Putnam
California
Investment Grade
Municipal Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam has introduced a number of
reforms for the benefit of shareholders, including increasing the amount
of disclosure for our funds. We are now including additional information
about your fund's management team. Following the Outlook for Your Fund,
we list any changes in your fund's Portfolio Leader and Portfolio
Members during the prior year period, the current Portfolio Leader's and
Portfolio Members' other fund management responsibilities at Putnam, and
the dollar range of fund shares owned by these individuals.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the
investment management industry. Myra R. Drucker is a Vice Chair of the
Board of Trustees of Sarah Lawrence College and serves as Chair of the
New York Stock Exchange (NYSE) Pension Managers Advisory Committee and
as a Trustee of Commonfund, a not-for-profit asset management firm.
Richard B. Worley is Managing Partner of Permit Capital LLC, an
investment management firm. Both Ms. Drucker and Mr. Worley are
independent Trustees (i.e., Trustees who are not "interested persons" of
your fund or its investment advisor). Charles E. Haldeman, Jr., the
third new Trustee, is President and Chief Executive Officer of Putnam
Investments.
During the period covered by the following report, Putnam California
Investment Grade Municipal Trust delivered respectable results. In the
following pages, the fund managers discuss fund performance, strategy,
and their outlook for fiscal 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 15, 2004
Report from Fund Management
Fund highlights
* For the six months ended October 31, 2004, Putnam California
Investment Grade Municipal Trust returned 7.70% at net asset value (NAV)
and 7.84% at market price.
* The fund's benchmark, the Lehman Municipal Bond Index, returned 4.78%.
* The average return for the fund's Lipper category, California
Municipal Debt Funds (closed-end), was 7.41%.
* See the Performance Summary beginning on page 9 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
Since your fund invests primarily in California municipal bonds, it was
able to benefit from a significant rally in the state's bond market
during the six months ended October 31, 2004. The portfolio's
single-state focus during a period of strong relative performance
enabled the fund to outperform its nationally diversified benchmark.
Based on results at NAV, the fund modestly outperformed the average for
its Lipper category. We attribute this in part to the fact that the
portfolio did not include any airline-related industrial development
bonds (IDBs) during a time when the sector performed poorly, as many of
its peers did. The performance of fund shares at market price, which
reflects investors' more sanguine view of the California municipal
market, also beat the benchmark and Lipper peer group average. It is
important to note that a fund's performance at market price may differ
from its results at NAV. Although market price performance generally
reflects investment results, it may also be influenced by several other
factors, including changes in investor perceptions of the fund or its
investment advisor, market conditions, fluctuations in supply and demand
for the fund's shares, and changes in fund distributions.
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TOTAL RETURN FOR
PERIODS ENDED 10/31/04
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Market
(inception 11/27/92) NAV price
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6 months 7.70% 7.84%
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1 year 9.10 9.47
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5 years 42.55 33.20
Annual average 7.35 5.90
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10 years 105.15 100.31
Annual average 7.45 7.19
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Annual average
(life of fund) 7.19 5.51
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return, net asset value, and market price will fluctuate and you may
have a gain or a loss when you sell your shares. Performance assumes
reinvestment of distributions and does not account for taxes.
FUND PROFILE
Putnam California Investment Grade Municipal Trust seeks to provide high
current income free from federal income tax and California personal
income taxes, consistent with the preservation of capital. It may be
suitable for conservative investors seeking tax-free income through
high-quality investments.
Market overview
Over the past six months, which constitute the first half of your fund's
2005 fiscal year, the yield on the 10-year Treasury bond fell, and bond
prices, which move in the opposite direction of yields, rose. In
mid-March, the bond market had begun to anticipate a change in the
Federal Reserve Board's monetary policy. Treasury bonds sold off sharply
and pushed yields upward, as strong economic growth and rising corporate
profitability increased the likelihood that the Fed would raise
short-term interest rates at its June 30 meeting. Interestingly, when
the Fed announced what had been a widely anticipated 25-basis-point
increase, the bond market changed its course. Yields of bonds with
maturities in the range of 11-21 years trended downward. At the same
time, yields rose for bonds with short maturities and those with very
long maturities (over 21 years). This resulted in a flattening of the
yield curve -- that is, shorter- and longer-term interest rates began to
converge.
Among uninsured bonds and bonds rated A and below, yield spreads
remained essentially flat for the period. However, these
higher-yielding securities continued to provide attractive income
streams that contributed to the fund's total return during the period.
