. Rev. Bonds (United Airlines), Ser. A, 6 1/2s, 11/15/31 Baa2 3,258,750 1,000,000 Rockport, Indl. Poll. Control Rev. Bonds (Indiana- Michigan Pwr.), Ser. B, FGIC, 7.6s, 3/1/16 Aaa 1,102,500 ------------ 4,838,377 Kansas (1.3%) - ------------------------------------------------------------------------------------------------------------------------------- 4,500,000 Burlington, Poll. Control Rev. Bonds (Kansas Gas & Electric Co.), MBIA, 7s, 6/1/31 Aaa 4,933,125 Louisiana (7.3%) - ------------------------------------------------------------------------------------------------------------------------------- 9,250,000 St. Charles Parish, Poll. Control Rev. Bonds (LA Pwr. & Lt. Co.), 8s, 12/1/14 Baa3 9,943,750 W. Feliciana, Parish Poll. Control Rev. Bonds (Gulf States Util. Co.) 2,500,000 8s, 12/1/24 Ba1 2,671,875 5,100,000 Ser. II, 7.7s, 12/1/14 Ba1 5,712,000 3,000,000 Ser. III, 7.7s, 12/1/14 Ba1 3,360,000 6,000,000 Ser. A, 7 1/2s, 5/1/15 BB+ 6,712,500 ------------ 28,400,125 Maine (1.4%) - ------------------------------------------------------------------------------------------------------------------------------- 5,000,000 ME Fin. Auth. Solid Waste Recycling Fac. Rev. Bonds (Great Northern Paper-Bowater), 7 3/4s, 10/1/22 Baa1 5,600,000 Maryland (1.4%) - ------------------------------------------------------------------------------------------------------------------------------- 3,035,000 MD Econ. Dev. Corp. Hlth. Care Facs. Rev. Bonds (Crescent Cities), Ser. A, GNMA Coll., 5.45s, 12/20/37 AAA 3,072,938 2,000,000 MD State Hlth. & Higher Edl. Fac. Auth. Rev. Bonds (Doctors Cmnty. Hosp.), 8 3/4s, 7/1/12 Aaa 2,227,500 ------------ 5,300,438 Massachusetts (5.4%) - ------------------------------------------------------------------------------------------------------------------------------- 8,750,000 MA State Hlth. & Edl. Fac. Auth. IFB (Med. Ctr. of Central MA), Ser. B, AMBAC, 8.82s, 6/23/22 Aaa 11,254,688 4,000,000 MA State Hlth. & Edl. Fac. Auth. Rev. Bonds (MA Eye & Ear Infirmary), Ser. A, 7 3/8s, 7/1/11 Baa3 4,255,000 5,000,000 MA State Indl. Fin. Agcy. Rev. Bonds (Cape Cod Hlth. Syst. Issue), 8 1/2s, 11/15/20 Aaa 5,618,750 ------------ 21,128,438 Michigan (2.0%) - ------------------------------------------------------------------------------------------------------------------------------- 1,715,000 Detroit, Dev. Fin. Auth. Tax Increment G.O. Bonds Ser. A, 9 1/2s, 5/1/21 BBB+/P 2,128,744 2,200,000 Detroit, Wtr. Supply Syst. IFB, FGIC, 8.613s, 7/1/22 Aaa 2,574,000 2,900,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds (Mercy Svcs. for Aging), 9.4s, 5/15/20 AAA/P 3,219,000 ------------ 7,921,744 Mississippi (2.1%) - ------------------------------------------------------------------------------------------------------------------------------- 7,950,000 Claiborne Cnty., Poll. Control Rev. Bonds (Middle South Energy, Inc.), Ser. C, 9 7/8s, 12/1/14 Ba1 8,380,970 Missouri (3.2%) - ------------------------------------------------------------------------------------------------------------------------------- 2,500,000 MO State Hlth. & Edl. Fac. Auth. Rev. Bonds (BJC Hlth. Syst.), Ser. A, 6 1/2s, 5/15/20 Aa 2,784,375 8,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Whispering Lake), Ser. A-11, FSA, 7.1s, 1/1/30 Aaa 9,689,875 ------------ 12,474,250 Nebraska (1.8%) - ------------------------------------------------------------------------------------------------------------------------------- 1,900,000 NE Investment Fin. Auth. Single Fam. Mtge. IFB, Ser. B, GNMA Coll., 11.14s, 3/15/22 Aaa 2,116,125 4,875,000 NE Investment Fin. Auth. Single Fam. Mtge. Rev. Bonds, Ser. 1, GNMA Coll, 8 1/8s, 8/15/38 Aaa 4,992,390 ------------ 7,108,515 Nevada (1.9%) - ------------------------------------------------------------------------------------------------------------------------------- 6,500,000 Clark Cnty., Indl. Dev. Rev. Bonds (Nevada Power Co.), 7.8s, 6/1/20 Baa3 6,995,625 500,000 Clark Cnty., Indl. Dev. Rev. Bonds (Southwest Gas Corp.), Ser. B, 7 1/2s, 9/1/32 Baa2 555,625 ------------ 7,551,250 New York (7.2%) - ------------------------------------------------------------------------------------------------------------------------------- 4,000,000 Long Island, Pwr. Auth. NY Elec. Syst. Rev. Bonds, Ser. A, 5 1/4s, 12/1/26 A- 3,955,000 2,000,000 NY City, Indl. Dev. Agcy. Rev. Bonds (Brooklyn Navy Yard Cogen. Partners), Ser. G, 5 3/4s, 10/1/36 Baa3 2,040,000 4,100,000 NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds, Ser. B, 5 3/4s, 6/15/26 A2 4,346,000 NY State Dorm. Auth. Rev. Bonds 4,500,000 (City U. Syst.), Ser. F, 7 7/8s, 7/1/17 Aaa 4,933,125 6,250,000 (State U. Edl. Fac.), Ser. A, 7.7s, 5/15/12 AAA 6,812,500 2,000,000 (City U. Syst.), Ser. A, 7 5/8s, 7/1/20 Aaa 2,185,000 3,780,000 Triborough