Putnam
California
Investment Grade
Municipal Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-98
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Throughout the dramatic market shifts of 1998, the municipal bond market
has continued to stand its ground. As of the end of October, long-term
municipal bond yields were approximately the same as the 30-year Treasury
bond yield -- an unprecedented level of near parity. It is within this
environment that I am pleased to report that Putnam California Investment
Grade Municipal Trust met its goal of producing high current income exempt
from federal and state taxes. For the six months ended October 31, 1998,
the fund provided total returns of 5.33% at net asset value and 6.57% at
market price. For complete performance information, please see pages 6 and
7.
* FLIGHT TO QUALITY DRIVES TREASURY YIELDS DOWN
A steady stream of international events set off the stock market
volatility that sparked the bond market rallies: the unabated financial
chaos in the Pacific Rim, currency devaluations and defaults in Russia,
and plunging stock markets in Latin America. As foreign investors and
hedge fund shareholders panicked about plummeting stock markets, they
began a flight to quality -- selling hedge funds and emerging-markets
holdings in favor of the safety of U.S. Treasury bonds. This buying drove
up the prices of Treasuries, and consequently, because yields and prices
move in an inverse relationship, pulled down their yields. Since foreign
investors do not benefit from the tax advantages of municipal bonds,
prices in this market did not rise as much as those of Treasuries. As a
result, with municipal bond yields about equal to Treasury yields,
municipals have become an exceptional investment choice for U.S.
investors.
* REFUNDINGS SLOW; MUNICIPAL SUPPLY BEGINS TO MODERATE
Normally, when interest rates fall, refundings boost the bond supply. But
rates have been low for some time. Most California issuers have already
completed their refundings and your fund's manager, Richard Wyke, expects
that the pace of supply of new issues will slow down, leading to a
continuing decline in the municipal bond supply. This decline is likely to
have a positive influence on municipal bond prices if demand becomes
stronger. However, as the equity market begins to recover, demand for a
safe haven in municipals may taper off.
The yield relationship of Treasury and municipal securities is also
contributing to the decline in supply. Since Treasury yields fell so
dramatically relative to municipal yields, the Treasury escrows used in
prerefundings are not adequate to pay off the municipal issues.
Since last spring, one of Rick's challenges has been to deliver an
attractive level of income in a market in which yields have fallen. He has
tried to meet this challenge by using the lower tiers of the
investment-grade sector to increase the fund's yield. However, the yield
spreads between higher-quality and lower-quality investment-grade paper
have narrowed, and it is hard to justify shifting the fund's focus from
the higher-quality investments without a significant yield advantage.
The potential for declining income may be offset in part by leveraging, a
strategy that has been useful in enhancing the trust's income. The trust
issues preferred shares to institutional short-term investors at low rates
and reinvests the proceeds in higher-paying longer-term bonds. The effect
is a more positive cash flow for the trust.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Utilities 19.8%
Health care 12.9%
Education 12.9%
Housing 9.9%
Water and sewer 5.4%
Footnote reads:
*Based on net assets as of 10/31/98. Holdings will vary over time.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aa -- 9.6%
A -- 9.2%
Baa -- 10.0%
Ba -- 6.3%
Aaa -- 64.9%
Footnote reads:
*As a percentage of market value as of 10/31/98. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions unless noted otherwise; percentages may include unrated bonds
considered by Putnam Management to be of comparable quality. Ratings will
vary over time.
The California economy is stable, but exports to Asia have fallen and so
economic growth is showing signs of slowing down. Rick viewed this as a
good time to pull back from investing in state general obligation issues.
As an alternative, he purchased Delano Medical Center certificates of
obligation and California statewide community development revenue bonds
for United Airlines. While these holdings were viewed favorably at the end
of the fiscal period, all portfolio holdings are subject to review and
adjustment in accordance with the fund's investment strategy and may vary
in the future.
Another strategy Rick has used has been to extend call protection as he
makes new investments. This is done by purchasing noncallable bonds or
bonds with distant call dates. Callable bonds carry the option of being
redeemed, or called away, by the issuer at a certain future date. Bonds
are normally called away if interest rates are lower than they were when
the bonds were originally issued. By avoiding callable bonds, the
portfolio has a better chance of maintaining a certain level of income.