Municipal bonds issued by the state of California were generally strong
performers. The California economy improved to such an extent that three
bond-rating agencies -- Moody's, Standard & Poor's, and Fitch --
upgraded the state's credit rating. Tobacco settlement bonds performed
fairly well during the period. Yields on these bonds varied with the
results of ongoing legal battles, but declined overall since May, and
their prices rose, accordingly. Airline-related industrial development
bonds (IDBs) performed poorly, in general, as the industry continued to
face financial difficulties that were made worse by record high oil
prices. New York City general obligation bonds rose in price over the
past six months, reflecting a dearth of new issuance, as well as
investors' confidence in improving economic prospects for the city.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 10/31/04
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Bonds
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Lehman Municipal Bond Index (tax-exempt bonds) 4.78%
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Lehman Aggregate Bond Index (broad bond market) 4.23%
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Lehman Government Bond Index (U.S. Treasury and agency securities) 3.96%
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JP Morgan Global High Yield Index (global high-yield corporate bonds) 6.14%
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Equities
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S&P 500 Index (broad stock market) 2.96%
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Russell 1000 Index (large-company stocks) 3.04%
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Russell 2000 Index (stocks of small and midsize companies) 4.87%
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These indexes provide an overview of performance in different market
sectors for the six months ended 10/31/04.
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Strategy overview
Because we believe that the Fed is likely to continue to raise
short-term interest rates through mid-2005, we are positioning the
portfolio more defensively. This involves shortening the fund's
duration, which means reducing its sensitivity to changes in interest
rates. To accomplish this, we began the process of selling longer-term
bonds and replacing them with shorter-term bonds, which have a shorter
duration. Meanwhile, we continued to trim and diversify the fund's
positions in uninsured bonds and bonds rated A and below, which have
performed strongly. The fund maintained its overweight position in
tobacco settlement bonds. We closely monitored developments in that
sector.
In previous fiscal years, the fund emphasized non-callable bonds --
bonds that the issuer is not permitted to redeem (or call) before the
maturity date. These issues performed well as rates fell through March
2004, but during the spring we began to moderate this position, selling
non-callable bonds and purchasing callable issues scheduled to mature in
the 15- to 20-year range. We believe callable bonds may perform better
than non-callable bonds if interest rates rise and the yield curve
flattens further.
[GRAPHIC OMITTED: horizontal bar chart THE FUND'S MATURITY AND DURATION
COMPARED]
THE FUND'S MATURITY AND DURATION COMPARED
4/30/04 10/31/04
Average effective maturity in years 11.0 9.0
Duration in years 10.2 8.6
This chart compares changes in the fund's duration (a measure of its
sensitivity to interest-rate changes) and its average effective
maturity (a weighted average of the holdings' maturities).
Average effective maturity also takes into account put and call
features, where applicable, and reflects prepayments for mortgage-backed
securities.
How fund holdings affected performance
The fund benefited from its investment in California general obligation
bonds (GOs), which rallied strongly during the six months ended October
31. We had increased the fund's investment in this sector prior to the
start of the fiscal year, anticipating that the $15 billion deficit
financing issue that was approved by California voters in November 2003
would be well received. The sale of these economic recovery bonds helped
to avert a liquidity crisis and prompted upgrades to the State of
California's credit rating by all the major credit rating agencies
during the reporting period. Prices of California GOs rose to reflect
the more upbeat outlook.
The fund's modest stake in lower-rated bonds helped performance
tremendously. The more credit-sensitive pockets of the market performed
very well due to increased demand from investors who were hungry for
yield in a low-interest-rate environment. Several of the fund's
uninsured holdings in the health-care sector proved especially
rewarding. Torrance Hospital Revenue Bonds, issued for Torrance Memorial
Hospital, which are rated A1 by Moody's, and bonds issued by the
Association of Bay Area Governments Financing Authority for American
Baptist Homes of the West, exemplify our strategy.
Tobacco settlement bonds also enjoyed strong performance during the
six-month period. The fund is invested in two types of these revenue
bonds, both of which are issued by the Golden State Tobacco Securitization
Corp. One group of bonds is secured 100% by the income stream from tobacco
companies' settlement obligations to the states and generally offers
higher yields than bonds of comparable quality. The second group has an
extra level of protection for bondholders; while the main source of income
for the bonds' interest payments is derived from the tobacco companies'
payments, the State of California would make up any shortfall if those
payments should prove insufficient due to a faster-than-expected decline
in cigarette sales. Thus, the outlook for these bonds is more closely
aligned with that of the state, since investors view it as quasi-state
debt. When the California GOs appreciated strongly, these enhanced bonds
followed suit, outperforming other tobacco settlement bonds.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW
Aaa -- (70.1%)
Aa -- (3.6%)
A -- (8.4%)
Baa -- (16.8%)
Ba -- (1.1%)
As a percentage of market value as of 10/31/04. A bond rated Baa or
higher is considered investment grade. The chart reflects Moody's
ratings; percentages may include bonds not rated by Moody's but
considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
In response to the Fed's increases in the federal funds rate, yields on
the short end and long end of the yield curve rose. However, municipal
bond yields in the 10- to 20-year maturity range fell, producing what is
often called a "butterfly movement" in the investment community. High
oil prices, lingering concerns about terrorism, and questions about the
strength of the U.S. recovery contributed to the lower yields in the
middle of the yield curve. Since bond prices rise when yields fall,
municipal bonds in the 2015 to 2025 maturity range outperformed
municipal securities at the short and long end of the municipal bond
yield curve for the period. For example, the fund's investments in San
Juan Basin Authority Lease Revenue Bonds, which have a 5% coupon and
mature in 2022, performed very well.
