<PAGE>
PUTNAM
CALIFORNIA
INVESTMENT GRADE
MUNICIPAL TRUST
ANNUAL REPORT
APRIL 30, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
"The comeback is most pronounced in the California municipal funds...
Booming state revenue growth and a stabilization in interest rates are
two bullish developments for municipalities."
- --Bond Fund Report, March 24, 1995
Performance should always be considered in light of a fund's
investment strategy. Putnam California Investment Grade Municipal
Trust is designed for investors seeking high current income free from
federal and state income tax, consistent with preservation of capital.
FISCAL 1995 RESULTS AT A GLANCE
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
MARKET
TOTAL RETURN: NAV PRICE
- ----------------------------------------------------------------------
(change in value during
period plus reinvested
distributions)
12 months ended 4/30/95 6.15% 6.67%
- ----------------------------------------------------------------------
MARKET
SHARE VALUE: (COMMON SHARES) NAV PRICE
- ----------------------------------------------------------------------
4/30/94 $14.49 $13.875
4/30/95 14.16 13.625
- ----------------------------------------------------------------------
IN
EXCESS
DISTRIBUTIONS:(1) OF
Fiscal year ended INVESTMENT CAPITAL CAPITAL
April 30, 1995 NO. INCOME GAINS GAINS TOTAL
- ----------------------------------------------------------------------
(common shares) 12 $0.9500 $0.1224 .02 $1.0924
(preferred shares)
Series A 320 12 $1,682.94 $262.04 37.62 $1,944.98
- ----------------------------------------------------------------------
Current return: NAV Market
price
- ----------------------------------------------------------------------
End of period
Current dividend rate(2) 6.57% 6.83%
Taxable equivalent(3) 12.22 12.70
- ----------------------------------------------------------------------
<FN>
Performance data represent past results and are no indication of
future results. For performance over longer periods, see pages 8 and
9. (1) Capital gains, if any, are taxable for federal and, in most
cases, state tax purposes. For some investors, investment income may
also be subject to the federal alternative minimum tax. Investment
income may be subject to state and local taxes. (2) Income portion of
most recent distribution, annualized and divided by NAV or market
price at end of period. (3) Assumes maximum combined 46.24% federal
and state tax rate. Results for investors subject to lower tax rates
would not be as advantageous.
</TABLE>
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
MANY OF THE GATHERING SIGNS OF HOPE THAT SUSTAINED MUNICIPAL BOND
INVESTORS DURING THE DARKEST DAYS OF THE 1994 MARKET DECLINE BEGAN
MANIFESTING THEMSELVES IN EARNEST OVER THE EARLY MONTHS OF 1995.
ALTHOUGH THE MARKET EXHIBITED VOLATILITY THROUGHOUT PUTNAM CALIFORNIA
INVESTMENT GRADE MUNICIPAL TRUST'S FISCAL YEAR, ITS MOOD WAS
APPRECIABLY MORE UPBEAT AT THE FUND'S YEAR END THAN AT ITS BEGINNING.
THE ECONOMY CONTINUED TO MARCH AT A BRISK STRIDE, THOUGH THE PACE
SINCE JANUARY HAS SLOWED CONSIDERABLY FROM THE LEVELS THAT PREVAILED
DURING THE REST OF THE FISCAL YEAR. INVESTORS TOOK THIS MODERATION AS
A SIGN THAT THE ECONOMY WAS RESPONDING FAVORABLY TO THE FEDERAL
RESERVE BOARD'S STRATEGY OF RAISING SHORT-TERM RATES TO REIN IN GROWTH
AND THEREBY HOLD INFLATION IN CHECK.
AS YOUR FUND MOVES INTO FISCAL 1996, IT WILL BE GUIDED BY A NEW FUND
MANAGER. WILLIAM H. REEVES IS NO STRANGER TO CALIFORNIA. BEFORE
JOINING PUTNAM IN 1986, HE WAS A VICE PRESIDENT AND REGISTERED
PRINCIPAL AT CROCKER NATIONAL BANK IN SAN FRANCISCO. BILL ALSO MANAGES
THREE OTHER PUTNAM CALIFORNIA TAX-FREE FUNDS. AS HE WRITES IN THE
FOLLOWING REPORT, BILL BELIEVES PROSPECTS FOR MUNICIPAL BONDS ARE NOW
MUCH IMPROVED OVER A FEW MONTHS AGO.
