Putnam
California
Investment Grade
Municipal Trust
ANNUAL REPORT
April 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "The state's A1* general obligation rating is a product of the
state's credit strengths, especially its robust economy. The economic
recovery is now well established and broad based with the state outpacing
the United States and well positioned for further expansion."
-- Moody's Investors Service,
Municipal Credit Research, March 9, 1998
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
15 Financial statements
* The modifier 1 indicates that the issue ranks in the higher end of its
generic rating category.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The fragility of market rallies was clearly demonstrated once again as Putnam
California Investment Grade Municipal Trust approached the end of fiscal 1998.
The suggestion that the Federal Reserve Board might be assuming a more
cautious stance on inflation was enough to stop the bond market's most recent
advance in its tracks.
One consequence of this turnabout was a slight erosion in total return for the
period. Fund Manager William Reeves considers the development merely a minor
setback; he remains confident that the fundamentals of strong demand and
attractive value will remain in place.
In this volatile environment, William continues to focus on maintaining a high
level of current tax-free income, consistent with capital preservation. In the
following report, he discusses his strategy during the 12 months ended
April 30, 1998, and looks at prospects for the new fiscal year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 17, 1998
Report from the Fund Manager
William H. Reeves
Riding a wave of economic and fiscal strength, California bond investors
enjoyed ongoing credit improvement and continuing demand for the state's debt
over the past 12 months. Putnam California Investment Grade Municipal Trust's
performance reflected this healthy environment. With a heavy accent on income,
your fund employed disciplined strategies that emphasized long-term total
return potential and minimized interest-rate risk. For the 12 months ended
April 30, 1998, your fund's shares produced a total return of 10.02% at net
asset value (7.71% at market price). Performance details for longer periods
can be found on page 8.
* FAVORABLE TRENDS LIFT CALIFORNIA MUNICIPAL BOND PRICES
The U.S. interest-rate environment provided a friendly backdrop for California
municipal bondholders. With inflation remaining low despite the eighth year of
an economic expansion, investors have become increasingly confident that
additional price pressures would remain limited longer over the term. Interest
rates reached historically low levels and moved within a narrow range during
the fiscal year. The development of the Asian crisis also kept interest rates
extraordinarily low as the Federal Reserve Board cautiously evaluated the
worldwide effects of the crisis and its potential to offset growth and
inflationary pressures in the U.S. economy.
In California, economic growth outpaced that of the nation. The state's
financial operations thrived as tax revenues poured into state and local
treasuries. While the Asian situation dampened the state's economy, the
effects thus far have been minimal and have been offset largely by benefits
associated with the North American Free Trade Agreement (NAFTA). Employment
has remained strong -- the number of California jobs has surpassed levels
reached prior to the state's recession in the early 1990s. Employment in the
aerospace industry is back to an all-time high and other sectors such as
entertainment, construction, high technology, and agriculture continue to
improve. The state's solid economic and fiscal fundamentals boosted municipal
bond prices and supported demand.
* STRATEGY SEEKS HIGH INCOME WHILE CONTROLLING RISK
The same low interest-rate environment that has been favorable for municipal
bond prices has added to the challenge of building an attractive and durable
level of portfolio income. Our investment strategy focused on meeting this
challenge while both limiting interest-rate risk and enhancing price
stability. We emphasized relative value, credit selection, and leveraging
techniques. Also, whenever possible, we invested in bonds with long call
dates, thereby securing the income stream for the longest period available
before the bond would be eligible to be called away by its issuer.
With nearly 75% of its assets invested in securities rated Aaa or Aa, the fund
has maintained an extremely high level of quality. The yields of lower-rated
bonds continued to creep closer to those of their higher-rated counterparts, a
trend known as spread compression, so that in our opinion higher-rated
securities offered the most attractive relative value. In addition to
reinforcing credit quality, these securities enhanced the fund's price
stability.
[GRAPHIC OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Utilities 18.1%
Water and sewerage 13.3%
Education 12.8%
Health care 11.0%
Housing 10.5%
Footnote reads:
* Based on net assets as of 4/30/98. Holdings will vary over time.
In an exception to this trend, we discovered value in a lower-rated bond
issued by the city of Vallejo for Marine World Foundation. Marine World
Foundation was one of the top-performing securities in the portfolio over the
past 12 months. Providing an attractive income stream -- the coupon is 7.00%
- -- the bond's price appreciation has reflected both credit-driven opportunity
and the benefits of spread compression.