We also were fortunate that the portfolio had no exposure to the airline
industry, which struggled in the face of higher fuel costs, among other
factors. Please note that all holdings in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
We'll continue to monitor the progress of California's recovery closely.
Tax receipts are about $2 billion ahead of projections, but that still
leaves the state with a $7 to $8 billion dollar deficit between revenues
and expenses. Governor Schwarzenegger has made some progress on cutting
spending out of the budget, but more work needs to be done before the
state's credit status will be stabilized.
Judging from the yield curve, the bond market appears to have largely
shrugged off the recent Fed rate hikes. However, we believe that
interest rates all along the yield curve are more likely to rise than
fall. We anticipate greater increases for bonds with shorter maturities
because we believe the Fed will continue to raise short-term rates
incrementally through mid-2005. This also suggests further flattening of
the yield curve. The fund is positioned defensively in terms of
duration, and we will continue to monitor and adjust duration as seems
appropriate. We believe inflation will remain low, despite the threat
posed by high oil prices. We also anticipate the GDP growth rate will
slow during the next two quarters, as the effects of the Fed's
tightening policy are felt.
In general, these signs indicate that we are headed into a more
challenging environment for bond investing. Our task will be to continue
to search for the most attrac tive opportunities among tax-exempt
securities, and to balance the pursuit of attractive current income with
prudent risk management.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. This fund
concentrates its investments in one state and involves more risk than a
fund that invests more broadly. Capital gains, if any, are taxable for
federal and, in most cases, state purposes. For some investors,
investment income may be subject to the federal alternative minimum tax.
Income from federally exempt funds may be subject to state and local
taxes. Mutual funds that invest in bonds are subject to certain risks,
including interest-rate risk, credit risk, and inflation risk. As
interest rates rise, the prices of bonds fall. Long-term bonds are more
exposed to interest-rate risk than short-term bonds. Unlike bonds, bond
funds have ongoing fees and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Tax Exempt
Fixed-Income Team. David Hamlin is the Portfolio Leader, and Paul Drury,
Susan McCormack, and James St. John are Portfolio Members of your fund.
The Portfolio Leader and Portfolio Members coordinate the team's
management of the fund.
For a complete listing of the members of the Putnam Tax Exempt
Fixed-Income Team, including those who are not Portfolio Leaders or
Portfolio Members of your fund, visit Putnam's Individual Investor Web
site at www.putnaminvestments.com.
Fund ownership
The table below shows fund ownership, in dollar ranges, by the fund's
Portfolio Leader and Portfolio Members. Information shown is for the
current and prior year ended November 30.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS
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$1 - $10,001 - $50,001- $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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David Hamlin 2004 *
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Portfolio Leader 2003 *
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Paul Drury 2004 *
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Portfolio Member 2003 *
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Susan McCormack 2004 *
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Portfolio Member 2003 *
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James St. John 2004 *
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Portfolio Member 2003 *
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Other funds managed by the Portfolio Leader and Portfolio Members
David Hamlin is the Portfolio Leader and Paul Drury, Susan McCormack,
and James St. John are Portfolio Members for Putnam's tax-exempt funds
for the following states: Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York, Ohio, and Pennsylvania. The
same group also manages Putnam AMT-Free Insured Municipal Fund*, Putnam
High Yield Municipal Trust, Putnam Investment Grade Municipal Trust,
Putnam Managed Municipal Income Trust, Putnam Municipal Bond Fund,
Putnam Municipal Income Fund, Putnam Municipal Opportunities Trust,
Putnam New York Investment Grade Municipal Trust, Putnam Tax Exempt
Income Fund, Putnam Tax-Free Health Care Fund and Putnam Tax-Free High
Yield Fund.
David Hamlin, Paul Drury, Susan McCormack, and James St. John may also
manage other accounts advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended October 31, 2004, Portfolio Member Richard Wyke
left your fund's management team.
* Formerly Putnam Tax-Free Insured Fund.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended October 31, 2004. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a
fund's investment strategy. Data represents past performance. Past
performance does not guarantee future results. More recent returns may
be less or more than those shown. Investment return, net asset value,
and market price will fluctuate and you may have a gain or a loss when
you sell your shares.
