Putnam
California
Investment Grade
Municipal Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
For income-oriented investors, including investors in tax-free municipal
bonds, low interest rates during the past year posed a dilemma. While low
rates reflected a low-inflation environment, they also presented a
challenge in terms of generating current income.
In this type of environment, which characterized Putnam California
Investment Grade Municipal Trust's fiscal year, manager Richard Wyke
addressed the challenge of generating maximum current income primarily
through careful selection of portfolio holdings. Putnam's edge in this
regard is its extensive credit research capability, which allows Rick to
choose higher-yielding securities from the lower tiers of the
investment-grade spectrum with a high degree of confidence in the safety
of these selections. There can never be ironclad guarantees against bond
defaults, of course, but diligent, in-depth research has proved to be an
effective tool for minimizing such unpleasant situations.
In the following report, Rick reviews your fund's performance during the
fiscal year that ended on April 30, 1999, and discusses his current
thinking about prospects for the fiscal year that has just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 15, 1999
Report from the Fund Manager
Richard P. Wyke
Over the 12 months ended April 30, 1999, robust economic growth and
negligible inflation combined with strong municipal balance sheets
provided a favorable environment for California municipal bond investors.
Despite a slowdown in Asian exports, the state economy showed strength
across a broad spectrum of industries. Tax revenues were on the rise
throughout the period and in October, California's general obligation
bonds garnered a credit upgrade from A1 to AA3. Putnam California
Investment Grade Municipal Trust took full advantage of this positive
environment, delivering solid returns for the period.
Total return for 12 months ended 4/30/99
Net asset value Market price
- ----------------------------------------------------
6.86% 8.11%
- ----------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* MUNICIPAL MARKET EXHIBITS RELATIVE STABILITY
While many financial markets have registered headline-making shifts over
the past 12 months, the municipal market has exhibited a refreshing state
of calm. A case in point: Municipal bond yields, which rise as bond prices
fall, have moved up less than 20 basis points since the beginning of the
year, while Treasury yields rose more in February than in any other single
month in 10 years. Although this means that municipal yields are heading
back toward more traditional ratios, municipal yields are still quite
attractive at 90% of comparable Treasuries. The slower rise in municipal
yields illustrates the resistance of the municipal market to unfavorable
news.
As expected, with the slight rise in yields, the new supply of municipal
bonds has tapered off. The calendar of new issues shows about 20% to 30%
fewer bonds coming to market compared with levels last year at this time.
This lower supply was an important factor in sustaining muni prices in
late 1998 and early 1999, when Treasury prices fell so much. As the period
drew to a close, the supply of municipal securities had begun to pick up a
bit. We expect it to increase further in May and June, when many
municipalities reach the end of their fiscal years. On the demand side,
cash flow into municipal bonds has decreased somewhat over the past
several months as a result of the stock market's compelling -- and
continuing -- advance. Nevertheless, with supply still so low, the current
supply/demand relationship remains positive for municipal bonds.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Utilities 19.6%
Health care 16.1%
Education 13.2%
Water and
sewerage 9.7%
Housing 8.2%
Footnote reads:
*Based on net assets as of 4/30/99. Holdings will vary over time.
Concerns are gradually beginning to surface about the effects of the Y2K
problem and Medicare reform proposals on certain sectors of the municipal
bond market. Such concerns are one reason why we have always considered
security selection coupled with credit analysis as a fundamental
investment strategy for this fund. Generally speaking, opportunity comes
from choosing issues correctly, rather than overall sector performance.
Security and credit research becomes even more important when we invest in
bonds that carry ratings at the lower end of the investment-grade market.
These are the bonds that can add tremendously to a fund's income level,
but they also mean greater credit risk and require the most meticulous
research efforts.
The healthy California economy has provided the impetus for state and
local municipalities to launch a fairly ambitious capital budget program
over the next few years. However, rising interest rates may slow this
program down. As these projects receive bond financing, we will evaluate
them carefully to gauge their potential benefit as fund holdings.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
AA/Aa -- 7.8%
A -- 7.4%
BBB/Baa -- 11.9%
BB/Ba -- 6.3%
VMIG1 -- 0.2%
AAA/Aaa -- 66.4%
Footnote reads:
*As a percentage of market value as of 4/30/99. A bond rated Baa or higher
is considered investment grade. All ratings reflect Standard & Poor's and
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.