Bridge & Tunnel Auth. Gen. Purpose Rev. Bonds, Ser. A, 5s, 1/1/24 Aa 3,690,225 ------------ 27,961,850 Ohio (1.5%) - ------------------------------------------------------------------------------------------------------------------------------- 5,000,000 OH State Air Quality Dev. Auth. Rev. Bonds (Cleveland Co.), FGIC, 8s, 12/1/13 Aaa 5,781,250 Pennsylvania (4.3%) - ------------------------------------------------------------------------------------------------------------------------------- 2,690,000 Allegheny Cnty., Res. Fin. Auth. Mtge. Rev. Bonds (Single Fam.) Ser. M, GNMA Coll., 7.9s, 6/1/11 Aaa 2,831,225 5,000,000 Montgomery Cnty., Indl. Dev. Auth. Resource Recvy. Rev. Bonds, 7 1/2s, 1/1/12 A 5,250,000 7,600,000 PA State Higher Ed. Assistance Agcy. IFB, Ser. B, MBIA, 10.717s, 3/1/20 Aaa 8,654,500 ------------ 16,735,725 Puerto Rico (1.7%) - ------------------------------------------------------------------------------------------------------------------------------- 7,000,000 Cmnwlth. of PR, Hwy. Trans. Auth. Rev. Bonds, Ser. A, 5s, 7/1/38 A 6,746,250 Tennessee (3.9%) - ------------------------------------------------------------------------------------------------------------------------------- 2,600,000 Metropolitan Govt. Nashville & Davidson Cnty. Tenn. Wtr. & Swr. IFB, AMBAC, 8.114s, 1/1/22 Aaa 3,029,000 10,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Steeplechase Falls), Ser. A-10, FSA, 7 1/8s, 1/1/30 Aaa 12,167,125 ------------ 15,196,125 Texas (11.7%) - ------------------------------------------------------------------------------------------------------------------------------- 11,500,000 Alliance, Arpt. Auth. Rev. Bonds (Federal Express Corp.), 6 3/8s, 4/1/21 Baa2 12,448,750 2,770,000 Austin, Indpt. School Dist. G.O. Bonds, 5 3/4s, 8/1/15 Aaa 2,932,738 2,500,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (St. Luke's Lutheran Hosp.), 7.9s, 5/1/11 AAA/P 2,900,000 5,000,000 Brazos River, Poll. Control Auth. Rev. Bonds (TX Utils. Elec. Co.) Ser. A, 7 7/8s, 3/1/21 Baa1 5,475,000 2,500,000 Dallas Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev. Bonds (American Airlines, Inc.), 7 1/2s, 11/1/25 Baa2 2,700,000 4,390,000 Matagorda Cnty., Poll. Control Rev. Bonds (Houston Pwr. & Lt. Co.), Ser. D, FGIC, 7.6s, 10/1/19 Aaa 4,680,838 8,000,000 North Central Hlth. Fac. Dev. Corp. IFB (Presbyterian Hlth. Care Syst.), Ser. C, MBIA, 9.265s, 6/22/21 Aaa 9,440,000 4,500,000 TX State G.O. Bonds (Nat'l. Research Lab. Communication Superconductor), 7 1/8s, 4/1/20 Aaa 4,831,870 ------------ 45,409,196 Utah (4.6%) - ------------------------------------------------------------------------------------------------------------------------------- 3,000,000 Carbon Cnty., Solid Waste Disp. (Laidlaw Env.), Ser. A, 7.45s, 7/1/17 B-/P 3,341,250 13,000,000 Utah Pwr. Supply Rev. Bonds (Intermountain Pwr. Agcy.), Ser. A, MBIA, 6.15s, 7/1/14 AAA 14,397,500 ------------ 17,738,750 Vermont (1.3%) - ------------------------------------------------------------------------------------------------------------------------------- 4,765,000 VT Edl. & Hlth. Bldgs. Fin. Agcy. Rev. Bonds (Brattleboro Memorial Hosp.), 7s, 3/1/24 BBB 5,175,981 Wisconsin (2.4%) - ------------------------------------------------------------------------------------------------------------------------------- 3,400,000 WI Hsg. & Econ. Dev. Auth. Rev. Bonds, Ser. B, 7.05s, 11/1/22 A1 3,650,750 5,600,000 WI State Hlth. & Edl. Fac. Auth. Rev. Bonds (United Hlth. Group, Inc.), Ser. B, MBIA, 5 1/2s, 2020 Aaa 5,747,000 ------------ 9,397,750 - ------------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $361,160,149) (b) $ 383,589,812 - ------------------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $389,523,726. (RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at May 31, 1998 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at May 31, 1998. Securities rated by Putnam are indicated by "/P" and are not publicly rated. (b) The aggregate identified cost on a tax basis is $361,160,940, resulting in gross unrealized appreciation and depreciation of $24,320,266 and $1,891,394, respectively, or net unrealized appreciation of $22,428,872. (RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at May 31, 1998 was $7,082,000 or 1.8% of net assets. The rates shown on IFB, which are securities paying interest rates that vary inversely to changes in the market interest rates, and VRDN's are the current interest rates at May 31, 1998. The fund had the following industry group concentrations greater than 10% at May 31, 1998 (as a percentage of net assets): Utilities 24.6% Transportation 19.8 Hospitals/Health care 16.2 Housing 11.3 The fund had the following insurance concentration greater than 10% at May 31, 1998 (as a percentage of net