Putnam
California
Investment Grade
Municipal Trust
ANNUAL REPORT
April 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "In today's rising interest-rate environment, an emphasis on a more
defensive, high-quality portfolio should help cushion the fund's net
asset value from unnecessary volatility. Income, not price
appreciation, will be the driving force behind performance."
-- William H. Reeves, manager
Putnam California Investment Grade Municipal Trust
* "Depending on your tax bracket, municipal bonds may offer juicier
after-tax yields than Treasuries of comparable maturities."
-- Money, May 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
14 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The spectacular rebound in the Golden State's economy has dramatically
increased the level of employment and has begun to replenish cash-starved
state and local government coffers. It also provided an ideal environment for
Putnam California Investment Grade Municipal Trust to deliver solid
performance during the fiscal year that closed on April 30, 1997.
A limited supply of municipal securities, coupled with increased demand for
them, further enhanced the fund's results. William Reeves, who has managed
your fund since its inception in 1992, has been focusing on investments in
industry sectors likely to benefit from the strong economy.
As a result, Bill believes the portfolio is positioned not only to weather any
further market volatility but also to benefit from what, in his view, will be
sustained strong demand for the state's municipal bonds. In the following
report, he reviews your fund's fiscal 1997 performance and presents his views
on prospects for the year ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 18, 1997
Report from the Fund Manager
William H. Reeves
Strong economic growth, working in tandem with a scarcity of local municipal
bonds, strengthened performance in the California municipal bond marketplace
substantially over the 12 months ended April 30, 1997. With this comfortable
backdrop, California Investment Grade Municipal Trust turned in a handsome
8.23% return at net asset value (11.02% at market price), well ahead of the
6.65% return posted by the Lehman Brothers Municipal Bond Index for the same
period. These returns reflect our focus on providing shareholders with steady
income and minimal volatility. For additional information on the fund's
performance, please see pages 8 and 9.
* HIGHER INTEREST RATES DAMPEN BOND PRICES BUT HELP BOOST YIELDS
Throughout much of the past fiscal year, the bond market remained relatively
quiet with interest rates moving up and down in a narrow trading range. By
February, however, most fixed-income markets, including the municipal bond
market, were poised for a long-awaited increase in interest rates in response
to continued strength in economic activity. The waiting game ended on March 25
when the Federal Reserve Board raised short-term interest rates by a quarter
of a percentage point, its first increase in more than two years.
Although higher interest rates generally mean lower bond prices, the recent
rate increase has also positively influenced the fund's yield and after-tax
yields. An investment taxed at the 45.22% combined maximum federal and state
tax rate would have had to provide a current return of 11.48% to equal the
fund's 6.29% current dividend rate at net asset value on
April 30, 1997.
* CALIFORNIA'S ECONOMY APPEARS HEALTHY AND GROWING
California has experienced an economic turnaround in recent years, with
revenues increasing and budget deficits declining. The California real estate
market, which has been sluggish for some time, is showing signs of recovery.
In addition, job growth within the state has been flourishing as employment in
the high-paying service, entertainment, and technology sectors continues to
increase. While the state's population growth slowed during the 1990 - 93
recession, this trend seems to be reversing.
Budgetary assumptions for 1997 - 98 seem to confirm our conclusion that
California's economy is growing at an accelerated pace. Governor Pete Wilson
has continued his commitment to education and has established guidelines for
implementing welfare reform. However, with forecasts of expansive long-term
growth, the state needs to face the considerable hurdles of funding this
growth.
* MARKET WARRANTS DEFENSIVE POSITIONING
As we mentioned earlier, the scarcity of local securities, along with strong
demand, has helped the performance of municipal bonds in California. Now that
California bonds carry a premier status and are sought by investors
nationwide, continuing low levels of municipal bond issuance may influence
bond prices even more positively.