RESPECTFULLY YOURS,
[SIGNATURE]
George Putnam
Chairman of the Trustees
June 21, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
WILLIAM REEVES
During the first six months of your fund's 1995 fiscal year, the broad
deterioration of bond prices -- a direct result of rising interest
rates and investor uncertainty -- was reflected in the prices of both
taxable and municipal bond funds. However, the year closed on a much
brighter note. Municipal bonds have recouped more than 50% of their
losses since hitting market lows last November. Stabilizing interest
rates, low inflation, and positive supply/demand dynamics have
contributed to this strong turnaround.
Your fund's conservative strategy, which places a premium on
attractive tax-free income and relative stability of principal, helped
cushion performance during one of the most challenging periods in
recent history for fixed-income investments. In addition, our decision
to keep the portfolio fully invested in high-quality bonds enabled the
fund to participate fully in the bond market rally that prevailed
during the first three months of calendar 1995.
Taxable equivalent yields are now at double-digit levels and represent
excellent values -- particularly for investors in such high-tax states
as California. In fact, your fund's 6.57% current dividend rate at net
asset value would translate into a current return of 12.22% for a
taxable investment, assuming the maximum combined 46.24% federal and
California state tax rate. Most investors in lower brackets would also
enjoy tax advantages, though not necessarily to the same extent.
YEAR-END EVENTS DRAG BOND PRICES DOWN
As the end of a tax year approaches, individual and institutional
investors typically employ several strategies to reduce the impact of
taxes. So, in October and November of 1994, many investors began
selling municipal bonds with the intent of using the capital losses to
offset taxable profits in other sectors. This tax-loss selling
thwarted a brief rally in early October and only led to further
pressures on municipal bond prices.
<PAGE>
In early December, as municipal bonds were enjoying a short rally, the
financial woes of Orange County shook the market. The immediate drop
in value of county-related bonds was only the beginning of the fallout
from the $2 billion in losses sustained by the county's investment
fund.
The portfolio's broad diversification played a major role in
minimizing the impact of this event. While the events in Orange County
raised concerns among municipal-bond investors across the country, it
only postponed an inevitable rally in the tax-free market, which began
in earnest early in 1995.
POSITIONING FOR AN IMPROVING MUNICIPAL MARKET
The Federal Reserve Board continued its tight stance on U.S. monetary
policy discussed in your fund's semiannual report. In November, the
Fed's most aggressive increase in short-term interest rates -- three-
quarters of a percentage point -- helped considerably in calming
inflation fears. Growing investor confidence was acknowledged by the
mere ripple that the Fed's widely expected rate increase in February -
- - the seventh rise in 12 months -- caused in the bond markets.
With all signs suggesting that the municipal bond market was oversold
and poised to recover in the ending months of 1994, we took several
steps early in the period to help ensure that your fund would be an
active participant in a rally. We moved
[BAR CHART]
CREDIT QUALITY PROFILE*
- ----------------------------------------------------------------------
AAA 25.8%
AA 12.7%
A/Aa 16.5%
BBB 11.2%
BB and below 22.8%
VMIG1 (short-term holdings) 2.2%
*As a percentage of net assets as of 4/30/95. Holdings will vary over
time.
<PAGE>
the fund to a fully invested position by adding a selection of high-
quality bonds with a good balance of attractive income and price
appreciation potential. We also lengthened the portfolio's duration by
extending the average maturity slightly and increasing the position of
deep discount bonds -- bonds selling at prices well below what we
perceive as their fair market value.
We believe the health care, utilities, and housing industries within
California hold particular promise for growth. Our extensive research
in these areas has already produced new investment prospects for your
fund.
TAX-REFORM PROPOSALS BEFORE CONGRESS
Among the many tax-reform proposals before Congress, one that has
generated a great deal of attention in the media is the flat tax.
Although its passage is far from certain, its perceived effects on the
tax status of municipal bonds has already contributed to a short-term
downturn in the market.
While it is, of course, impossible to predict the course of political
events, it appears that public support exists for a revision of the
current income-tax code. However, this will likely not occur until
after the 1996 presidential election. If history is any guide, we
believe it is too early to jump to conclusions. However, we will
monitor any developments on all tax-reform proposals and their
potential effects on the securities markets and on your fund.
OUTLOOK: POSITIVE FUNDAMENTALS SEEN FOR 1995
Putnam Management believes California is now in an economic upswing.
The growth in the computer area and Silicon Valley is strong,
unemployment in the Los Angeles basin area has decreased, and defense
cutbacks and restructuring have been completed, for the most part.