assets): MBIA 15.0% The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities May 31, 1998 (Unaudited) Assets - ------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $361,160,149) (Note 1) $383,589,812 - ------------------------------------------------------------------------------------------------- Cash 1,537,122 - ------------------------------------------------------------------------------------------------- Interest receivable 6,729,133 - ------------------------------------------------------------------------------------------------- Receivable for securities sold 185,000 - ------------------------------------------------------------------------------------------------- Total assets 392,041,067 Liabilities - ------------------------------------------------------------------------------------------------- Distributions payable to shareholders 1,746,921 - ------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 678,543 - ------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 49,223 - ------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 10,170 - ------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 1,100 - ------------------------------------------------------------------------------------------------- Other accrued expenses 31,384 - ------------------------------------------------------------------------------------------------- Total liabilities 2,517,341 - ------------------------------------------------------------------------------------------------- Net assets $389,523,726 Represented by - ------------------------------------------------------------------------------------------------- Series A remarketed preferred shares, (1,400 shares authorized and outstanding at $100,000 per share) (Note 4) $140,000,000 - ------------------------------------------------------------------------------------------------- Paid-in capital -- common shares (unlimited shares authorized) (Note 1) 230,042,753 - ------------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 4,922,155 - ------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (7,870,845) - ------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 22,429,663 - ------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $389,523,726 Computation of net asset value - ------------------------------------------------------------------------------------------------- Series A remarketed preferred shares $140,000,000 - ------------------------------------------------------------------------------------------------- Cumulative undeclared dividends on remarketed preferred shares 29,916 - ------------------------------------------------------------------------------------------------- Net assets allocated to remarketed preferred shares -- liquidation preference $140,029,916 - ------------------------------------------------------------------------------------------------- Net assets available to common shares $249,493,810 - ------------------------------------------------------------------------------------------------- Net asset value per common share ($249,493,810 divided by 20,743,267 shares) $12.03 - ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended May 31, 1998 (Unaudited) Tax exempt interest income: $12,760,746 - ------------------------------------------------------------------------------------------------- Expenses: - ------------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 1,345,385 - ------------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 181,023 - ------------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 7,336 - ------------------------------------------------------------------------------------------------- Administrative services (Note 2) 3,273 - ------------------------------------------------------------------------------------------------- Reports to shareholders 8,621 - ------------------------------------------------------------------------------------------------- Auditing 31,682 - ------------------------------------------------------------------------------------------------- Legal 17,427 - ------------------------------------------------------------------------------------------------- Exchange listing fees 23,991 - ------------------------------------------------------------------------------------------------- Preferred share remarketing agent fees 211,554 - ------------------------------------------------------------------------------------------------- Other 3,663 - ------------------------------------------------------------------------------------------------- Total expenses 1,833,955 - ------------------------------------------------------------------------------------------------- Expense reduction (Note 