The Marine World Foundation bonds reflect the opportunities for attractive
gains that exist in all interest-rate environments and show how extensive
research capabilities enable us to identify such potential. When our research
team first learned of this project, uncertainties regarding the development of
management had driven some investors away from participation. Our analysts
investigated further and became confident that plans would proceed as
expected. We invested in the project. Later the project's new management team
injected a substantial amount of equity for Marine World Foundation to undergo
extensive improvements and expansion. Investors pushed the price of Marine
World Foundation's bonds higher in recognition of the project's improved
finances and the demand for its attractive yield.
Your fund continues to make judicious use of structured derivative securities
to increase income. Specifically we selected inverse floaters, variable-rate
bonds whose coupons move in the opposite direction of short-term interest
rates. These bonds are carefully analyzed and their performance is continually
monitored.
* BRIGHT HORIZON FOR CALIFORNIA BOND INVESTORS
We expect economic and fiscal trends to remain favorable for California
municipal bond investors. The state's strong economy and employment growth
seem likely to continue, generating appreciable income and considerable demand
for the state's tax-exempt bonds. We also anticipate a reduction in supply
which should help support prices as we head further into 1998. During the
year's first quarter, typically a slow period for new supply, California bond
issuance rose to $8 billion, as municipalities accelerated financings to take
advantage of low interest rates.
In addition to a positive fundamental and technical outlook, we believe that
municipal bonds currently offer attractive value. The heavy supply that
existed in the year's first quarter drove the yields of Aaa-insured municipal
bonds to 90% of those of U.S. Treasuries with comparable maturities. Since
municipal bonds typically yield 84% of their taxable counterparts, these
levels make municipal bonds extremely cheap, in our opinion. Their relative
value increases further because of their currently high real rate of return.
The real rate of return is the return to the investor after inflation is
removed; the low level of inflation has enabled real rates to remain high.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB, MBIA,
9.04s, 8/1/25
Santa Clara Cnty. Fin. Auth. Lease Rev. Bonds
(VMC Fac. Replacement), Ser. A, AMBAC,
6 7/8s, 11/15/14
Sacramento, Muni. Util. Dist. Elec. Rev. Bonds, FGIC,
6.3s, 8/15/18
Vallejo, COP (Marine World Foundation),
7s, 2/1/17
Orange Cnty., Pub. Fin. Auth. Waste Mgt. Syst. Rev. Bonds, AMBAC,
5 3/4s, 12/1/10
Anaheim, Pub. Fin. Auth. Lease Rev. Bonds (Pub. Impts.),
Ser. C, FSA,
6s, 9/1/16
CA Edl. Fac. Auth. Rev. Bonds (U. of San Francisco),
6.4s, 10/1/17
Victor, Elementry School Dist. COP
(School Construction Refinancing), MBIA,
6.45s, 5/1/18
Rancho, Wtr. Dist. Fin. Auth. IFB, AMBAC,
8.894s, 8/17/21
CA Poll. Control Fin. Auth. Rev. Bonds
(Southern CA Edison Co.), AMBAC,
6s, 7/1/07
* These holdings represent 55.4% of the fund's net assets as of 4/30/98.
We believe in the value that an income-oriented investment can provide to a
well-rounded investment portfolio and the rewards that municipal bonds can
bring to the long-term investor. In our opinion, every market environment
creates its own unique opportunity. Through thorough market and portfolio
analysis along with astute credit selection, we believe your fund can continue
to generate attractive levels of income and long-term total return.
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 4/30/98, 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 4/30/98
(common shares)
Lehman Bros.