While the months ahead are not likely to sustain the healthy pace of
the first few months of calendar 1995, there are several reasons to be
cautiously optimistic about your fund's prospects. The most dramatic
rise in interest rates appears to be behind us. With interest rates
stabilizing, the fund will remain fully invested in order to take full
advantage of future market
<PAGE>
[BAR CHART]
TOP INDUSTRY SECTORS
- ----------------------------------------------------------------------
Utilities 11.0%
Hospitals 10.6%
Water & Sewerage 10.5%
Housing 8.0%
upturns. Furthermore, low inflation and moderate economic growth
foster a generally benign environment for bonds. Finally, moderately
strong demand chasing a diminishing supply of tax-free securities can
create a natural price support.
Without a doubt, 1994 represented one of the worst bond markets on
record. However, all signs now suggest that municipal bonds, like most
fixed-income investments, are back on track. Clearly, those investors
who sat tight and remained committed to their longer-term goals are
well positioned to benefit from the potential of an improving
tax-free market.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described
holdings were viewed favorably as of 4/30/95, there is no guarantee
the fund will continue to hold these securities in the future.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions back into the fund. We show
total return in two ways: on a cumulative long-term basis and on
average how the fund might have grown each year over varying periods.
TOTAL RETURN FOR PERIODS ENDED 4/30/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
LEHMAN BROS.
MARKET MUNICIPAL
NAV PRICE BOND INDEX CPI
- ----------------------------------------------------------------------
1 year 6.15% 6.67% 6.65% 3.05%
- ----------------------------------------------------------------------
Life of fund (since 11/27/92) 20.45 8.32 15.31 6.97
Annual average 7.96 3.34 6.04 2.81
- ----------------------------------------------------------------------
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 3/31/95
(most current calendar quarter)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
LEHMAN BROS.
MARKET MUNICIPAL
NAV PRICE BOND INDEX CPI
- ----------------------------------------------------------------------
1 year 6.59% 4.74% 7.43% 2.85%
- ----------------------------------------------------------------------
Life of fund (since 11/27/92) 20.45 6.73 15.17 6.62
Annual average 8.28 2.82 6.22 2.78
- ----------------------------------------------------------------------
<FN>
Performance data represent past results and is not indicative of
future performance. Investment returns, net asset value, and market
price will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost. Fund performance data do not
take into account any adjustment for taxes payable on reinvested
distributions.
</TABLE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus
any liabilities, the liquidation preference and cumulative undeclared
dividends paid on the remarketed preferred shares, divided by the
number of outstanding common 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.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
for the year ended April 30, 1995
To the Trustees and Shareholders of
Putnam California Investment Grade Municipal Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned (except for bond
ratings), and the related statements of operations and of changes in
net assets and the financial highlights present fairly, in all
material respects, the financial position of Putnam California
Investment Grade Municipal Trust (the "Fund") at April 30, 1995, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereinafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of investments owned at April 30, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 15, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
April 30, 1995
Key to Abbreviations
COP--Certificate of Participation
IFB--Inverse Floating Rate Bonds
FB--Floating Rate Bonds
VRDN--Variable Rate Demand Notes
AMBAC--American Municipal Bond Assurance Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Insurance Association
<TABLE><CAPTION>
<C> <S> <C> <C>
MUNICIPAL BONDS AND NOTES(91.2%)*
PRINCIPAL AMOUNT RATINGS** VALUE
- ----------------------------------------------------------------------
CALIFORNIA (91.2%)
- ----------------------------------------------------------------------
$3,000,000Berkeley, Hlth. Facs. Rev. Bonds
(Alta Bates Med. Ctr.),
Ser. A, 6.55s, 12/1/22 Baa $2,793,750
3,600,000CA Edl. Fac. Rev. Bonds (U. of San
Francisco), 6.4s, 10/1/17 A 3,645,000
800,000 CA Hlth. Fac. Fin. Auth. VRDN
(St. Joseph Hlth. Syst.),
Ser. A, 5s, 7/1/13 VMIG1 800,000
3,525,000CA Hlth. Facs. Fing. Auth. Rev.
Bonds (Kaiser Permante), Ser. C,
5.6s, 5/1/33 AA 3,102,000
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds Ser. D
2,000,000 6.55s, 8/1/26 AA 2,002,500
8,500,000 zero %, 8/1/20 Aa 1,179,375
CA Poll. Control Fin. Auth. Rev. Bonds
2,885,000(Pacific Gas & Elec Co. Project),
Ser. B, 8 7/8s, 1/1/10 A 3,180,713
1,000,000 (Shell Oil Co. Project), VRDN
Ser. C, 4s, 11/1/00 VMIG1 1,000,000
1,000,000CA State Dept. of Wtr. Resources
Rev. Bond (Central Valley Project
Wtr. Syst.), Ser. J-3, 5 1/2s, 12/1/22 AA 903,750
2,000,000CA State Dept. of Wtr. Resources
IFB (Central Valley Project),
9.626s, 12/1/12 (acquired 11/27/92
cost $2,188,785)++ AA 2,460,000
2,000,000CA State Pub. Wks. Board Lease Rev.