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TOTAL RETURN AND COMPARATIVE INDEX RESULTS FOR PERIODS ENDED 10/31/04
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Lipper
California
Lehman Municipal
Municipal Debt Funds
Market Bond (closed-end)
NAV price Index category average*
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6 months 7.70% 7.84% 4.78% 7.41%
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1 year 9.10 9.47 6.02 9.99
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5 years 42.55 33.20 41.48 51.73
Annual average 7.35 5.90 7.19 8.64
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10 years 105.15 100.31 97.69 114.13
Annual average 7.45 7.19 7.05 7.87
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Annual average
Life of fund
(since 11/27/92) 7.19 5.51 6.50 6.96
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Performance assumes reinvestment of distributions and does not account
for taxes.
Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 10/31/04, there
were 30, 30, 19, and 17 funds, respectively, in this Lipper category.
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TOTAL RETURN FOR PERIODS ENDED 9/30/04 (MOST RECENT CALENDAR QUARTER)
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NAV Market price
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6 months 2.08% -2.31%
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1 year 6.81 7.03
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5 years 38.36 24.14
Annual average 6.71 4.42
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10 years 96.00 87.56
Annual average 6.96 6.49
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Annual average
Life of fund
(since 11/27/92) 7.11 5.43
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 10/31/04
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Distributions from common shares
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Number 6
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Income 1 $0.372
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Capital gains 1 --
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Total $0.372
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Series A
Distributions from preferred shares (320 shares)
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Income 1 $297.84
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Capital gains 1 --
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Total $297.84
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Share value: NAV Market price
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4/30/04 $14.48 $12.82
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10/31/04 15.16 13.44
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Current return (common shares, end of period)
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Current dividend rate 2 4.91% 5.54%
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Taxable equivalent 3 8.33 9.40
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1 Capital gains, if any, are taxable for federal and, in most cases,
state purposes. For some investors, investment income may be subject to
the federal alternative minimum tax. Income from federally exempt funds
may be subject to state and local taxes.
2 Most recent distribution, excluding capital gains, annualized and
divided by NAV or market price at end of period.
3 Assumes maximum 41.05% federal and state tax rate for 2004. 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
exchanges such as the American Stock Exchange and the New York Stock
Exchange.
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index used to mirror
the investable universe of the U.S. dollar global high-yield corporate
debt market of both developed and emerging markets.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Russell 1000 Index is an unmanaged index of the largest 1,000 companies
in the Russell 3000 Index.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell
3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
The fund's portfolio
October 31, 2004 (Unaudited)
Key to Abbreviations
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AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
G.O. Bonds General Obligation Bonds
IFB Inverse Floating Rate Bonds
MBIA MBIA Insurance Company
Municipal bonds and notes (100.0%) (a)
Principal amount Rating (RAT) Value
California (100.0%)
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ABAG Fin. Auth. COP
$500,000 (American Baptist Homes), Ser. A,
6.2s, 10/1/27 BB+ $498,750
1,000,000 (Odd Fellows Home), 6s, 8/15/24 A 1,068,750
8,000,000 Alameda, Corridor Trans. Auth.
Rev. Bonds, Ser. 99-A, MBIA, zero %,
10/1/31 Aaa 1,890,000
2,000,000 Alameda, Recreational Fac. Impts.
COP, MBIA, 5 3/4s, 12/1/21 Aaa 2,205,000
1,530,000 Anaheim, Pub. Fin. Auth. Rev. Bonds
(Distr. Syst.), MBIA, 5 1/4s,
10/1/22 Aaa 1,671,525
4,200,000 Anaheim, Pub. Fin. Auth. Lease
Rev. Bonds (Pub. Impts.), Ser. C,
FSA, 6s, 9/1/16 Aaa 5,129,250
300,000 Association of Bay Area Governments
(ABAG) Fin. Auth. for Nonprofit
Corps. Rev. Bonds (San Diego Hosp.
Assn.), Ser. C, 5 3/8s, 3/1/21 Baa1 309,375
500,000 CA Rev. Bonds (Stanford Hosp. &
Clinics), Ser. A, 5s, 11/15/23 A3 511,875
750,000 CA Edl. Fac. Auth. Rev. Bonds
(Lutheran U.), Ser. C, 4 1/2s,
10/1/19 Baa1 757,500
CA Hlth. Fac. Auth. Rev. Bonds
750,000 (Sinai Med. Ctr.), Ser. A, 6 1/4s,
12/1/34 A3 812,813
1,600,000 (Sutter Hlth.), Ser. A, MBIA,
5 3/8s, 8/15/30 Aaa 1,676,000
1,665,000 CA Hsg. Fin. Agcy. Rev. Bonds
(Multi-Fam. Hsg. III), Ser. B, MBIA,
5 1/2s, 8/1/39 Aaa 1,706,625
500,000 CA Poll. Control Fin. Auth.