* INCOME, CALL PROTECTION STILL TOP PRIORITIES
During periods of lower interest rates, one of the key challenges we face
is to continue delivering an attractive level of income while maintaining
high credit quality. Although yields on municipal securities have risen
somewhat in recent months, they remain much lower than the yields provided
by many of the portfolio's older bond holdings. As these older bonds reach
their call dates, we continue to seek new holdings to maintain the fund's
income stream. We are also attempting to select bonds with the longest
call dates to maximize the length of time these bonds will generate income
for the fund while minimizing the possibility that they will be called by
the issuer and refinanced with debt carrying a lower interest rate.
In our search for income, we have focused primarily on
security-by-security analysis to add appropriate holdings to the
portfolio. During the reporting period, the fund's investment in Marine
World USA provided particularly strong returns. This aquarium in Vallejo,
California, was recently purchased by a well-capitalized theme park
company and enjoyed a 70% rise in attendance during 1998.
The fund's West Contra Costa School District bonds also performed quite
well; although these bonds are not rated by the major agencies, we have
upgraded our assessment of their creditworthiness based on the official
upgrade of California's general obligation bonds last October.
Riding the wave of low fuel prices and high passenger demand, the
portfolio's United Airline holdings performed exceptionally well over the
period. This carrier has successful hubs in both Los Angeles and San
Francisco, and ongoing demand has kept revenue high and interest payments
steady.
* SECTOR SELECTION BOOSTS INCOME
As a complement to our individual securities selection process, we have
identified three industry sectors in which taking on a bit more credit
risk can have particularly rewarding income results: transportation,
health care, and utilities. In transportation, economic growth continues
to provide solid underpinnings for the industry -- especially airline and
air freight companies. At the same time, many of these issuers enjoy broad
market diversification, adding to their business strength.
Among health-care issuers, positive trends toward cost containment and
improved operating efficiency continue to provide opportunities. Over the
period, we concentrated on selling lower coupon issues and reducing
exposure to riskier hospital securities while seeking potentially
insurable credits that may have the potential for credit upgrades in the
future.
In the utility sector, we believe that while deregulation and
restructuring are still in the early stages, the prices of many municipal
electric utility bonds have already been fully discounted, and these bonds
now represent significant value. We are now selectively adding bonds from
issuers with low cost structures, attractive business strategies, and
adequate resources for recovering costs incurred during the era of
regulation.
* LOW INTEREST RATES BOOSTED VALUE OF LEVERAGING
The low interest rates we have enjoyed over the past year have benefited
the fund's leveraging strategy, which historically has been useful in
enhancing the fund's current income. In leveraging, the fund issues and
sells preferred shares to institutional short-term investors at low rates
and reinvests the proceeds in longer-term, higher-paying bonds. After
earnings from the bonds are used to pay dividends to the preferred stock
shareholders, the surplus is used to enhance income for the common stock
shareholders. With the Federal Reserve Board lowering short-term interest
rates three times last fall and long-term interest rates edging up over
the past few months, the spread between short- and long-term rates has
widened, making leveraging a successful income-generating strategy over
the annual period.
With indications that inflation may be starting to rise, the consumer
price index is moving towards an annualized core inflation rate of
approximately 2%. Since inflation in 1998 was practically nonexistent, a
move to 2% may seem tremendous, but is actually still well below what has
been generally considered average (4%). And despite some signs of
inflation, we still live predominately in a deflationary world where many
prices are falling. Just look at online stock trading prices and the
discounts available from online bookstores for evidence of deflation.
It is important to keep inflation in mind when investors determine what
constitutes a good rate of return. Simply put, a yield of 6% with 2%
inflation is still a solid return, especially once the psychology of an
advancing stock market begins to shift. When that happens, a steady 4%
after-inflation yield looks very good in addition to the benefit of
substantially less volatility.
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 4/30/99, 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 4/30/99
Lehman Bros. Consumer
Market Municipal price
(common shares) NAV price Bond Index index
- --------------------------------------------------------------------
1 year 6.86% 8.11% 6.95% 2.28%
- --------------------------------------------------------------------
5 years 48.23 55.40 43.57 12.75
Annual average 8.19 9.22 7.50 2.43
- --------------------------------------------------------------------
Life of fund (11/27/92) 68.20 57.81 55.22 17.04
Annual average 8.44 7.36 7.10 2.48
- --------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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 4/30/99
- ---------------------------------------------------------------------------
Distributions (common shares)
- ---------------------------------------------------------------------------
Number 12
- ---------------------------------------------------------------------------
Income $0.8700
- ---------------------------------------------------------------------------
Capital gains1 0.0514
- ---------------------------------------------------------------------------
Total $0.9214
- ---------------------------------------------------------------------------
Preferred shares Series A (320 shares)
- ---------------------------------------------------------------------------
Income $1,658.85
- ---------------------------------------------------------------------------
Capital gains1 106.06
- ---------------------------------------------------------------------------
Total $1,764.91
- ---------------------------------------------------------------------------
Share value (common shares) NAV Market price
- ---------------------------------------------------------------------------
4/30/98 $15.37 $15.250
- ---------------------------------------------------------------------------
4/30/99 15.49 15.562
- ---------------------------------------------------------------------------
Current return (common shares)
- ---------------------------------------------------------------------------
Current dividend rate2 5.62% 5.59%
- ---------------------------------------------------------------------------
Taxable equivalent3 10.26 10.20
- ---------------------------------------------------------------------------
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.