In a rising interest-rate environment, protecting portfolio value becomes
increasingly important. In order to maintain the fund's stream of income with
minimal share price volatility, we typically assume a defensive positioning,
with shorter durations and an emphasis on premium bonds. Duration is a measure
of the portfolio's maturity structure, and shorter durations can help preserve
principal value as interest rates rise. Premium bonds sell at prices above par
value, carrying higher coupons and tending to be more stable in price when
interest rates are rising. At the period's end, the average market price of
the fund's bonds was well above par ($100.00) at $106.80.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Housing 18.4%
Hospitals 15.7%
Water and sewerage 13.4%
Education 12.8%
Utilities 12.2%
Footnote reads:
*Based on net assets as of 4/30/97. Holdings will vary over time.
* FUND FOCUSES ON HIGH-QUALITY BONDS AND INCOME-PRODUCING STRATEGIES
We maintained a focus on high-quality bonds with close to two thirds of the
portfolio invested in municipal bonds rated Aaa and Aa. For some of the Aaa
issues, timely payment of principal and interest is insured by major municipal
bond insurance companies, adding an extra degree of assurance for investors.
To enhance the fund's income stream, we have also positioned approximately 15%
of the fund's assets in bonds whose ratings place them in the lower tier of
the investment-grade categories. This composition results in an average
portfolio quality of Aa. As always, the fund remains fully invested, seeking
to provide as much income as possible without compromising its dedication to
quality.
In pursuit of this goal, we occasionally take a small position in inverse
floaters as another way to increase the fund's income. An inverse floater is a
derivative security in the form of a variable-rate bond whose coupon moves in
the opposite direction of short-term interest rates. Because these securities
require careful analysis, we monitor their performance closely and adjust
portfolio positions to minimize the fund's risk.
Your fund also employs a leveraging technique to enhance income, issuing and
selling preferred shares that pay dividends at prevailing short-term interest
rates. We then invest the proceeds from the sale of those shares in
longer-term bonds with higher yields. The difference between the amount of
income generated by these bonds and the amount paid out to preferred
shareholders is used to enhance the distributions to shareholders.
* UNCERTAINTY OVER INTEREST RATES BLURS OUTLOOK
Certain developments have influenced our currently positive outlook for
California's municipal bonds. In a rising interest-rate market, the number of
refunded bonds coming to market tends to slow. This lack of supply is behind
the current scarcity of California municipal bonds. Sustained strong demand
tips the scales of supply and demand in favor of more attractive bond prices.
TOP 10 HOLDINGS*
Northern California Power Agency, Multi. Cap. Facilities IFB, MBIA,
8.837s, 8/1/25
Santa Clara County, Financing Authority Lease Revenue Bonds (VMC
Facilities Replacement), Series A, AMBAC,
6 7/8s, 11/15/14
Vallejo, Certificate of Participation (Marine World Foundation),
7s, 2/1/17
San Bernardino, Department of Transportation Lease Financing Authority
Revenue Bonds, Series A,
5 1/2s, 12/1/14
California Educational Facilities, Revenue Bonds
(University of San Francisco),
6.4s, 10/1/17
California Housing Financing Agency,
Home Mortgage Revenue Bonds, Series C,
8.3s, 8/1/19
Rancho, Water District Financing Authority IFB, AMBAC,
8.924s, 8/17/21
Victor, Elementary School District Certificate of Participation (School
Construction Refinancing), MBIA,
6.45s, 5/1/18
Irvine Ranch, Water District Joint Power Agency Revenue Bonds (Issue
II), FNMA,
8 1/4s, 8/15/23
Los Angeles, Multi-Family Revenue Bonds
(Mission Plaza Apartments), Series A, GNMA,
7.8s, 1/20/35
Footnote reads:
* These holdings represent 50.6% of the fund's assets as of 4/30/97.
Portfolio holdings will vary over time.