Market Municipal Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------------
1 year 10.02% 7.71% 9.30% 1.44%
- ------------------------------------------------------------------------------
5 years 42.96 44.18 37.14 12.85
Annual average 7.41 7.59 6.52 2.45
- ------------------------------------------------------------------------------
Life of fund (11/27/92) 57.40 45.97 32.79 12.82
Annual average 8.73 7.23 6.64 2.77
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/98
(most recent calendar quarter)
(common shares)
Market
NAV Price
- ------------------------------------------------------------------------------
1 year 11.89% 11.30%
- ------------------------------------------------------------------------------
5 years 45.86 48.98
Annual average 7.84 8.30
- ------------------------------------------------------------------------------
Life of fund (11/27/92) 58.61 50.06
Annual average 9.02 7.90
- ------------------------------------------------------------------------------
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 ended 4/30/98
- ------------------------------------------------------------------------------
Distributions (common shares)
- ------------------------------------------------------------------------------
Number 12
- ------------------------------------------------------------------------------
Income $0.8486
- ------------------------------------------------------------------------------
Capital gains1
- ------------------------------------------------------------------------------
Long-term 0.0388
- ------------------------------------------------------------------------------
Short-term 0.0326
- ------------------------------------------------------------------------------
Total $0.9200
- ------------------------------------------------------------------------------
Preferred shares Series A (320 shares)
- ------------------------------------------------------------------------------
Income $1818.55
- ------------------------------------------------------------------------------
Capital gains 126.71
- ------------------------------------------------------------------------------
Total $1945.26
- ------------------------------------------------------------------------------
Share value
(common shares) : NAV Market price
- ------------------------------------------------------------------------------
4/30/97 $14.80 $15.00
- ------------------------------------------------------------------------------
4/30/98 15.37 15.25
- ------------------------------------------------------------------------------
Current return
(common shares): NAV Market price
- ------------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------------
Current dividend rate2 5.66% 5.70%
- ------------------------------------------------------------------------------
Taxable equivalent3 10.33 10.41
- ------------------------------------------------------------------------------
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 common 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, 1998, 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, 1998
by correspondence with the custodian and brokers, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 9, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1998
Key to Abbreviations
AMBAC - AMBAC Indemnity Corporation
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
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 (98.2%)(a)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
California (98.2%)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Anaheim, Pub. Fin. Auth. Lease Rev. Bonds
(Pub. Impts.)
$4,200,000 Ser. C, FSA, 6s, 9/1/16 Aaa $4,635,750
3,200,000 Ser. A, FSA, 5s, 9/1/27 Aaa 3,052,000
3,000,000 Berkeley, Hlth. Fac. Rev. Bonds
(Alta Bates Med. Ctr.), Ser. A, 6.55s, 12/1/22 A+ 3,318,750
1,500,000 Big Bear Lake Wtr. Rev. Bonds, MBIA, 6s, 4/1/22 Aaa 1,659,375
3,600,000 CA Edl. Fac. Auth. Rev. Bonds
(U. of San Francisco), 6.4s, 10/1/17 AAA 3,960,000
3,000,000 CA Hlth. Fac. Fin. Auth. Rev. Bonds
(Henry Mayo Newhall), Ser. A, 8s, 10/1/18 A+ 3,105,930
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds
2,715,000 Ser. C, 8.3s, 8/1/19 Aa2 2,778,612
2,760,000 Ser. A, 7 3/4s, 8/1/17 Aa2 2,877,300
3,575,000 CA Poll. Control Fin. Auth. Rev. Bonds
(Southern CA Edison Co.), AMBAC, 6s, 7/1/07 Aaa 3,740,343
2,000,000 CA State Dept. Wtr. Resources IFB
(Central Valley), 9.47s, 12/1/12
(acquired 11/27/92, cost $2,198,104) (RES) Aa2 2,927,500
2,000,000 CA State Pub. Wks. Board Lease Rev. Bonds
(Dept. of Corrections Monterey Cnty. Sole),
Ser. A, 7s, 11/1/19 AAA 2,320,000
3,150,000 Irvine Ranch, Wtr. Dist. Jt. Pwr. Agcy. Rev. Bonds
(Issue II), FNMA Coll., 8 1/4s, 8/15/23 A+ 3,184,808
3,120,000 Los Angeles, Multi-Fam. Rev. Bonds (Mission
Plaza Apts.), Ser. A, GNMA Coll., 7.8s, 1/20/35 AAA 3,412,500
5,500,000 Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB,
MBIA, 9.04s, 8/1/25 Aaa 6,517,500
2,000,000 Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management), 7 7/8s, 12/1/13 Baa 2,085,920
4,950,000 Orange Cnty., Pub. Fin. Auth. Waste Mgt. Syst.