2) (16,205) - ------------------------------------------------------------------------------------------------- Net expenses 1,817,750 - ------------------------------------------------------------------------------------------------- Net investment income 10,942,996 - ------------------------------------------------------------------------------------------------- Net realized loss on investments (Notes 1 and 3) (853,243) - ------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 1,852,575 - ------------------------------------------------------------------------------------------------- Net gain on investments 999,332 - ------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $11,942,328 - ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Six months ended Year ended May 31 November 30 1998* 1997 - ------------------------------------------------------------------------------------------------------------------- Increase in net assets - ------------------------------------------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------------------------------------------- Net investment income $ 10,942,996 $ 22,541,282 - ------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments (853,243) 1,176,166 - ------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 1,852,575 3,151,505 - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 11,942,328 26,868,953 - ------------------------------------------------------------------------------------------------------------------- Distributions to remarketed preferred shareholders: - ------------------------------------------------------------------------------------------------------------------- From net investment income (2,625,996) (5,144,062) - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations applicable to common shareholders (excluding cumulative undeclared dividends on remarketed preferred shares of $29,916 and $29,536 respectively) 9,316,332 21,724,891 - ------------------------------------------------------------------------------------------------------------------- Distributions to common shareholders: - ------------------------------------------------------------------------------------------------------------------- From net investment income (9,935,967) (19,741,555) - ------------------------------------------------------------------------------------------------------------------- Issuance of common shares in connection with reinvestment of distributions 1,312,301 2,357,814 - ------------------------------------------------------------------------------------------------------------------- Total increase in net assets 692,666 4,341,150 Net assets - ------------------------------------------------------------------------------------------------------------------- Beginning of period 388,831,060 384,489,910 - ------------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $4,922,155 and $6,541,122, respectively) $389,523,726 $388,831,060 - ------------------------------------------------------------------------------------------------------------------- Number of fund shares - ------------------------------------------------------------------------------------------------------------------- Common shares outstanding at beginning of period 20,646,799 20,470,991 - ------------------------------------------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 96,468 175,808 - ------------------------------------------------------------------------------------------------------------------- Common shares outstanding at end of period 20,743,267 20,646,799 - ------------------------------------------------------------------------------------------------------------------- Remarketed preferred shares outstanding at beginning and end of period 1,400 1,400 - ------------------------------------------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period) - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended Per-share May 31 operating performance (Unaudited) Year ended November 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of year (common shares) $12.05 $11.94 $12.37 $11.22 $13.44 $12.36 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .53 1.09 1.06 1.17 1.20 1.32 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments .06 .23 (.28) 1.23 (2.03) .91 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .59 1.32 .78 2.40 (.83) 2.23 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders (.48) (.96) (.96) (.94) (.97) (.96) - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders (.13) (.25) (.25) (.28) (.19) (.16) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders -- -- -- -- (.21) -- - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders -- -- -- -- -- (.03) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders -- -- -- (.02) (.02) -- - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders -- -- -- (d) (.01) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.61) (1.21) (1.21) (1.25) (1.39) (1.15) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of year (common shares) $12.03 $12.05 $11.94 $12.37 $11.22 $13.44 - ------------------------------------------------------------------------------------------------------------------------------------ Market value, end of year (common shares) $13.937 $14.750 $13.625 $13.500 $11.880 $14.000 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at market price (common shares) (%)(a) (2.09)* 16.25 8.65 22.95 (6.74) 13.54 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (total fund) (in thousands) $389,524 $388,831 $384,490 $391,003 $364,814 $405,670 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b)(c) .73* 1.43 1.49 1.50 1.45 1.40 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%)(b) 3.32* 7.13 6.84 7.50 8.07 8.59 - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 15.36* 26.91 146.43 122.65 78.97 33.73 - ------------------------------------------------------------------------------------------------------------------------------------ (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Ratios reflect net assets available to common shares only; net investment income ratio also reflects reduction for dividend payments to preferred shareholders. (c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2). (d) Distributions in excess of net realized gain to the preferred stockholders amounted to less than $0.01 per common share.
Notes to financial statements May 31, 1998 (Unaudited) Note 1 Significant accounting policies Putnam Investment Grade Municipal Trust (the "fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The fund's investment objective is to provide as high a level of current income exempt from federal income tax as is believed to be consistent with preservation of capital. The fund intends to achieve its objective by investing in a diversified portfolio of tax-exempt municipal securities that Putnam Investment Management ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., believes do not involve undue risk to income or principal. Under normal market conditions, the fund will invest at least 80% of its total assets in tax-exempt municipal securities rated "investment grade" at the time of investment or, if not rated, determined by Putnam Management to be of comparable quality. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. A) Security valuation Tax-exempt bonds and notes are stated on the basis of valuations provided by a pricing service, approved by the Trustees, which uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value and other investments including restricted securities are stated at fair market value following procedures approved by the Trustees. B) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. C) Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, 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 November 30, 1997, the fund had a capital loss carryover of approximately $2,632,000 available to offset future capital gains, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration - -------------- ----------------- $1,985,000 November 30, 2004 647,000 November 30, 2005 D) Distributions to shareholders Distributions to common and preferred shareholders are recorded by the fund on the ex-dividend date. Dividends on remarketed preferred shares become payable when, as and if declared by the Trustees. Each dividend period for the remarketed preferred shares is generally a seven day period. The applicable dividend rate for the remarketed preferred shares on May 31, 1998 was 3.90%. 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. E) Determination of net asset value Net asset value of the common shares is determined by dividing the value of all assets of the fund, less all liabilities and the liquidation preference of any outstanding remarketed preferred shares, by the total number of common shares outstanding. F) Amortization of bond premium and accretion of bond discount Any premium resulting from the purchase of securities in excess of maturity value is amortized on a yield-to-maturity basis. Discounts on original issue discount bonds are accreted according to the yield-to-maturity basis. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Management for management and investment advisory services is paid quarterly based on the average net assets of the fund, including those allocated to the remarketed preferred shares. Such fee is based on the annual rate of 0.70% of the average weekly net assets. If dividends payable on remarketed preferred shares during any dividend payment period plus any expenses attributable to remarketed preferred shares for that period exceed the fund's gross income attributable to the proceeds of the remarketed preferred shares during that period, then the fee payable to Putnam Management for that period will be reduced by the amount of the excess (but not more than 0.70% of the liquidation preference of the remarketed preferred shares outstanding during the period). The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended May 31, 1998, fund expenses were reduced by $16,205 under expense offset arrangements with PFTC. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Each Trustee of the fund receives an annual Trustee fee, of which $540 has been allocated to the fund, and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain in the fund and are invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as 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 Tustees in the Statement of operations. Accrued pension liability is included n Payable for compensation of Trustees in the Statement of assets and liabilities. Note 3 Purchase and sales of securities During the six months ended May 31, 1998, purchases and sales of investment securities other than short-term investments aggregated $29,856,895 and $36,262,890, respectively. There were no purchases and sales of U.S. government obligations. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Remarketed preferred shares The Series A shares are redeemable at the option of the fund on any dividend payment date at a redemption price of $100,000 per share, plus an amount equal to any dividends accumulated on a daily basis but unpaid through the redemption date (whether or not such dividends have been declared) and, in certain circumstances, a call premium. Additionally, the fund has authorized a separate series of 2,000 Serial Remarketed Preferred shares, which are issuable only under certain conditions in exchange for Series A shares. No Serial Remarketed Preferred shares are currently outstanding. It is anticipated that dividends paid to holders of remarketed preferred shares will be considered tax-exempt dividends under the Internal Revenue Code of 1986. To the extent that the fund earns taxable income and capital gains by the conclusion of a fiscal year, it will be required to apportion to the holders of the remarketed preferred shares throughout that year additional dividends as necessary to result in an after-tax equivalent to the applicable dividend rate for the period. Under the Investment Company Act of 1940, the fund is required to maintain asset coverage of at least 200% with respect to the remarketed preferred shares as of the last business day of each month in which any such shares are outstanding. Additionally, the fund is required to meet more stringent asset coverage requirements under terms of the remarketed preferred shares and the shares' rating agencies. Should these requirements not be met, or should dividends accrued on the remarketed preferred shares not be paid, the fund may be restricted in its ability to declare dividends to common shareholders or may be required to redeem certain of the remarketed preferred shares. At May 31, 1998, no such restrictions have been placed on the fund. WELCOME TO www.putnaminv.com Now you can use your PC to get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and economic outlooks from Putnam. VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR: [bullet] the benefits of investing with Putnam [bullet] Putnam's money management philosophy [bullet] complete fund information, daily pricing and long-term performance [bullet] the latest on new funds and other Putnam news You can also read Putnam economist Dr. Robert Goodman's commentary and Putnam's Capital Markets outlook, search for a particular fund by name or objective, use our glossary to decode investment terms . . . and much more. The site can be accessed through any of the major online services (America Online, CompuServe, Prodigy) that offer web access. Of course, you can also access it via Netscape or Microsoft Internet Explorer, using an independent Internet service provider. New features will be added to the site regularly. So be sure to bookmark us at http://www.putnaminv.com Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President William J. Curtin Vice President Jerome J. Jacobs Vice President Blake E. Anderson Vice President Richard P. Wyke Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Beverly Marcus Clerk and Assistant Treasurer Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-to-date information about the fund's NAV. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - -------------------- Bulk Rate U.S. Postage PAID Putnam Investments - -------------------- 43768-058 7/98 -----END PRIVACY-ENHANCED MESSAGE-----