Bonds (Dept. of Corrections Monterey
Cnty. Soledad II), Ser. A, 7s, 11/1/19 A 2,097,500
2,700,000Central Valley, Fin. Auth. Rev. Bonds
(Carson Ice-Cogeneration Project),
6.2s, 7/1/20 BBB 2,511,000
3,150,000Irvine Ranch, Wtr. Dist. Jt. Pwr.
Agcy. Rev. Bonds (Issue II), FNMA
Collateral 8 1/4s, 8/15/23 A 3,327,185
2,350,000Long Beach, Fing. Auth. Rev. Bonds
AMBAC, 5 1/2s, 11/1/22 AAA 2,141,438
2,750,000Los Angeles Cnty., COP (Marina Del
Rey), Ser. A, 6 1/4s, 7/1/03 BBB/P 2,736,250
3,120,000Los Angeles Multi. Fam. Rev. Bonds
(Mission Plaza Apts. Project),
Ser. A, GNMA 7.8s 1/20/35 AAA 3,287,700
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
- ----------------------------------------------------------------------
CALIFORNIA (continued)
- ----------------------------------------------------------------------
$2,000,000Metropolitan Wtr. Dist. Southn.
CA Wtrwks. Rev. Bonds 5 1/2s, 7/1/13 AA $1,865,000
5,500,000Northn. CA Pwr. Agcy. Multi. Cap.
Facs. IFB MBIA, 8.544s, 8/1/25 AAA 5,754,375
2,000,000Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management),
7 7/8s, 12/1/13 BBB 2,020,000
2,000,000Pomona, Pub. Fin. Auth. Rev. Bonds
(Southwest Pomona Redev.), Ser. L,
5.7s, 2/1/13 Baa 1,750,000
4,000,000Rancho, Wtr. Dist. Fin. Auth. Rev.
Bonds AMBAC, 8.374s, 8/17/21 AAA 4,675,000
1,655,000Richmond, Jt. Pwr. Fin. Auth. Rev.
Bonds (Impt. Dists. 851 & 853),
Ser. B, 8 1/2s, 9/2/19 BBB/P 1,706,719
2,890,000 Riverside, Hosp. Rev. Bonds
(Riverside Cmnty. Hosp.), Ser. A,
6 3/4s, 11/1/15 BBB 2,691,313
1,000,000San Joaquin Hills, Trans. Corridor
Agcy. Toll Rd. Sr. Lien, Rev. Bonds
5s, 1/1/33 BB/P 745,000
1,980,000 Santa Ana, Cmnty. Redev. Agcy.
Tax Alloc. Rev. Bonds, Ser. B,
6 3/4s, 9/1/19 BBB 1,856,250
4,750,000Santa Clara Cnty. Fin. Auth. Lease
Rev. Bonds (VMC Fac. Replacement
Project), Ser. A, AMBAC,
6 7/8s 11/15/14 AAA 5,124,063
4,500,000 Vallejo, COP (Marine World
Foundation), 8.1s, 2/1/21 BBB/P 4,730,625
West Contra Costa U. School Dist. COP
1,860,000 7 1/8s, 1/1/24 Ba 1,894,875
1,140,000 6 7/8s, 1/1/09 Ba 1,152,825
1,000,000Westminster, Redev. Agcy. Tax. Alloc.
Rev. Bonds (Coml. Redev. Project No 1),
Ser. A, 7.3s, 8/1/21 Baa 1,012,500
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (cost $70,391,961)*** $74,146,706
- ----------------------------------------------------------------------
<FN>
* Percentages indicated are based on net assets of $81,268,655. Net
assets available to common shareholders are $65,226,048, which
correspond to a net asset value per common share of $14.16.
** The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at April 30, 1995 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 April 30, 1995. Securities rated
by Putnam are indicated by "/P" and are not publicly rated.
Ratings are not covered by the Report of Independent Accountants.
++ Restricted as to public resale. At the date of acquisition these
securities were valued at cost. There were no outstanding
securities of the same class as those held. Total market value or
restricted securities owned at April 30, 1995 was $2,460,000 or
3.0%.
*** The aggregate identified cost for federal income tax purposes is
$70,391,961, resulting in gross unrealized appreciation and
depreciation of $4,004,836 and $250,091, respectively, or net
unrealized appreciation of $3,754,745.