In general, bond prices may not be as resilient as they have been in the past
few weeks. The market strengthened when signs emerged that a slowdown in
second-quarter growth persuaded the Fed to hold off on an interest-rate
increase at its May 20 policy-setting meeting. Without any conclusive evidence
of inflation, however, the markets are likely to continue to play a waiting
game. Even the stock market seems unable to make up its mind about which
direction the economy is heading. Amidst so much uncertainty, we plan to
maintain a defensive duration in the fund's portfolio for the near term and
continue our long-term focus on providing shareholders with steady income.
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 4/30/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
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.
TOTAL RETURN FOR PERIODS ENDED 4/30/97
(common shares)
Lehman Bros.
Market Municipal Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------------
1 year 8.23% 11.02% 6.65% 2.50%
- ------------------------------------------------------------------------------
Life of fund
(11/27/92) 43.05 35.52 32.79 12.82
Annual average 8.44 7.12 6.64 2.77
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
(common shares)
Market
NAV price
- ------------------------------------------------------------------------------
1 year 6.78% 9.15%
- ------------------------------------------------------------------------------
Life of fund (11/27/92) 41.76 34.84
Annual average 8.37 7.13
- ------------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, net asset value
and market price will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
12 months 4/30/97
- ------------------------------------------------------------------------------
Distributions (common shares)
- ------------------------------------------------------------------------------
Number 12
- ------------------------------------------------------------------------------
Income $0.908
- ------------------------------------------------------------------------------
Capital gains1
- ------------------------------------------------------------------------------
Long-term $0.022
- ------------------------------------------------------------------------------
Short-term --
- ------------------------------------------------------------------------------
Total $0.93
- ------------------------------------------------------------------------------
Preferred shares (320 shares)
- ------------------------------------------------------------------------------
Income $1,721.54
- ------------------------------------------------------------------------------
Capital gains 41.84
- ------------------------------------------------------------------------------
Total $1,763.38
- ------------------------------------------------------------------------------
Share value
(common shares): NAV Market price
- ------------------------------------------------------------------------------
4/30/96 $14.55 $14.375
- ------------------------------------------------------------------------------
4/30/97 $14.80 $15.000
- ------------------------------------------------------------------------------
Current return
(common shares): NAV Market price
- ------------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------------
Current dividend rate2 6.29% 6.20%
- ------------------------------------------------------------------------------
Taxable equivalent3 11.48 11.32
- ------------------------------------------------------------------------------
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 45.22% combined federal and state tax rate. Results for
investors subject to lower tax rates would not be as advantageous.
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 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 American
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, taxes or other costs, may include bonds different from those
in the fund, and may pose different risks than the fund. The index assumes
reinvestment of all distributions and interest payments. 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.
Report of independent accountants
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, 1997, 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 (hereafter 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, 1997
by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 11, 1997
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1997
Key to Abbreviations
AMBAC - AMBAC Indemnity Corporation
COP - Certificate of Participation
FNMA Coll. - Federal National Mortgage Association Collateralized
FSA - Financial Security Assurance
GNMA Coll. - Government National Mortgage Association Collateralized
IFB - Inverse Floating Rate Bonds
MBIA - Municipal Bond Investors Assurance Corporation
MUNICIPAL BONDS AND NOTES (97.6%) *
PRINCIPAL AMOUNT RATINGS ** VALUE
California (97.6%)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Anaheim, Pub. Fin. Auth. Lease Rev. Bonds
(Pub. Impts.)