Mandatory Put Bonds, 2s, 3/1/06 A3 495,625
CA State G.O. Bonds
2,000,000 5 3/4s, 12/1/29 A 2,190,000
250,000 5 1/8s, 4/1/23 A3 266,563
2,000,000 CA State Dept. of Wtr. Resources
IFB (Central Valley), 11.941s,
12/1/12 (acquired 11/27/92, cost
$2,198,104) (RES) Aa2 3,032,500
CA State Dept. of Wtr. Resources
Rev. Bonds
2,000,000 Ser. A, AMBAC, 5 1/2s, 5/1/16 Aaa 2,262,500
2,000,000 Ser. O, MBIA, 4 3/4s, 12/1/29 Aaa 2,002,500
2,290,000 CA State U. Syst. Rev. Bonds,
Ser. A, AMBAC, 5s, 11/1/33 Aaa 2,347,250
700,000 CA Statewide Cmnty. Dev. Auth. Apt.
Dev. Rev. Bonds (Irvine Apt.
Cmntys.), Ser. A-3, 5.1s, 5/15/25 Baa2 742,000
950,000 CA Statewide Cmnty. Dev. Auth. COP
(The Internext Group), 5 3/8s,
4/1/30 BBB- 946,438
850,000 CA Statewide Cmnty. Dev. Auth.
Multi-Fam. Rev. Bonds (Hsg. Equity
Res.), Ser. B, 5.2s, 12/1/29 Baa1 899,938
880,000 CA Tobacco Securitization Agcy.
Rev. Bonds (Gold Cnty. Funding
Corp.), 5 3/4s, 6/1/27 Baa3 789,800
Central CA Joint Pwr. Hlth. Fin.
Auth. COP (Cmnty. Hosp. of Central
CA)
200,000 6s, 2/1/30 Baa2 205,250
1,000,000 6s, 2/1/20 Baa2 1,056,250
1,945,000 Chabot-Las Positas, Cmnty. College
Dist. G.O. Bonds (Election of 2004),
Ser. A, MBIA, 5s, 8/1/25 Aaa 2,047,113
1,500,000 Commerce, Redev. Agcy. Rev. Bonds
(Project 1), zero %, 8/1/21 BBB 581,250
800,000 Delano, COP (Delano Regl. Med.
Ctr.), 5.6s, 1/1/26 BBB- 800,000
2,000,000 Desert, Cmnty. College Dist. G.O.
Bonds, Ser. A, MBIA, 5s, 8/1/26 Aaa 2,090,000
1,000,000 Duarte, COP, Ser. A, 5 1/4s, 4/1/31 Baa2 977,500
1,200,000 Foothill/Eastern Corridor Agcy.
Rev. Bonds (CA Toll Roads), 5 3/4s,
1/15/40 Baa3 1,216,500
Golden State Tobacco Securitization
Corp. Rev. Bonds
300,000 Ser. A-3, 7 7/8s, 6/1/42 BBB 322,875
1,000,000 Ser. 2003 A-1, 6 1/4s, 6/1/33 BBB 955,000
1,500,000 Ser. B, 5 5/8s, 6/1/38 A- 1,591,875
1,920,000 Jurupa, Unified School Dist. G.O.
Bonds (Election of 2001), FGIC, 5s,
8/1/25 Aaa 2,011,200
1,130,000 Los Angeles, Sanitation Equip.
Rev. Bonds, Ser. A, AMBAC, 5s,
2/1/24 Aaa 1,193,563
1,000,000 Los Angeles, Unified School Dist.
G.O. Bonds, Ser. B, FGIC, 5s, 7/1/17 Aaa 1,072,500
2,000,000 Los Angeles, Wtr. & Pwr. Rev. Bonds
(Pwr. Syst.), Ser. B, FSA, 5 1/8s,
7/1/20 Aaa 2,180,000
Metro. Wtr. Dist. Rev. Bonds
(Southern CA Waterworks), Ser. B,
MBIA
985,000 4 3/4s, 7/1/21 Aaa 999,775
15,000 4 3/4s, 7/1/21 (Prerefunded) Aaa 15,713
500,000 Placentia, Redev. Auth. Tax Alloc.
Rev. Bonds, Ser. B, 5 3/4s, 8/1/32 BBB+ 527,500
500,000 Rancho Mirage, JT Powers Fin. Auth.
Rev. Bonds (Eisenhower Med. Ctr.),
5 7/8s, 7/1/26 A3 528,750
2,000,000 Sacramento, City Unified School
Dist. G.O. Bonds (Election 1999),
Ser. D, FSA, 5s, 7/1/28 Aaa 2,070,000
3,000,000 San Diego, Unified School Dist. G.O.