TOTAL RETURN FOR PERIODS ENDED 3/31/99 (most recent calendar quarter)
Market
(common shares) NAV price
- ---------------------------------------------------------------------------
1 year 5.96% 8.05%
- ---------------------------------------------------------------------------
5 years 48.73 59.10
Annual average 8.26 9.73
- ---------------------------------------------------------------------------
Life of fund (11/27/92) 68.06 62.14
Annual average 8.53 7.92
- ---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost.
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. This 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 index 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.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type
and industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of
shares. (For funds with preferred shares, the amount subtracted from total
assets includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the
amounts listed in the Statement of Operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
Report of independent accountants
For the fiscal year ended April 30, 1999
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, 1999, 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, 1999
by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 11, 1999
<TABLE>
<CAPTION>
The fund's portfolio
April 30, 1999
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
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (98.9%) (a)
PRINCIPAL AMOUNT RATING(RAT) VALUE
<S> <C> <C> <C>
California (98.9%)
- --------------------------------------------------------------------------------------------------------------------------
$2,000,000 Alameda, Corridor Trans. Auth. Rev. Bonds,
MBIA, Ser. A, 4 3/4s, 10/1/25 AAA $ 1,887,500
4,200,000 Anaheim, Pub. Fin. Auth. Lease Rev. Bonds
(Pub. Impts.), FSA, Ser. C, 6s, 9/1/16 AAA 4,798,500
3,000,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates
Med. Ctr.), Ser. A, 6.55s, 12/1/22 A+ 3,352,500
1,500,000 Big Bear Lake Wtr. Rev. Bonds, MBIA, 6s, 4/1/22 Aaa 1,706,250
3,600,000 CA Edl. Fac. Auth. Rev. Bonds (U. of San Francisco),
6.4s, 10/1/17 Aaa 3,996,000
3,000,000 CA Hlth. Fac. Fin. Auth. Rev. Bonds (Henry Mayo
Newhall), Ser. A, 8s, 10/1/18 A+ 3,069,210
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds
1,980,000 Ser. C, 8.3s, 8/1/19 Aa2 2,002,275
1,760,000 Ser. A, 7 3/4s, 8/1/17 Aa2 1,803,613
3,575,000 CA Poll. Control Fin. Auth. Rev. Bonds (Southern
CA Edison Co.), AMBAC, 6s, 7/1/27 AAA 3,793,969
2,000,000 CA State Dept. Wtr. Resources IFB (Central Valley),
10.349s, 12/1/12 (acquired 11/27/92,
cost $2,198,104) (RES) Aa2 2,965,000
2,000,000 CA State Pub. Wks. Board Lease Rev. Bonds
(Dept. of Corrections Monterey Cnty. Sole),
Ser. A, 7s, 11/1/19 Aaa 2,355,000
1,250,000 CA Statewide Cmnty. Dev. Auth. COP
(The Internext Group), 5 3/8s, 4/1/30 BBB 1,226,563
CA Statewide Cmnty. Dev. Auth. Rev. Bonds
(United Airlines Inc.)
1,000,000 Ser. A, 5.7s, 10/1/33 Baa3 1,021,250
1,500,000 5 5/8s, 10/1/34 Baa3 1,522,500
1,750,000 Delano, COP (Delano Regl. Med. Ctr.), 5.6s, 1/1/26 BBB- 1,754,375
1,500,000 Duarte, COP, Ser. A, 5 1/4s, 4/1/31 BBB+ 1,447,500
3,120,000 Los Angeles, Multi-Fam. Rev. Bonds (Mission Plaza
Apts.), GNMA Coll., Ser. A, 7.8s, 1/20/35 AAA 3,377,400
1,500,000 Los Angeles, Dept. of Wtr. & Pwr. Elec. Rev. Bonds,
MBIA, 6s, 6/1/13 Aaa 1,593,750
200,000 Los Angeles, School Dist. COP VRDN (Belmont
Learning Complex), Ser. A, 3.85s, 12/1/17 VMIG1 200,000
Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB
2,830,000 MBIA, 9.618s, 8/1/25 Aaa 3,399,538
2,370,000 MBIA, 9.659s, 8/1/25 Aaa 2,894,363
4,950,000 Orange Cnty., Pub. Fin. Auth. Waste Mgt. Syst.