The fund had the following insurance concentration greater than
10% of net assets at April 30, 1995:
AMBAC 14.7%
The fund had the following industry group concentrations greater
than 10% of net assets at April 30, 1995:
Utilities 11.0%
Hospitals 10.6
Water & Sewerage 10.5
The rates shown on VRDNs and IFBs are the current interest rates
at April 30,1995, which are subject to change based on the terms
of the security.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------------------
Investments in securities, at value
(identified cost $70,391,961) (Note 1) $74,146,706
- ----------------------------------------------------------------------
Cash 111,768
- ----------------------------------------------------------------------
Receivable for securities sold 6,056,575
- ----------------------------------------------------------------------
Interest receivable 1,505,981
- ----------------------------------------------------------------------
Unamortized organization expenses (Note 1) 4,929
- ----------------------------------------------------------------------
TOTAL ASSETS 81,825,959
- ----------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------
Distributions payable to shareholders 357,036
- ----------------------------------------------------------------------
Payable for compensation of Manager (Note 3) 137,116
- ----------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 262
- ----------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 15,275
- ----------------------------------------------------------------------
Payable for administrative services (Note 3) 1,495
- ----------------------------------------------------------------------
Other accrued expenses 46,120
- ----------------------------------------------------------------------
TOTAL LIABILITIES 557,304
- ----------------------------------------------------------------------
NET ASSETS $81,268,655
- ----------------------------------------------------------------------
REPRESENTED BY
- ----------------------------------------------------------------------
Remarketed preferred shares, without par value;
shares authorized (320 shares issued at $50,000
per share liquidation preference) (Note 2) $16,000,000
- ----------------------------------------------------------------------
Common shares, without par value; unlimited
shares authorized; 4,607,092 shares outstanding (Note 1) 64,176,446
- ----------------------------------------------------------------------
Undistributed net investment income (Note 1) 128,585
- ----------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (2,791,121)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments 3,754,745
- ----------------------------------------------------------------------
NET ASSETS $81,268,655
- ----------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE
- ----------------------------------------------------------------------
Remarketed preferred shares at liquidation preference $16,000,000
- ----------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 42,607
- ----------------------------------------------------------------------
Net assets allocated to remarketed preferred
shares at liquidation preference 16,042,607
- ----------------------------------------------------------------------
Net assets available to common shares: Net asset value
per share $14.16 ($65,226,048 divided by 4,607,092 shares) 65,226,048
- ----------------------------------------------------------------------
NET ASSETS $81,268,655
- ----------------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended April 30, 1995
<TABLE>
<S> <C>
TAX EXEMPT INTEREST INCOME $5,584,057
- ----------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------
Compensation of Manager (Note 3) 565,966
- ----------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 69,399
- ----------------------------------------------------------------------
Compensation of Trustees (Note 3) 7,807
- ----------------------------------------------------------------------
Auditing 39,599
- ----------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,405
- ----------------------------------------------------------------------
Reports to shareholders 47,023
- ----------------------------------------------------------------------
Legal 9,873
- ----------------------------------------------------------------------
Postage 14,012
- ----------------------------------------------------------------------
Administrative services (Note 3) 6,129
- ----------------------------------------------------------------------
Exchange listing fees 8,478
- ----------------------------------------------------------------------
Preferred share remarketing agent fees 2,820
- ----------------------------------------------------------------------
Other 5,313
- ----------------------------------------------------------------------
TOTAL EXPENSES 778,824
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 4,805,233
- ----------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 4) (2,531,505)
- ----------------------------------------------------------------------
Net realized loss on futures (Notes 1 and 4) (84,942)
- ----------------------------------------------------------------------
Net realized loss on options written (Notes 1 and 4) (67,293)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,990,454
- ----------------------------------------------------------------------
NET LOSS ON INVESTMENTS (693,286)
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,111,947
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
Year ended April 30
-------------------------
1995 1994
- ----------------------------------------------------------------------
DECREASE IN NET ASSETS
- ----------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------
Net investment income $4,805,233 $4,762,519
- ----------------------------------------------------------------------
Net realized gain (loss) on investments,
written options and futures contracts (2,683,740) 1,167,585
- ----------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 1,990,454 (2,940,139)
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 4,111,947 2,989,965
- ----------------------------------------------------------------------
Distributions to remarketed preferred shareholders