$2,600,000 Ser. C, FSA, 6s, 9/1/16 Aaa $ 2,713,750
3,200,000 Ser. A, FSA, 5s, 9/1/27 Aaa 2,844,000
3,000,000 Berkeley, Hlth. Fac. Rev. Bonds
(Alta Bates Med. Ctr.), Ser. A, 6.55s, 12/1/22 Baa 3,075,000
1,500,000 Big Bear Lake Wtr. Rev. Bonds, MBIA, 6s, 4/1/22 Aaa 1,567,500
3,600,000 CA Edl. Fac. Auth. Rev. Bonds
(U. of San Francisco), 6.4s, 10/1/17 AAA 3,928,500
CA Hlth. Fac. Fin. Auth. Rev. Bonds
3,000,000 (Henry Mayo Newhall), Ser. A, 8s, 10/1/18 A 3,183,750
2,000,000 (Catholic Healthcare West), Ser. E, AMBAC,
5 1/4s, 7/1/16 Aaa 1,877,500
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds
3,755,000 Ser. C, 8.3s, 8/1/19 AA 3,877,038
2,900,000 Ser. A, 7 3/4s, 8/1/17 Aa 3,045,000
2,885,000 CA Poll. Control Fin. Auth. Rev. Bonds
(Pacific Gas & Elec. Co.), Ser. B, 8 7/8s, 1/1/10 A 3,013,786
2,000,000 CA State Dept. Wtr. Resources IFB
(Central Valley), 9.65s, 12/1/12
(acquired 11/27/92, cost $2,198,104) [DBL. DAGGER] Aa 2,617,500
2,000,000 CA State Pub. Wks. Board Lease Rev. Bonds
(Dept. of Corrections Monterey Cnty. Sole),
Ser. A, 7s, 11/1/19 AAA 2,282,500
3,150,000 Irvine Ranch, Wtr. Dist. Jt. Pwr. Agcy. Rev. Bonds
(Issue II), FNMA Coll., 8 1/4s, 8/15/23 A 3,295,687
3,120,000 Los Angeles, Multi-Fam. Rev. Bonds (Mission
Plaza Apts.), Ser. A, GNMA Coll., 7.8s, 1/20/35 AAA 3,295,500
5,500,000 Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB,
MBIA, 8.837s, 8/1/25 Aaa 6,111,875
2,000,000 Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management), 7 7/8s, 12/1/13 Baa 2,092,500
3,250,000 Rancho, Wtr. Dist. Fin. Auth. IFB, AMBAC,
8.924s, 8/17/21 Aaa 3,794,375
1,120,000 Richmond, Jt. Pwr. Fin. Auth. Rev. Bonds
(Impt. Dists. 851 & 853), Ser. B, 8 1/2s, 9/2/19 BBB/P 1,169,885
2,000,000 Riverside Hosp. Rev. Bonds
(Riverside Cmnty. Hosp.), Ser. A, 6 3/4s, 11/1/15 BBB 2,022,500
4,500,000 San Bernardino, Dept. of Trans. Lease Fin. Auth.
Rev. Bonds, Ser. A, 5 1/2s, 12/1/14 A 4,359,375
2,000,000 San Francisco, Bldg. Auth. Lease Rev. Bonds
(San Francisco Civic Ctr. Complex), Ser. A,
AMBAC, 5 1/4s, 12/1/16 Aaa 1,887,500
4,750,000 Santa Clara Cnty. Fin. Auth. Lease Rev. Bonds
(VMC Fac. Replacement), Ser. A, AMBAC,
6 7/8s, 11/15/14 Aaa 5,230,938
3,000,000 U. of CA Hosp. Rev. Bonds (U. of CA, Med. Ctr.),
AMBAC, 5 3/4s, 7/1/15 Aaa 3,018,750
5,000,000 Vallejo COP (Marine World Foundation), 7s, 2/1/17 BB/P 5,050,000
3,345,000 Victor, Elementry School Dist. COP (School
Construction Refinancing), MBIA, 6.45s, 5/1/18 Aaa 3,679,500
West Contra Costa U. School Dist. COP
1,860,000 7 1/8s, 1/1/24 BBB 1,946,025
1,140,000 6 7/8s, 1/1/09 BBB 1,189,875
- ---------------------------------------------------------------------------------------------------------------------
Total Investments (cost $78,216,698) *** $82,170,109
- ---------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $84,204,642. Net assets available
to common shareholders are $68,162,389.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent
ratings available at April 30, 1997 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, 1997.