* INTEREST-RATE CUTS HELP BOND MARKET FOCUS
The bond markets are beginning to move away from their obsession with the
international markets. The Federal Reserve Board cut interest rates twice
in three weeks (and again in mid November after the close of this
reporting period), which helped the U.S. bond markets pay more attention
to economic fundamentals and become more balanced.
The intermediate maturity range of the yield curve (8 to 15 years), where
many of the fund's holdings have been positioned, has outperformed other
maturities and Rick expects this trend to continue over the near term.
There will come a time, however, when a shift to longer maturities will
offer better performance. As opportunities appear in the longer-term
market, he will adjust the portfolio accordingly.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 16, 1998
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 10/31/98, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its 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 10/31/98
Lehman Bros.
Market Municipal Consumer
(common shares) NAV Price Bond Index Price Index
- ----------------------------------------------------------------------------
6 months 5.33% 6.57% 5.11% 0.80%
- ----------------------------------------------------------------------------
1 year 7.51 4.90 8.02 1.36
- ----------------------------------------------------------------------------
5 years 37.58 41.94 36.12 12.42
Annual average 6.59 7.26 6.36 2.37
- ----------------------------------------------------------------------------
Life of fund (11/27/92) 65.80 55.55 52.56 15.35
Annual average 8.92 7.75 7.40 2.44
- ----------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/98
(most recent calendar quarter)
Market
(common shares) NAV price
- ----------------------------------------------------------------------------
6 months 4.85% 3.60%
- ----------------------------------------------------------------------------
1 year 8.85 7.88
- ----------------------------------------------------------------------------
5 years 38.07 42.56
Annual average 6.66 7.35
- ----------------------------------------------------------------------------
Life of fund (11/27/92) 66.30 55.46
Annual average 9.10 7.85
- ----------------------------------------------------------------------------
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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 10/31/98
- ------------------------------------------------------------------------------
Distributions (common shares)
- ------------------------------------------------------------------------------
Number 6
- ------------------------------------------------------------------------------
Income $0.435
- ------------------------------------------------------------------------------
Capital gains1 --
- ------------------------------------------------------------------------------
Total $0.435
- ------------------------------------------------------------------------------
Preferred shares Series A (320 shares)
- ------------------------------------------------------------------------------
Income $915.25
- ------------------------------------------------------------------------------
Capital gains1 --
- ------------------------------------------------------------------------------
Total $915.25
- ------------------------------------------------------------------------------
Share value (common shares) NAV Market price
- ------------------------------------------------------------------------------
4/30/98 $15.37 $15.250
- ------------------------------------------------------------------------------
10/31/98 15.75 15.812
- ------------------------------------------------------------------------------
Current return (common shares/end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 5.52% 5.50%
- ------------------------------------------------------------------------------
Taxable equivalent3 10.08 10.04
- ------------------------------------------------------------------------------
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 POP 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 assumes reinvestment of all distributions
and interest payments and does not take in account brokerage fees or
taxes. Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest directly
in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1998 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collateralized
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
MUNICIPAL BONDS AND NOTES (98.1%) (a)
PRINCIPAL AMOUNT RATINGS (RAT) VALUE
<S> <C> <C> <C>
California (98.1%)
- --------------------------------------------------------------------------------------------------------------------------
$4,200,000 Anaheim, Pub. Fin. Auth. Lease Rev. Bonds
(Pub. Impts.), Ser. C, FSA, 6s, 9/1/16 Aaa $ 4,856,250
3,000,000 Berkeley, Hlth. Fac. Rev. Bonds
(Alta Bates Med. Ctr.), Ser. A, 6.55s, 12/1/22 A+ 3,378,750
1,500,000 Big Bear Lake Wtr. Rev. Bonds, MBIA, 6s, 4/1/22 Aaa 1,740,000
3,600,000 CA Edl. Fac. Auth. Rev. Bonds (U. of San Francisco),
6.4s, 10/1/17 Aaa 4,027,500
3,000,000 CA Hlth. Fac. Fin. Auth. Rev. Bonds
(Henry Mayo Newhall), Ser. A, 8s, 10/1/18 A+ 3,052,500
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds
2,715,000 Ser. C, 8.3s, 8/1/19 Aa2 2,765,906
2,475,000 Ser. A, 7 3/4s, 8/1/17 Aa2 2,560,685
3,575,000 CA Poll. Control Fin. Auth. Rev. Bonds
(Southern CA Edison Co.), AMBAC, 6s, 7/1/27 Aaa 3,811,844
2,000,000 CA State Dept. Wtr. Resources IFB
(Central Valley), 10.122s, 12/1/12
(acquired 11/27/92, cost $2,198,104) (RES) Aa2 3,052,500
CA State Pub. Wks. Board Lease Rev. Bonds
2,000,000 (Dept. of Corrections Monterey Cnty. Sole),
Ser. A, 7s, 11/1/19 Aaa 2,372,500
1,500,000 (Dept. of Corrections), Ser. D, 5 3/8s, 11/1/13 A1 1,591,875
1,500,000 CA Statewide Cmty. Dev. Auth Rev. Bonds
(United Airlines, Inc.), 5 5/8s, 10/1/34 Baa3 1,543,125
1,750,000 Delano, COP (Delano Regl. Med. Ctr.), 5.6s,
1/1/26 BBB- 1,754,375
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
1,500,000 Los Angeles, Dept. of Wtr. & Pwr. Elec. Rev. Bonds,
MBIA, 6s, 6/1/13 Aaa 1,608,750
Northern CA Pwr. Agcy. Multi. Cap. Fac. MBIA, IFB