- ----------------------------------------------------------------------
From net investment income (538,541) (578,383)
- ----------------------------------------------------------------------
From net realized gains (71,815) (84,851)
- ----------------------------------------------------------------------
In excess of net realized gains (12,038) --
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS
(excluding cumulative undeclared dividends on
remarketed preferred shares of $42,607 and
$38,483 respectively.) 3,489,553 2,326,731
- ----------------------------------------------------------------------
Distributions to common shareholders
- ----------------------------------------------------------------------
From net investment income (4,369,764) (4,284,931)
- ----------------------------------------------------------------------
From net realized gains (568,796) (829,261)
- ----------------------------------------------------------------------
In excess of net realized gains (95,343) --
- ----------------------------------------------------------------------
Underwriting commissions and offering costs
on remarketed preferred shares -- (46,642)
- ----------------------------------------------------------------------
Total decrease in net assets (1,544,350) (2,834,103)
- ----------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------
BEGINNING OF YEAR 82,813,005 85,647,108
- ----------------------------------------------------------------------
END OF YEAR (including undistributed net
investment income of $128,585 and $230,778
respectively) $81,268,655 $82,813,005
- ----------------------------------------------------------------------
NUMBER OF FUND SHARES
- ----------------------------------------------------------------------
COMMON SHARES OUTSTANDING AT BEGINNING AND
END OF YEAR 4,607,092 4,607,092
- ----------------------------------------------------------------------
REMARKETED PREFERRED SHARES OUTSTANDING AT
BEGINNING AND END OF YEAR 320 320
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C> <C>
FOR THE PERIOD
NOVEMBER 27, 1992
(COMMENCEMENT OF
OPERATIONS) TO
YEAR ENDED APRIL 30 APRIL 30
- ----------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD (common shares) $14.49 $15.12 $14.02*
- ----------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------
Net investment income 1.04 1.03 .41(a)
Net realized and unrealized gain
(loss) on investments (.15) (.40) 1.12
- ----------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .89 .63 1.53
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
From net investment income:
- ----------------------------------------------------------------------
to preferred shareholders (.12) (.12) (.03)**
- ----------------------------------------------------------------------
to common shareholders (.95) (.93) (.31)
- ----------------------------------------------------------------------
From net realized gains:
- ----------------------------------------------------------------------
to preferred shareholders (.01) (.02) --
- ----------------------------------------------------------------------
to common shareholders (.12) (.18) --
- ----------------------------------------------------------------------
In excess of net realized gain
to common shareholders (.02) -- --
- ----------------------------------------------------------------------
In excess of net realized gains
to preferred shareholders -- -- --
- ----------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.22) (1.25) (.34)
- ----------------------------------------------------------------------
Preferred share offering costs -- (.01) (.09)**
- ----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD
(common shares) $14.16 $14.49 $15.12
- ----------------------------------------------------------------------
MARKET VALUE, END OF PERIOD
(common shares) $13.63 $13.88 $14.88
- ----------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT MARKET
VALUE (common shares) (%)(b) 6.67 .31 1.23(d)
- ----------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(total fund) (in thousands) $81,269 $82,813 $85,647
- ----------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (c) 1.20 1.07 .33(a)(d)
- ----------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) (c) 6.52 5.84 2.69(a)(d)
- ----------------------------------------------------------------------
Portfolio turnover rate (%) 101.23 54.06 43.46(d)
- ----------------------------------------------------------------------
<FN>
* Represents initial net asset value of $14.10 less offering
expenses of approximately $0.08.
** Preferred shares were issued on February 18, 1993.
(a) Reflects a waiver of the management fee for the period November
27, 1992 to February 19, 1993. As a result of such waiver,
expenses of the fund for the period ended April 30, 1993 reflect
a reduction of approximately $0.02 per share (See Note 3).
(b) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(c) Ratios reflect net assets available to common shares; net
investment income ratio also reflects reduction for income
dividend distributions and undeclared payments to preferred
shareholders.
(d) Not annualized.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed- end management investment
company. The fund's investment objective is to seek high current
income exempt from federal income tax and California personal income
tax. The fund intends to achieve its objective by investing in
investment grade municipal securities constituting a portfolio that
Putnam Investment Management Inc. (Putnam Management), a wholly owned
subsidiary of Putnam Investments, Inc., believes to be consistent
with preservation of capital.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
A SECURITY VALUATION 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. The fair value of restricted securities is determined by the
Manager following procedures approved by the Trustees, and such
valuations and procedures are reviewed periodically 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 FUTURES The fund may purchase and sell financial futures contracts
to hedge against changes in the values of tax-exempt municipal
securities the fund owns or expects to purchase.
A futures contract is an agreement between two parties to buy or sell
units of a particular index or a certain amount of a U.S. Government
security at a set price on a future date.