Securities rated by Putnam are indicated by "/P" and are not publicly rated. Ratings are not
covered by the Report of independent accountants.
*** The aggregate identified cost on a tax basis is $78,216,698, resulting in gross unrealized
appreciation and depreciation of $4,474,106 and $520,695, respectively, or net unrealized
appreciation of $3,953,411.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. The total market
value of restricted securities held at April 30, 1997 was $2,617,500 or
3.1% of net assets.
The fund had the following industry group concentrations greater than 10% at April 30, 1997
(as a percentage of net assets):
Housing 18.4%
Hospitals 15.7
Water & sewerage 13.4
Education 12.8
Utilities 12.2
The fund had the following insurance concentrations greater than 10% at April 30, 1997
(as a percentage of net assets):
AMBAC 18.8%
MBIA 13.5
The rates shown on Inverse Floating Rate Bonds (IFB), which are securities paying
interest rates that vary inversely to changes in the market interest rates, are the
current interest rates at April 30, 1997.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $78,216,698) (Note 1) $82,170,109
- ---------------------------------------------------------------------------------------------------
Cash 997,786
- ---------------------------------------------------------------------------------------------------
Interest receivable 1,590,926
- ---------------------------------------------------------------------------------------------------
Unamortized organization expense (Note 1) 120
- ---------------------------------------------------------------------------------------------------
Total assets 84,758,941
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 357,028
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 142,774
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,657
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 4,590
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 390
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 45,860
- ---------------------------------------------------------------------------------------------------
Total liabilities 554,299
- ---------------------------------------------------------------------------------------------------
Net assets $84,204,642
Represented by
- ---------------------------------------------------------------------------------------------------
Remarketed preferred shares (320 shares issued and
outstanding at $50,000 per share) (Note 4) $16,000,000
- ---------------------------------------------------------------------------------------------------
Paid-in capital -- common shares
(unlimited shares authorized) (Note 1) 64,107,285
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 200,225
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
futures contracts (Note 1) (56,279)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,953,411
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $84,204,642
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Remarketed preferred shares $16,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on
remarketed preferred shares 42,253
- ---------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares
at liquidation preference $16,042,253
- ---------------------------------------------------------------------------------------------------
Net assets available to common shares $68,162,389
- ---------------------------------------------------------------------------------------------------
Net asset value per common share
($68,162,389 divided by 4,607,092 shares) $14.80
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended April 30, 1997
<S> <C>
Tax exempt interest income: $5,648,124
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 591,373
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 73,534
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,175
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,713
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,404
- --------------------------------------------------------------------------------------------------
Reports to shareholders 27,574
- --------------------------------------------------------------------------------------------------
Auditing 45,037
- --------------------------------------------------------------------------------------------------
Legal 9,159
- --------------------------------------------------------------------------------------------------
Postage 9,702
- --------------------------------------------------------------------------------------------------
Exchange listing fees 3,967
- --------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 46,600
- --------------------------------------------------------------------------------------------------
Other 15,256
- --------------------------------------------------------------------------------------------------
Total expenses 842,494
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (57,101)
- --------------------------------------------------------------------------------------------------
Net expenses 785,393
- --------------------------------------------------------------------------------------------------
Net investment income 4,862,731
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (6,323)
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 242,623
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 890,339
- --------------------------------------------------------------------------------------------------
Net gain on investments 1,126,639
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,989,370
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended April 30
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 4,862,731 $ 4,779,081
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 236,300 2,602,136
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments 890,339 (691,673)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,989,370 6,689,544
- ----------------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (550,902) (610,115)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gains (13,379) --
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations applicable
to common shareholders (excluding cumulative undeclared
dividends on remarketed preferred shares of $42,253
and $44,004, respectively) 5,425,089 6,079,429
- ----------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (4,183,999) (4,284,289)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gains (100,243) --
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,140,847 1,795,140
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 83,063,795 81,268,655
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $200,225 and $65,515, respectively) $84,204,642 $83,063,795