Bonds (Election of 1998), Ser. D,
FGIC, 5 1/4s, 7/1/21 Aaa 3,397,500
2,000,000 San Jose Fin. Auth. Rev. Bonds
(Civic Ctr.), Ser. B, AMBAC, 5s,
6/1/27 Aaa 2,052,500
1,270,000 San Jose, Redev. Agcy. Tax Alloc.
(Merged Area Redev.), FGIC, 5s,
8/1/27 Aaa 1,312,863
1,000,000 San Juan, Basin Auth. Rev. Bonds
(Ground Wtr. Recvy. Project), AMBAC,
5s, 12/1/34 Aaa 1,025,000
1,000,000 San Juan, Basin Auth. Lease
Rev. Bonds (Ground Wtr. Recvy.
Project), AMBAC, 5s, 12/1/22 Aaa 1,057,500
1,425,000 San Ramon Valley, Unified School
Dist. G.O. Bonds (Election of 2002),
FSA, 5s, 8/1/24 Aaa 1,501,594
1,000,000 Santa Barbara, Elementary School
Dist. G.O. Bonds (Election of 1998),
Ser. B, FSA, 5s, 8/1/29 Aaa 1,036,250
1,500,000 Santa Maria, Joint Unified High
School Dist. G.O. Bonds, Ser. A,
FSA, 5 1/4s, 8/1/25 Aaa 1,633,125
500,000 Sierra View, Hlth. Care Dist.
Rev. Bonds, 5.4s, 7/1/22 BBB+ 506,250
1,125,000 State Center, Cmnty. College Dist.
G.O. Bonds (Election of 2002),
Ser. A, MBIA, 5 1/4s, 8/1/25 Aaa 1,210,781
500,000 Tobacco Securitization Auth. of
Southern CA Rev. Bonds, Ser. B, 6s,
6/1/43 Ba1 420,000
1,000,000 Torrance, Memorial Med. Ctr.
Rev. Bonds, Ser. A, 6s, 6/1/22 A1 1,108,750
1,000,000 Tustin, Unified School Dist. Special
Tax (Cmnty. Fac. Dist. No. 97-1),
FSA, 5s, 9/1/32 Aaa 1,025,000
1,000,000 U. of CA Rev. Bonds, Ser. A, AMBAC,
5 1/8s, 5/15/18 Aaa 1,101,250
800,000 Vallejo, COP (Marine World
Foundation), 7s, 2/1/17 BBB-/P 826,000
3,345,000 Victor, Elementary School Dist. COP
(School Construction Refinancing),
MBIA, 6.45s, 5/1/18 Aaa 4,197,971
2,170,000 West Contra Costa Unified School
Dist. G.O. Bonds (Election of 2002),
Ser. C, FGIC, 5s, 8/1/29 AAA 2,240,525
1,000,000 WM S. Hart, Unified High School
Dist. G.O. Bonds, Ser. A, MBIA, 5s,
9/1/23 Aaa 1,060,000
- -------------------------------------------------------------------------------
Total Investments (cost $77,378,657) $83,368,050
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on portfolio market value.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at October 31, 2004 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, 2004. Securities rated by Putnam are indicated
by "/P".
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at October 31, 2004 was
$3,032,500 or 3.6% of portfolio market value.
The rates shown on mandatory put bonds are the current interest rates at
October 31, 2004.
The rates shown on 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, 2004.
The fund had the following industry group concentrations greater than
10% at October 31, 2004 (as a percentage of portfolio market value):
Water and sewer 12.4%
Health care 11.9
The fund had the following insurance concentrations greater than 10% at
October 31, 2004 (as a percentage of portfolio market value):
MBIA 27.3%
FSA 17.5
AMBAC 13.2
FGIC 12.0
The dates shown on mandatory put bonds are the next mandatory put dates.