Upon entering into such a contract the fund is required to pledge to
the broker an amount of cash or securities equal to minimum "initial
margin" requirements of the futures. Pursuant to the contract, the
fund agrees to receive from and pay to the broker an amount of cash
equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as "variation margin" and are recorded by the
fund as unrealized gains and losses. When the contract is closed, the
fund records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at
the time it was closed.
The potential risk to the fund is that the change in value of futures
contracts primarily corresponds with the value of underlying
instruments which may not correspond to the change in the value of the
hedged instruments. In addition, there is a risk that the fund may not
be able to close out its futures positions due to an illiquid
secondary market.
D OPTION ACCOUNTING PRINCIPLES The fund may, to the extent
consistent with its investment objective and policies,
<PAGE>
seek to increase its current returns by writing covered call and put
options on securities it owns or in which it may invest. When a fund
writes a call or put option, an amount equal to the premium received
by the fund is included in the fund's "Statement of assets and
liabilities" as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to- market" to reflect the
current market value of an option written. The current market value of
an option is the last sale price or, in the absence of a sale, the
last offering price. If an option expires on its stipulated expiration
date, or if the fund enters into a closing purchase transaction, the
fund realizes a gain (or loss if the closing purchase transaction
exceeds the premium received when the option was written) without
regard to and unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a written
call option is exercised, the fund realizes a gain or loss from the
sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option
is exercised, the amount of the premium originally received reduces
the cost of the security that the fund purchases upon exercise of the
option.
The risk in writing a call option is that the fund relinquishes the
opportunity to profit if the market price of the underlying security
increases and the option is exercised. In writing a put option, the
fund assumes the risk of incurring a loss if the market price of the
underlying security decreases and the option is exercised. In
addition, there is the risk the fund may not be able to enter into a
closing transaction because of an illiquid secondary market.
The fund may also, to the extent consistent with its investment
objectives and policies, buy put options to protect its portfolio
holdings in an underlying security against a decline in market value.
The fund may buy call options to hedge against an increase in the
price of the securities that the fund ultimately wants to buy. These
funds may also buy and sell combinations of put and call options on
the same underlying security to earn additional income. The premium
paid by a fund for the purchase of a put or call option is included in
the fund's "Statement of assets and liabilities" as an investment and
is subsequently "marked-to-market" to reflect the current market value
of the option. If an option the fund has purchased expires on the
stipulated expiration date, the fund realizes a loss in the amount of
the cost of the option. If the fund enters into a closing sale
transaction, the fund realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than
the cost of the option. If the fund exercises a call option, the cost
of securities acquired by exercising the call is increased by the
premium paid to buy the call. If the fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are decreased by the premium originally
paid. The risk associated with purchasing options is limited to the
premium originally paid.
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
(including accrued interest and dividends), less all liabilities
(including accrued expenses), and the liquidation value of any
outstanding remarketed preferred shares, by the total number of common
shares outstanding.
F FEDERAL TAXES It is the policy of the fund to distribute all of
its income within the prescribed time and otherwise comply with the
provisions
<PAGE>
of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an
amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income or capital gains or unrealized
appreciation of securities held or excise tax on income and capital
gains. At April 30, 1995 the fund had a capital loss carryover of
approximately $753,425 which may be available to offset future
realized capital gains to the extent provided by regulations. This
amount will expire on April 30, 2003.
G 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 was generally a 30-day period until
January 13, 1995 with a fixed dividend rate of 3.9%. Each subsequent
dividend period will generally be a 28-day period and the applicable
dividend will be the dividend rate determined by the remarketing
agent. The applicable dividend rate for the remarketed preferred
shares on April 30, 1995 was 4.05% per annum.
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. The difference includes
amortization of organization expenses. Reclassifications are made to
the fund's capital accounts at the close of the fund's fiscal year to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
For the year ended April 30, 1995, the fund reclassified $879 to
increase undistributed net investment income and $879 to decrease
additional paid- in-capital. The calculation of net investments income
per share in the financial highlights table excludes these
adjustments.
H AMORTIZATION OF BOND PREMIUM AND DISCOUNT Any premium resulting
from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discount on zero-coupon bonds,
step-up bonds and original issue discount bonds is accreted according
to the effective yield method.
I UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund in
connection with its organization aggregated $12,024. These expenses
are being amortized on a straight-line basis over a five-year period.
NOTE 2
REMARKETED PREFERRED SHARES
The remarketed preferred shares are redeemable at the option of the
fund on any remarketing date at a redemption price of $50,000 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.
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 the
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
<PAGE>
shareholders or may be required to redeem certain of the remarketed
preferred shares. At April 30, 1995, there were no such restrictions
on the fund.