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
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Nov. 27, 1992+
operating performance Year ended April 30 to April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(common shares) $14.55 $14.16 $14.49 $15.12 $14.02 (e)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.06 1.04 1.04 1.03 .41 (a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .24 .41 (.15) (.40) 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.30 1.45 .89 .63 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.12) (.13) (.12) (.12) (.03)(f)
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.91) (.93) (.95) (.93) (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- (g) -- (.01) (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.02) -- (.12) (.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain to common shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- -- (g) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.05) (1.06) (1.22) (1.25) (.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- (.01) (.09)(f)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $14.80 $14.55 $14.16 $14.49 $15.12
- ------------------------------------------------------------------------------------------------------------------------------------
Market value, end of period
(common shares) $15.00 $14.38 $13.63 $13.88 $14.88
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return at
market value (common shares) (%)(b) 11.02 12.68 6.67 .31 1.23 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $84,205 $83,064 $81,269 $82,813 $85,647
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.23 1.26 1.20 1.07 .33 (a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) 6.28 6.11 6.52 5.84 2.69 (a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 35.98 125.01 101.23 54.06 43.46 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects a waiver of the management fee. 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.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Ratio reflects net assets available to common shares only; net investment income ratio also reflects
reduction for dividend payments to preferred shareholders.
(d) The ratio of expenses to average net assets for the year ended April 30, 1996 and thereafter
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2)
(e) Represents initial net asset value of $14.10 less offering expenses of of approximately $0.08.
(f) Preferred shares were issued on February 18, 1993.
(g) Distributions in excess of net investment income amounted to less than $0.01 per share.
</TABLE>
Notes to financial statements
April 30, 1997
Note 1
Significant accounting policies
Putnam California Investment Grade Municipal Trust (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 Putnam
Investment Management, Inc. ("Putnam Management"), the fund's Manager, 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
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. 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 and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it owns
or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written options.
Options traded over-the-counter are valued using prices supplied by dealers.
D) 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 preference of any outstanding remarketed preferred shares,
by the total number of common shares outstanding.
E) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
F) 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 28 day period. The applicable dividend rate for the remarketed
preferred shares on April 30, 1997 was 3.57%. 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. These differences include treatment of post-October loss
deferrals, realized gains and losses on certain futures contracts, and
dividends payable. 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. For the year ended April
30, 1997, the fund reclassified $6,880 to increase undistributed net
investment income and $76,800 to decrease paid-in-capital, with a decrease to
accumulated net realized loss on investments and futures contracts of $69,920.
The calculation of net investment income per share in the financial highlights
table excludes these adjustments.
G) 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 effective yield method.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offering of
its shares were $12,024. These expenses are being amortized on a straight-line
basis over a five-year period.
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. Such
fee is based on the following annual rates: 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.
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
Putnam Management 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 reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended April 30, 1997, fund expenses were reduced by $57,101 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.
Trustees of the fund receive an annual Trustees fee of $470 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 adopted a Trustee Fee Deferral Plan (the "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 Plan.
The Fund has adopted an unfunded noncontributory defined benefit pension plan
covering all Trustees of the Fund who have served as Trustee for at least five
years. Benefits under the 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 Trustee fees in the Statement of
operations for the year ended April 30, 1997. Accrued pension liability is
included in Payable for compensation of Trustees in the Statement of assets
and liabilities.
Note 3
Purchase and sales of securities
During the year ended April 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $29,681,796 and
$30,410,295, 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 $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.
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, as amended. 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. Total additional dividends for
the fiscal year ended April 30, 1997 were $5,667.
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 April
30, 1997, no such restrictions have been placed on the fund.
Federal tax information
(Unaudited)
The fund has designated 98.92% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax purposes.
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
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
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Jerry J. Jacobs
Vice President
William Reeves
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
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.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Putnam
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