3,130,000 9.192s, 8/1/25 Aaa 3,756,000
2,370,000 Prerefunded, 9.192s, 8/1/25 Aaa 2,935,837
2,000,000 Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management), 7 7/8s, 12/1/13 Baa 2,047,300
4,950,000 Orange Cnty., Pub. Fin. Auth. Waste Mgt. Syst.
Rev. Bonds, AMBAC, 5 3/4s, 12/1/10 Aaa 5,593,500
3,250,000 Rancho, Wtr. Dist. Fin. Auth. IFB, AMBAC,
9.524s, 8/17/21 Aaa 3,851,250
5,000,000 Sacramento, Muni. Util. Dist. Elec. Rev. Bonds,
FGIC, 6.3s, 8/15/18 Aaa 5,462,500
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 5,605,000
3,000,000 U. of CA Hosp. Rev. Bonds (U. of CA, Med. Ctr.),
AMBAC, 5 3/4s, 7/1/15 Aaa 3,281,250
5,000,000 Vallejo, COP (Marine World Foundation), 7s,
2/1/17 BB+/P 5,456,250
3,345,000 Victor, Elementary School Dist. COP
(School Construction Refinancing), MBIA,
6.45s, 5/1/18 Aaa 4,047,450
West Contra Costa U. School Dist. COP
1,860,000 7 1/8s, 1/1/24 BBB+ 2,066,925
1,140,000 6 7/8s, 1/1/09 BBB+ 1,276,800
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $78,940,131) (b) $86,909,122
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $88,605,091.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
October 31, 1998 for the securities listed. Ratings are generally ascribed to securities at the time of issuance.
While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities at October 31, 1998. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $78,940,131, resulting in gross unrealized appreciation and
depreciation of $8,280,096 and $311,105, respectively or net unrealized appreciation of $7,968,991.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at
October 31, 1998 was $3,052,500 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 October 31, 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 October 31, 1998.
The fund had the following industry group concentrations greater than 10% at October 31, 1998 (as a percentage
of net assets):
Utilities 19.8%
Hospitals/health care 12.9
Education 12.9
The fund had the following insurance concentrations greater than 10% at October 31, 1998 (as a percentage of net
assets):
AMBAC 25.0%
MBIA 15.9
- -------------------------------------------------------------------------------------------
Futures Contracts Outstanding at October 31, 1998 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------------------
Muni Index Future (Long) $1,631,094 $1,633,615 Dec-98 $(2,521)
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $78,940,131) (Note 1) $86,909,122
- -----------------------------------------------------------------------------------------------
Cash 828,511
- -----------------------------------------------------------------------------------------------
Interest receivable 1,415,506
- -----------------------------------------------------------------------------------------------
Total assets 89,153,139
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 9,750
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 333,989
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 156,762
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 13,622
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 8,194
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 346
- -----------------------------------------------------------------------------------------------
Other accrued expenses 25,385
- -----------------------------------------------------------------------------------------------
Total liabilities 548,048
- -----------------------------------------------------------------------------------------------
Net assets $88,605,091
Represented by
- -----------------------------------------------------------------------------------------------
Series A 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) 357,415
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 173,921
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 7,966,470
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $88,605,091
Computation of net asset value
- -----------------------------------------------------------------------------------------------
Series A remarketed preferred shares $16,000,000
- -----------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 24,549
- -----------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred
shares -- liquidation preference $16,024,549
- -----------------------------------------------------------------------------------------------
Net assets available to common shares $72,580,542
- -----------------------------------------------------------------------------------------------
Net asset value per common share
($72,580,542 divided by 4,607,092 shares) $15.75
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended October 31, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $2,716,255
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 312,337
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 42,413
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,817
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,071
- -----------------------------------------------------------------------------------------------
Reports to shareholders 8,741
- -----------------------------------------------------------------------------------------------
Auditing 20,962
- -----------------------------------------------------------------------------------------------
Legal 5,521
- -----------------------------------------------------------------------------------------------
Postage 5,708
- -----------------------------------------------------------------------------------------------
Exchange listing fees 667
- -----------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 18,667
- -----------------------------------------------------------------------------------------------
Other 10,556
- -----------------------------------------------------------------------------------------------
Total expenses 432,460
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,555)
- -----------------------------------------------------------------------------------------------
Net expenses 429,905
- -----------------------------------------------------------------------------------------------