NOTE 3
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management, the fund's Manager for management
and investment advisory services is paid quarterly based on the
average net assets of the fund, including net assets attributable to
remarketed preferred shares. Such fee is based on the annual rate of
0.70% of the first $500 million of the average net asset value of the
fund, 0.60% of the next $500 million, 0.55% of the next $500 million
and 0.50% of any excess over $1.5 billion of such average net asset
value.
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 net income
attributable to the proceeds of the remarketed preferred shares during
that period, then the fee payable to the Manager for that period will
be reduced by the amount of the excess (but not more than .70% of the
liquidation preference of the remarketed preferred shares outstanding
during the period).
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $520 and an
additional fee for each Trustees' meeting attended. Trustees who are
not interested persons of the Manager and who serve on committees of
the Trustees receive additional fees for attendance at certain
committee meetings.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of
operations for the year ended April 30, 1995 have been reduced by
credits allowed by PFTC.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the year ended April 30, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$78,760,203 and $81,223,712, respectively. In determining the net gain
or loss on securities sold, the cost of securities has been determined
on the identified cost basis.
The following is a summary of written options activity during the
period:
<TABLE><CAPTION>
<S> <C> <C>
CONTRACT PREMIUM
AMOUNT RECEIVED
- ----------------------------------------------------------------------
Contracts outstanding at begining of year -- $ --
- ----------------------------------------------------------------------
Options written 24,300,008 440,490
- ----------------------------------------------------------------------
Options closed (24,300,008) (440,490)
- ----------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AT END OF YEAR -- $ --
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
SELECTED QUARTERLY DATA
(Unaudited)
<TABLE><CAPTION>
<S> <C> <C> <C>
APRIL 30 JANUARY 31 OCTOBER 31
1995 1995 1994
- ----------------------------------------------------------------------
Total investment income
Total $1,389,764 $1,372,289 $1,465,080
Per share+ $.30 $.30 $.32
- ----------------------------------------------------------------------
Net investment income available
to common shareholders
Total $1,034,349 $1,088,151 $1,092,630
Per share+ $.22 $.24 $.23
- ----------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments
Total $2,341,857 $256,135 $(3,778,702)
Per share+ $.50 $.05 $(.81)
- ----------------------------------------------------------------------
Net increase (decrease) in net assets
available to common shareholders
resulting from operations
Total $3,376,206 $1,344,286 $(2,686,072)
Per share+ $.72 $.29 $(.58)
- ----------------------------------------------------------------------
Net assets available to common
shareholders at end of period
Total $65,226,048 $62,921,282 $63,441,522
Per share+ $14.16 $13.66 $13.77
- ----------------------------------------------------------------------
<FN>
+ Per common share.
</TABLE>
<PAGE>
SELECTED QUARTERLY DATA (continued)
<TABLE><CAPTION>
<C> <C> <C> <C> <C>
July 31 April 30 January 31 October 31 July 31
1994 1994 1994 1993 1993
- ----------------------------------------------------------------------
$1,356,924 $1,365,012 $1,383,360 $1,399,089 $1,384,972
$.29 $.29 $.30 $.31 $.30
- ----------------------------------------------------------------------
$1,008,950 $1,004,269 $1,077,194 $1,045,563 $1,057,110
$.22 $.21 $.24 $.23 $.23
- ----------------------------------------------------------------------
$487,424 $(6,920,591) $705,801 $2,986,551 $1,455,691
$.11 $(1.51) $.15 $.65 $.31
- ----------------------------------------------------------------------
$1,496,374 $(6,001,179) $1,782,995 $4,032,114 $2,512,801
$.33 $(1.32) $.39 $.88 $.54
- ----------------------------------------------------------------------
$67,199,203 $66,774,522 $73,881,488 $74,010,364 $71,088,472
$14.59 $14.49 $16.04 $16.06 $15.43
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
FEDERAL TAX INFORMATION
The fund has designated distributions paid from net investment income
during the fiscal year as exempt-interest dividends. Thus 100% of
these distributions are exempt from federal income tax and California
personal income tax. The fund has designated long-term capital gains
dividends of $0.1624 per common share and $262.04 per preferred share.
The Form 1099 you will receive in January 1996 will tell you the tax
status of any distributions paid to your account in calendar 1995. The
income earned from each state will also be reported at this time.
<PAGE>
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
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Blake E. Anderson
Vice President
William H. Reeves
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
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 or to request Putnam's
quarterly Closed-End Fund Commentary.
<PAGE>
PUTNAM INVESTMENTS
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
18339-184
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of these
financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