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
October 31, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$77,378,657) (Note 1) $83,368,050
- -------------------------------------------------------------------------------
Cash 1,687,843
- -------------------------------------------------------------------------------
Interest and other receivables 1,349,392
- -------------------------------------------------------------------------------
Receivable for securities sold 1,759,520
- -------------------------------------------------------------------------------
Total assets 88,164,805
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to shareholders 285,605
- -------------------------------------------------------------------------------
Accrued preferred shares distribution payable (Note 1) 14,729
- -------------------------------------------------------------------------------
Payable for securities purchased 1,789,968
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 140,576
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 12,640
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 25,008
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 980
- -------------------------------------------------------------------------------
Other accrued expenses 40,823
- -------------------------------------------------------------------------------
Total liabilities 2,310,329
- -------------------------------------------------------------------------------
Series A remarketed preferred shares: (320 shares authorized
and outstanding at $50,000 per share (Note 4) 16,000,000
- -------------------------------------------------------------------------------
Net assets $69,854,476
Represented by
- -------------------------------------------------------------------------------
Paid-in capital -- common shares (unlimited shares
authorized) (Note 1) $64,103,468
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 360,795
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (599,180)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,989,393
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to common shares
outstanding $69,854,476
Computation of net asset value
- -------------------------------------------------------------------------------
Net asset value per common share ($69,854,476 divided by
4,607,092 shares) $15.16
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of operations
Six months ended October 31, 2004 (Unaudited)
Interest income: $2,124,923
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 272,130
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 16,862
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 19,937
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 4,875
- -------------------------------------------------------------------------------
Administrative services (Note 2) 2,932
- -------------------------------------------------------------------------------
Auditing 34,650
- -------------------------------------------------------------------------------
Preferred share remarketing agent fees 23,534
- -------------------------------------------------------------------------------
Other 30,221
- -------------------------------------------------------------------------------
Total expenses 405,141
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (13,318)
- -------------------------------------------------------------------------------
Net expenses 391,823
- -------------------------------------------------------------------------------
Net investment income 1,733,100
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,376,422
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 1,839,900
- -------------------------------------------------------------------------------
Net gain on investments 3,216,322
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $4,949,422
- -------------------------------------------------------------------------------
Distributions to Series A remarketed preferred shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (95,310)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations
(applicable to common shareholders) $4,854,112
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
October 31 April 30
Increase (decrease) in net assets 2004* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $1,733,100 $3,673,491
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,376,422 (319,614)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 1,839,900 (1,771,804)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 4,949,422 1,582,073
- -------------------------------------------------------------------------------
Distributions to Series A remarketed
preferred shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (95,310) (156,250)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations (applicable to common shareholders) 4,854,112 1,425,823
- -------------------------------------------------------------------------------
Distributions to common shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (1,713,633) (3,427,287)
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets 3,140,479 (2,001,464)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 66,713,997 68,715,461
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $360,795 and $436,638,
respectively) $69,854,476 $66,713,997
- -------------------------------------------------------------------------------
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.
Financial highlights
(For a common share outstanding throughout the period)
Six months
ended
October 31
Per-share (Unaudited) Year ended April 30
operating performance 2004 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period (common shares) $14.48 $14.92 $14.74 $14.69 $14.14 $15.49
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .38 .80 .84 .95 .96 .96
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .69 (.47) .28 .02 .58 (1.30)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.07 .33 1.12 .97 1.54 (.34)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to preferred shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.02) (.03) (.04) (.06) (.13) (.13)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.01) -- (e) -- -- (e)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations:
(applicable to common shares) 1.05 .30 1.07 .91 1.41 (.47)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.37) (.74) (.82) (.83) (.86) (.87)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- (.07) (.03) -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.37) (.74) (.89) (.86) (.86) (.88)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $15.16 $14.48 $14.92 $14.74 $14.69 $14.14
- ------------------------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $13.44 $12.82 $13.44 $13.82 $13.90 $13.44
- ------------------------------------------------------------------------------------------------------------------------------
Total return at market price
(common shares) (%)(b) 7.84* 0.81 3.73 5.51 9.75 (8.02)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(common shares) (in thousands) $69,854 $66,714 $68,715 $67,887 $67,667 $65,161
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .60* 1.16 1.20 1.20 1.22 1.21
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) 2.42* 5.11 5.41 5.97 5.67 5.72
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 28.91* 20.89 22.00 11.82 13.65 17.48
- ------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of common shares
outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Ratio reflects net assets available to common shares only; net investment income ratio also reflects reduction
for dividend payments to preferred shareholders.
(d) Includes amounts paid through expense offset arrangements (Note 2).
(e) Distributions amounted to less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
October 31, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam California Investment Grade Municipal Trust (the "fund"), a
Massachusetts business trust, 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 a high
current income exempt from federal income tax and California personal
income tax. The fund intends to achieve its objective by investing in
investment grade municipal securities constituting a portfolio that
Putnam Investment Management, LLC ("Putnam Management"), the fund's
Manager, an indirect wholly-owned subsidiary of Putnam, LLC, believes to
be consistent with preservation of capital. The fund may be affected by
economic and political developments in the state of California.
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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are valued at fair
value on the basis of valuations provided by an independent pricing
service, approved by the Trustees. Such services use information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Other investments are valued at fair
value following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. All premiums/discounts
are amortized/accreted on a yield-to-maturity basis. The premium in
excess of the call price, if any, is amortized to the call date;
thereafter, any remaining premium is amortized to maturity.
C) 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 of 1986 (the "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 Code, 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.