Rev. Bonds, AMBAC, 5 3/4s, 12/1/10 Aaa 5,296,500
3,250,000 Rancho, Wtr. Dist. Fin. Auth. IFB, AMBAC,
8.894s, 8/17/21 AAA 3,802,500
5,000,000 Sacramento, Muni. Util. Dist. Elec. Rev. Bonds,
FGIC, 6.3s, 8/15/18 Aaa 5,418,750
4,750,000 Santa Clara Cnty. Fin. Auth. Lease Rev. Bonds
(VMC Fac. Replacement), Ser. A, AMBAC,
6 7/8s, 11/15/14 (SEG) Aaa 5,480,313
3,000,000 U. of CA Hosp. Rev. Bonds (U. of CA, Med. Ctr.),
AMBAC, 5 3/4s, 7/1/15 Aaa 3,157,500
5,000,000 Vallejo, COP (Marine World Foundation),
7s, 2/1/17 BB+/P 5,375,000
3,345,000 Victor, Elementry School Dist. COP (School
Construction Refinancing), MBIA, 6.45s, 5/1/18 Aaa 3,876,019
West Contra Costa U. School Dist. COP
1,860,000 7 1/8s, 1/1/24 BBB+ 2,018,100
1,140,000 6 7/8s, 1/1/09 BBB+ 1,238,325
- --------------------------------------------------------------------------------------------------
Total Investments (cost $78,998,094) (b) $85,239,295
- --------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $86,818,489.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available
at April 30, 1998 for the securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to
these securities at April 30, 1998. Securities rated by Putnam are indicated by "/P" and are not publicly
rated. Ratings are not covered by the Report of independent accountants.
The table below shows the percentage of the fund's investment on April 30, 1998 in securities assigned to
various rating categories by Moody's and Standard and Poor's and in unrated securities determined by
Putnam Management to be of comparable quality.
Unrated Securities
Rated securities as a of comparable quality,
percentage of fund's as a percentage of fund's
Rating net assets net assets
AAA/Aaa 64.8% --
AA/Aa 9.9 --
A/A 11.1 --
BBB/Baa 6.2 --
BB/Ba -- 6.2%
----- -----
92.0% 6.2%
(b) The aggregate identified cost on a tax basis is $78,998,094, resulting in gross unrealized appreciation and
depreciation of $6,705,527 and $464,326, respectively, or net unrealized appreciation of $6,241,201.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held
at April 30, 1998 was $2,927,500 or 3.4% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at April 30, 1998.
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, 1998.
The fund had the following industry group concentrations greater than 10% at April 30, 1998
(as a percentage of net assets):
Utilities 18.1%
Water & sewerage 13.3
Education 12.8
Health care 11.0
Housing 10.5
The fund had the following insurance concentrations greater than 10% at April 30, 1998
(as a percentage of net assets):
AMBAC 24.7%
MBIA 13.9
- ---------------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 1998
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
- ---------------------------------------------------------------------------
Municipal Index
Future (Long) $1,573,813 $1,567,719 Jun-98 $6,094
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1998
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $78,998,094) (Note 1) $85,239,295
- ---------------------------------------------------------------------------------------------------
Cash 753,460
- ---------------------------------------------------------------------------------------------------
Interest receivable 1,385,714
- ---------------------------------------------------------------------------------------------------
Receivable for variation margin 17,469
- ---------------------------------------------------------------------------------------------------
Total assets 87,395,938
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 376,951
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 151,491
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 685
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,212
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 350
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 40,760
- ---------------------------------------------------------------------------------------------------
Total liabilities 577,449
- ---------------------------------------------------------------------------------------------------
Net assets $86,818,489
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) 367,840
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 96,069
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 6,247,295
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $86,818,489
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Series A remarketed preferred shares $16,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 14,381
- ---------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares --
liquidation preference $16,014,381
- ---------------------------------------------------------------------------------------------------
Net assets available to common shares $70,804,108
- ---------------------------------------------------------------------------------------------------
Net asset value per common share
($70,804,108 divided by 4,607,092 shares) $15.37
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended April 30, 1998
<S> <C>
Tax exempt interest income: $5,453,284
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 608,968
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 86,300
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,778
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,263
- --------------------------------------------------------------------------------------------------
Amortization of organization expense (Note 1) 120
- --------------------------------------------------------------------------------------------------
Reports to shareholders 10,750
- --------------------------------------------------------------------------------------------------
Auditing 53,945
- --------------------------------------------------------------------------------------------------
Legal 10,224
- --------------------------------------------------------------------------------------------------
Postage 3,058
- --------------------------------------------------------------------------------------------------
Exchange listing fees 4,667
- --------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 50,444
- --------------------------------------------------------------------------------------------------
Other 2,365
- --------------------------------------------------------------------------------------------------
Total expenses 844,882
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (50,353)
- --------------------------------------------------------------------------------------------------
Net expenses 794,529
- --------------------------------------------------------------------------------------------------
Net investment income 4,658,755
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 552,854
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (31,018)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 2,293,884
- --------------------------------------------------------------------------------------------------
Net gain on investments 2,815,720
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $7,474,475
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended April 30
--------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $4,658,755 $4,862,731
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 521,836 236,300
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,293,884 890,339
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 7,474,475 5,989,370