Net investment income 2,286,350
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 158
- -----------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 77,694
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 1,719,175
- -----------------------------------------------------------------------------------------------
Net gain on investments 1,797,027
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $4,083,377
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
October 31 April 30
1998* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 2,286,350 $ 4,658,755
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 77,852 521,836
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,719,175 2,293,884
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,083,377 7,474,475
Distributions to remarketed preferred shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (292,880) (581,935)
- ---------------------------------------------------------------------------------------------------------------
From net realized gains -- (40,548)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders (excluding cumulative
undeclared dividends on remarketed preferred shares
of $24,549 and $14,381, respectively) 3,790,497 6,851,992
- ---------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (2,003,895) (3,909,205)
- ---------------------------------------------------------------------------------------------------------------
From net realized gains -- (328,940)
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,786,602 2,613,847
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 86,818,489 84,204,642
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $357,415 and $367,840 respectively) $88,605,091 $86,818,489
- ---------------------------------------------------------------------------------------------------------------
Number of fund shares
- ---------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of period 4,607,092 4,607,092
- ---------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at beginning and
end of period 320 320
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share October 31
operating performance (Unaudited) Year ended April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
(common shares) $15.37 $14.80 $14.55 $14.16 $14.49 $15.12
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .50 1.01 1.06 1.04 1.04 1.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .39 .61 .24 .41 (.15) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .89 1.62 1.30 1.45 .89 .63
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.07) (.12) (.12) (.13) (.12) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.44) (.85) (.91) (.93) (.95) (.93)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- (.01) --(d) -- (.01) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders -- (.07) (.02) -- (.12) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain to common shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- -- -- -- (d) --
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- -- -- (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.51) (1.05) (1.05) (1.06) (1.22) (1.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $15.75 $15.37 $14.80 $14.55 $14.16 $14.49
- ------------------------------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $15.81 $15.25 $15.00 $14.38 $13.63 $13.88
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return at
market value (common shares) (%)(a) 6.57* 7.71 11.02 12.68 6.67 .31
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $88,605 $86,818 $84,205 $83,064 $81,269 $82,813
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) .60* 1.19 1.23 1.26 1.20 1.07
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 2.76* 5.74 6.28 6.11 6.52 5.84
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 19.15* 25.26 35.98 125.01 101.23 54.06
- ------------------------------------------------------------------------------------------------------------------------------------
(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)
(d) Distributions amounted to less than $0.01 per share.
</TABLE>
Notes to financial statements
October 31, 1998 (Unaudited)
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 a current income exempt from federal
income tax and California personal income tax. The fund intends to achieve
its objective by investing in investment grade municipal securities
constituting a portfolio that Putnam Investment Management, Inc., ("Putnam
Management"), 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
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 October 31, 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. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available capital
loss carry-overs) under income tax regulations.
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.
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 weekly average net assets, 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 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 0.70% of the liquidation
preference of the remarketed preferred shares outstanding during the
period).
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended October 31, 1998, fund expenses were reduced by
$2,555 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 $420 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 six months ended October 31, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$16,482,660 and $16,438,245, 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.
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 October 31, 1998, no such restrictions have been
placed on the fund.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
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
Brett C. Browchuk
Vice President
Jerome J. Jacobs
Vice President
Richard P. Wyke
Vice President and Fund Manager
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
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BULK RATE
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PUTNAM
INVESTMENTS
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47856 184 12/98