At April 30, 2004, the fund had a capital loss carryover of $1,975,601
available to the extent allowed by the Code to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- --------------------------------
$636,304 April 30, 2011
1,339,297 April 30, 2012
The aggregate identified cost on a tax basis is $77,378,657, resulting
in gross unrealized appreciation and depreciation of $6,069,900 and
$80,507, respectively, or net unrealized appreciation of $5,989,393.
D) Distributions to shareholders Distributions to common and preferred
shareholders from net investment income are recorded by the fund on
the ex-dividend date. Distributions from capital gains, if any, are
recorded on the ex-dividend date and paid at least annually. 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, 2004 was 1.40%. 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.
E) Determination of net asset value Net asset value of the common shares
is determined by dividing the value of all assets of the fund, less all
liabilities and the liquidation preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding as of
period end.
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 0.65% of the fund's weekly average net
assets attributable to common and preferred shares outstanding.
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 .65% 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, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended October 31, 2004, the
fund paid PFTC $36,799 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended October 31,
2004, the fund's expenses were reduced by $13,318 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $482, as a quarterly retainer, has been allocated to the fund, and
an additional fee for each Trustees meeting attended. 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
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 a 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 Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the statement of assets
and liabilities. The Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
Note 3
Purchases and sales of securities
During the six months ended October 31, 2004, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $23,503,832 and $24,206,730, respectively. There
were no purchases or sales of U.S. government securities.
Note 4
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 may 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, no such
restrictions have been placed on the fund.
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission ("SEC") and the Massachusetts
Securities Division representing a final settlement of all charges
brought against Putnam Management by those agencies on October 28, 2003
in connection with excessive short-term trading by Putnam employees and,
in the case of the charges brought by the Massachusetts Securities
Division, by participants in some Putnam-administered 401(k) plans. The
settlement with the SEC requires Putnam Management to pay $5 million in
disgorgement plus a civil monetary penalty of $50 million, and the
settlement with the Massachusetts Securities Division requires Putnam
Management to pay $5 million in restitution and an administrative fine
of $50 million. The settlements also leave intact the process
established under an earlier partial settlement with the SEC under which
Putnam Management agreed to pay the amount of restitution determined by
an independent consultant, which may exceed the disgorgement and
restitution amounts specified above, pursuant to a plan to be developed
by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear
all costs, including restitution, civil penalties and associated legal
fees stemming from both of these proceedings. The SEC's and
Massachusetts Securities Division's allegations and related matters also
serve as the general basis for numerous lawsuits, including purported
class action lawsuits filed against Putnam Management and certain
related parties, including certain Putnam funds. Putnam Management has
agreed to bear any costs incurred by Putnam funds in connection with
these lawsuits. Based on currently available information, Putnam
Management believes that the likelihood that the pending private
lawsuits and purported class action lawsuits will have a material
adverse financial impact on the fund is remote, and the pending actions
are not likely to materially affect its ability to provide investment
management services to its clients, including the Putnam funds.
Results of October 14, 2004
shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund was held on October 14,
2004. At the meeting, each of the nominees for Trustees was elected, as
follows:
Common shares
Votes
Votes for withheld
- ------------------------------------------------------------------
Jameson Adkins Baxter 3,973,778 71,267
Charles B. Curtis 3,968,468 76,277
Myra R. Drucker 3,973,070 71,975
Charles E. Haldeman, Jr. 3,967,921 77,124
Ronald J. Jackson 3,970,062 74,983
Paul L. Joskow 3,970,429 74,616
Elizabeth T. Kennan 3,968,768 76,277
John H. Mullin, III 3,978,729 66,316
George Putnam, III 3,970,629 74,416
A.J.C. Smith 3,974,951 70,094
W. Thomas Stephens 3,969,129 75,916
Richard B. Worley 3,955,828 89,217
Preferred Shares
Votes
Votes for withheld
- ------------------------------------------------------------------
Jameson Adkins Baxter 308 2
Charles B. Curtis 308 2
Myra R. Drucker 308 2
Charles E. Haldeman, Jr. 308 2
John A. Hill 308 2
Ronald J. Jackson 308 2
Paul L. Joskow 308 2
Elizabeth T. Kennan 308 2
John H. Mullin, III 308 2
Robert E. Patterson 308 2
George Putnam, III 308 2
A.J.C. Smith 308 2
W. Thomas Stephens 308 2
Richard B. Worley 308 2
Fund information
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and BSA
Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and
Chief Compliance Officer
Judith Cohen
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.putnaminvestments.com) anytime for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Do you want to save paper and receive this document faster?
Shareholders can sign up for email delivery of shareholder reports on
www.putnaminvestments.com.
216538 12/04
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
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(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: December 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: December 29, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: December 29, 2004