- ---------------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders:
- ---------------------------------------------------------------------------------------------------------------------
From net investment income (581,935) (550,902)
- ---------------------------------------------------------------------------------------------------------------------
From net realized gains (40,548) (13,379)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations applicable
to common shareholders (excluding cumulative undeclared
dividends on remarketed preferred shares of $14,381
and $42,253, respectively) 6,851,992 5,425,089
- ---------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ---------------------------------------------------------------------------------------------------------------------
From net investment income (3,909,205) (4,183,999)
- ---------------------------------------------------------------------------------------------------------------------
From net realized gains (328,940) (100,243)
- ---------------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,613,847 1,140,847
Net assets
- ---------------------------------------------------------------------------------------------------------------------
Beginning of year $84,204,642 $83,063,795
- ---------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $367,840 and
$200,225, respectively) 86,818,489 84,204,642
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)
- ----------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended April 30
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(common shares) $14.80 $14.55 $14.16 $14.49 $15.12
- ----------------------------------------------------------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 1.01 1.06 1.04 1.04 1.03
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .61 .24 .41 (.15) (.40)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.62 1.30 1.45 .89 .63
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.12) (.12) (.13) (.12) (.12)
- ----------------------------------------------------------------------------------------------------------------------
To common shareholders (.85) (.91) (.93) (.95) (.93)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ----------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.01) --(e) -- (.01) (.02)
- ----------------------------------------------------------------------------------------------------------------------
To common shareholders (.07) (.02) -- (.12) (.18)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain to common shareholders
- ----------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- -- --(e) --
- ----------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- -- (.02) --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (1.05) (1.05) (1.06) (1.22) (1.25)
- ----------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- -- (.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $15.37 $14.80 $14.55 $14.16 $14.49
- ----------------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $15.25 $15.00 $14.38 $13.63 $13.88
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return at
market value (common shares) (%)(a) 7.71 11.02 12.68 6.67 .31
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $86,818 $84,205 $83,064 $81,269 $82,813
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.19 1.23 1.26 1.20 1.07
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 5.80 6.28 6.11 6.52 5.84
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Portfolio turnover rate (%) 25.26 35.98 125.01 101.23 54.06
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(a) Total investment return assumes dividend reinvestment.
(b) Ratio reflects net assets available to common shares only; net investment income ratio also reflects reduction for
dividend payments to preferred shareholders.
(c) The ratio of expenses to average net assets for the year ended April 30, 1996 and thereafter includes amounts paid
through expense offset arrangements. Prior period ratios exclude these amounts. (Note 2)
(e) Distributions amounted to less than $0.01 per share.
</TABLE>
Notes to financial statements
April 30, 1998
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 Putnam Management 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. 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. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
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) 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.
E) 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, 1998 was 3.50%. 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 temporary differences of dividends
payable, and unrealized gains and losses on certain futures contracts, and
straddle loss deferrals. 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, 1998, the fund had no such reclassifications.
F) Determination of net asset value Net asset value of the common shares is
determined by dividing the value of all assets of the fund, less all
liabilities and the liquidation preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding.
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 yield-to-maturity basis.
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 have been fully amortized over a
five-year period, as of April 30, 1998.
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% thereafter.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred shares
for that period exceed the fund's gross income attributable to the proceeds of
the remarketed preferred shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount of the excess
(but not more than .70% of the liquidation preference of the remarketed
preferred shares outstanding during the period).
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the year ended April 30, 1998, fund expenses were reduced by $50,353 under
expense offset arrangements with PFTC. Investor servicing and custodian fees
reported in the Statement of operations exclude these credits. The fund could
have invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered into
such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $400 has
been allocated to the fund, and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. 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, 1998, purchases and sales of investment
securities other than short-term investments aggregated $21,412,556 and
$21,145,053, 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. 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, 1998 were $30,476.
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, 1998, no such restrictions have been placed on the fund.
Federal tax information
The fund has designated 100% of dividends paid from net investment income
during the fiscal year as tax exempt for Federal income tax purposes.
Pursuant to section 852 of the Internal Revenue Code, as amended the Fund
hereby designates $162,695 as capital gain, which includes $87,489 as 20%
capital gain, for its taxable year ended April 30, 1998.
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
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
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
William H. Reeves
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or visit our
website (www.putnaminv.com) any 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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