Rev. Bonds, AMBAC, 5 3/4s, 12/1/10 Aaa 5,506,875
3,250,000 Rancho, Wtr. Dist. Fin. Auth. IFB, AMBAC,
9.305s, 8/17/21 Aaa 3,790,313
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 5,569,373
3,000,000 U. of CA Hosp. Rev. Bonds (U. of CA, Med. Ctr.),
AMBAC, 5 3/4s, 7/1/15 Aaa 3,247,500
5,000,000 Vallejo, COP (Marine World Foundation),
7s, 2/1/17 BB+/P 5,412,500
3,345,000 Victor, Elementary School Dist. COP (School
Construction Refinancing), MBIA, 6.45s, 5/1/18 Aaa 4,001,456
West Contra Costa U. School Dist. COP
1,860,000 7 1/8s, 1/1/24 BBB+ 2,041,350
1,140,000 6 7/8s, 1/1/09 BBB+ 1,256,850
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $79,305,428) (b) $ 86,412,023
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $87,381,883.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at April 30,
1999 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, 1999. Securities rated by
Putnam are indicated by "/P" and are not publicly rated. Ratings are not covered by the Report of independent
accountants.
(b) The aggregate identified cost on a tax basis is $79,305,428, resulting in gross unrealized appreciation and
depreciation of $7,506,964 and $400,369, respectively, or net unrealized appreciation of $7,106,595.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at
April 30, 1999 was $2,965,000 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, 1999.
The rates shown on IFB, which are securities paying interest rates that vary inversely
to changes in the market interest rates, and VRDN's are the current interest rates at April 30, 1999.
The fund had the following industry group concentrations greater than 10% at April 30, 1999 (as a percentage of
net assets):
Utilities 19.6%
Health care 16.1
Education 13.2
The fund had the following insurance concentrations greater than 10% at April 30, 1999 (as a percentage of
net assets):
AMBAC 25.1%
MBIA 17.7
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 1999
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
- -------------------------------------------------------------------------------
Municipal Bond
Index (Long) $1,601,438 $1,598,799 Jun-99 $2,639
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $79,305,428) (Note 1) $86,412,023
- -----------------------------------------------------------------------------------------------
Interest receivable 1,288,493
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 275,231
- -----------------------------------------------------------------------------------------------
Total assets 87,975,747
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 19,881
- -----------------------------------------------------------------------------------------------
Payable for variation margin 16,656
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 333,988
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 153,608
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 7,889
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 8,931
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,325
- -----------------------------------------------------------------------------------------------
Other accrued expenses 51,586
- -----------------------------------------------------------------------------------------------
Total liabilities 593,864
- -----------------------------------------------------------------------------------------------
Net assets $87,381,883
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) 353,463
- -----------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments (Note 1) (188,099)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 7,109,234
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $87,381,883
Computation of net asset value
- -----------------------------------------------------------------------------------------------
Series A remarketed preferred shares $16,000,000
- -----------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 1,446
- -----------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares -- liquidation preference $16,001,446
- -----------------------------------------------------------------------------------------------
Net assets available to common shares $71,380,437
- -----------------------------------------------------------------------------------------------
Net asset value per common share ($71,380,437 divided by 4,607,092 shares) $15.49
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended April 30, 1999
<S> <C>
Tax exempt interest income: $5,378,216
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 616,149
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 89,512
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,381
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,044
- -----------------------------------------------------------------------------------------------
Reports to shareholders 14,310
- -----------------------------------------------------------------------------------------------
Registration fees 75
- -----------------------------------------------------------------------------------------------
Auditing 48,892
- -----------------------------------------------------------------------------------------------
Legal 8,625
- -----------------------------------------------------------------------------------------------
Postage 8,315
- -----------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 50,444
- -----------------------------------------------------------------------------------------------
Other 29,412
- -----------------------------------------------------------------------------------------------
Total expenses 879,159
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (25,251)
- -----------------------------------------------------------------------------------------------
Net expenses 853,908
- -----------------------------------------------------------------------------------------------
Net investment income 4,524,308
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (73,180)
- -----------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 59,754
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 861,939
- -----------------------------------------------------------------------------------------------
Net gain on investments 848,513
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,372,821
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended April 30
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 4,524,308 $ 4,658,755
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (13,426) 521,836
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 861,939 2,293,884
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,372,821 7,474,475
Distributions to remarketed preferred shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (530,833) (581,935)
- ---------------------------------------------------------------------------------------------------------------
From net realized gains (33,938) (40,548)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders (excluding cumulative
undeclared dividends on remarketed preferred shares of
$1,446 and $14,381, respectively) 4,808,050 6,851,992
- ---------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (4,007,852) (3,909,205)
- ---------------------------------------------------------------------------------------------------------------
From net realized gains (236,804) (328,940)
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 563,394 2,613,847
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 86,818,489 84,204,642
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $353,463 and $367,840, respectively) $87,381,883 $86,818,489
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (common shares) $15.37 $14.80 $14.55 $14.16 $14.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .98 1.01 1.06 1.04 1.04
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Net realized and unrealized
gain (loss) on investments .18 .61 .24 .41 (.15)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.16 1.62 1.30 1.45 .89
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income
- ---------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.11) (.12) (.12) (.13) (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.87) (.85) (.91) (.93) (.95)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ---------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.01) (.01) -- (d) -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.05) (.07) (.02) -- (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain to common shareholders
- ---------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- -- -- --(d)
- ---------------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.04) (1.05) (1.05) (1.06) (1.22)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $15.49 $15.37 $14.80 $14.55 $14.16
- ---------------------------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $15.56 $15.25 $15.00 $14.38 $13.63
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at market
value (common shares) (%)(a) 8.11 7.71 11.02 12.68 6.67
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $87,382 $86,818 $84,205 $83,064 $81,269
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.22 1.19 1.23 1.26 1.20
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 5.52 5.80 6.28 6.11 6.52
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 13.87 25.26 35.98 125.01 101.23
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Total 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
April 30, 1999
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 Investment
Management, Inc. ("Putnam Management"), the fund's manager, a wholly-owned
subsidiary of Putnam Investments, Inc. following procedures approved by
the Trustees, and such valuations and procedures are reviewed periodically
by 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, 1999 was 3.05%. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available capital
loss carryovers) under income tax regulations. For the year ended April
30, 1999, the fund had no reclassification.
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 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 0.70% of the liquidation
preference of the remarketed preferred shares outstanding during the
period).
As part of the subcustodian contract between the subcustodian bank and
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc, the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At April 30, 1999, the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
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 PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended April 30, 1999, fund expenses were reduced by $25,251
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, 1999, purchases and sales of investment
securities other than short-term investments aggregated $12,125,032 and
$11,901,965, 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 April 30, 1999, no such restrictions have been placed
on the fund.
Federal tax information
(Unaudited)
The fund has designated 100% of dividends paid from net investment income
during the fiscal year as tax exempt for Federal income tax purposes.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Results of October 1, 1998 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 1, 1998. At the
meeting, each of the nominees for Trustees was elected, as follows:
Common Shares Preferred Shares
Votes Votes
Votes for withheld Votes for withheld
Jameson Adkins Baxter 3,058,777 59,171 320 0
Hans H. Estin 3,059,687 58,261 320 0
R.J. Jackson 3,055,488 62,460 320 0
Paul L. Joskow 3,057,687 60,261 320 0
Elizabeth T. Kennan 3,057,377 60,571 320 0
Lawrence J. Lasser 3,059,373 58,575 320 0
John H. Mullin III 3,059,373 58,575 320 0
Donald S. Perkins 3,055,353 62,595 320 0
William F. Pounds 3,057,649 60,299 320 0
George Putnam 3,058,231 59,717 320 0
George Putnam, III 3,053,635 64,313 320 0
A.J.C. Smith 3,059,955 57,993 320 0
W. Thomas Stephens 3,055,973 61,975 320 0
W. Nicholas Thorndike 3,057,220 60,728 320 0
A proposal to ratify the selection of PricewaterhouseCoopers LLP as
independent accountants for the fund was approved as follows: 3,004,691
votes for, and 11,770 votes against, with 101,487 abstentions and
non-broker votes. A proposal to approve an amendment to the fund's
fundamental investment restriction with respect to making loans was
approved as follows: 2,413,729 votes for, and 179,838 votes against, with
524,381 abstentions and non-broker votes. A proposal to approve an
amendment to the fund's fundamental policy concerning the purchase of
bonds paying interest subject to the federal Alternative Minimum Tax was
approved as follows: 2,416,847 votes for, and 157,135 votes against, with
543,966 abstentions and non-broker votes.
Fund information
WEB SITE
www.putnaminv.com
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
PricewaterhouseCoopers LLP
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
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Richard P. Wyke
Vice President and Fund Manager
Richard A. Monaghan
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 Web site (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
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
52512 184 6/99
