The California Muni Fund
Dear Fellow Shareholder:
Interest rates rose sharply in this year's first half, and bond prices
consequently fell. As result, the Net Asset Value of the California Muni Fund
dropped from $8.91 per share at year end 1995, to $7.78 per share on June 30,
1996. This was disappointing. However, municipal bonds generally outperformed
taxable bonds in the period. This reflected improving credit conditions for
municipals, favorable supply conditions, and diminished expectations for tax
reform legislation.
1996 began with a high degree of optimism in global financial markets that
Congress and the Clinton Administration would reach a bipartisan agreement to
eliminate the federal budget deficit by the turn of the century. This hope
seemed to be shattered in mid-winter. At the same time, evidence began to
surface that economic activity was accelerating. This raised anxieties about a
possible credit tightening move by the Federal Reserve, which drove down bond
prices.
None of this seemed to concern the equity market. Strong money flows
propelled equity prices to new heights. By mid-year the Bond Buyer Municipal
Bond Index dropped by 6.7% from year end 1995, while the Dow Jones Industrial
Average posted a 10.5% advance. No doubt some investors shifted funds from bonds
to equities in the period. This weakened the entire fixed income market, and
eventually made equities expensive relative to bonds by most measures.
We were disappointed by the collapse of budget negotiations, but view this
as a buying opportunity in the fixed income markets. After all, despite the
political stalemate, policies toward deficit reduction remain firmly entrenched,
and the deficit continues to shrink both absolutely and as a share of the
economy. Meanwhile, while the economy is continuing to grow, this growth is
moderate and noninflationary. For these reasons we have not thought the Federal
Reserve would tighten credit by raising short term interest rates. But even if
the Fed were so inclined, any tightening is likely to be minor, and not
indicative of a trend.
Given this, the Fund's portfolio was positioned for a continued solid bond
market in 1996. A large portion of the Fund's assets, relative to other Funds
with similar investment objectives, were in municipal bonds having a high degree
of sensitivity to changes in interest rates. In addition, the Fund borrows more
than other Funds with similar investment objectives, paying short term interest
rates to buy higher yielding long term municipal bonds. Borrowing also increases
the Fund's sensitivity to interest rates.
This approach worked well in 1995. However, it was disadvantageous in the
first half of this year. Our expectaton is that it will be beneficial going
forward if the bond market climate improves as we anticipate. Moreover,
municipals face an extremely favorable net supply condition going forward as
bond calls, redemptions, prepayments, and coupon payments will exceed the amount
of new municipal bond issuance in the next year. Thus, if there is any
rechanneling of funds out of equities and into fixed income securities, a
dramatic improvement in municipal bond prices could be expected.
Additionally, California state and municipal bonds may do especially well as
California's credit worthiness has improved with a favorable resolution of the
Orange County bankruptcy situation.
We thank you for your continued trust, and we look forward to serving you in
the future.
Sincerely,
Dr. Vincent J. Malanga
President
1
<PAGE>
The California Muni Fund
Portfolio Composition
June 30, 1996
CHART GOES HERE
FIXED COUPON BONDS
FCLT - Long Term (maturity + 15 years) (includes long zero coupons)
FCSI - Short or Intermediate Term - (maturity -15 years) (includes zero
coupon bonds)
VARIABLE RATE BONDS
RIB (Residential Interest Bond) type inverse floaters. These are leveraged bonds
whose coupon varies inversely with rates on short term companion issues, and
whose value will fluctuate by some multiple of the fluctuations in value of a
fixed rate bond with the same maturity and coupon as the underlying bond.
LRIB - Long Term (maturity = 15 years)
SRIB - Short or Intermediate Term (- 15 year maturity)
IN (Index) based inverse floaters are bonds whose interest coupons vary
inversely with an index of short term interest rates and then revert to a fixed
rate mode. The duration and fluctuations on these bonds will be similar to fixed
rate bonds with the same maturity.
INLT - Long Term (maturity + 15 years)
INSI - Short or Intermediate Term (maturity - 15 years)
+If a security has a split rating, the highest applicable rating is used,
including published ratings on identical credits for individual securities not
individually rated.
2
<PAGE>
(Left column)
THE CALIFORNIA MUNI FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
ASSETS
Cash ........................................................... $ 56,804
Investment in securities
at value (cost $16,541,660) .................................. 15,992,991
Receivables
Interest ..................................................... 253,373
Capital Shares Purchased ..................................... 10,000
-----------
Total assets ........................................... 16,313,168
-----------
LIABILITIES
Dividends payable .............................................. 15,126
Accrued expenses and other payables ............................ 116,428
-----------
Total liabilities ...................................... 131,554
-----------
NET ASSETS consisting of:
Accumulated net realized loss ..................... $ (338,412)
Unrealized depreciation of securities ............. (548,669)
Paid-in-capital applicable to 2,079,329 shares
of beneficial interest (Note 4) ................. 17,068,695
----------- -----------
$16,181,614
===========
NET ASSET VALUE PER SHARE ........................................ $7.78
=====
(Right Column)
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ..................................... $ 579,096
EXPENSES (Notes 2 and 3)
Management fee ...................................... $35,394
Custodian and accounting fees ....................... 31,288
Transfer agent fees ................................. 16,616
Professional fees ................................... 55,290
Printing and postage ................................ 3,450
Interest ............................................ 38,511
Distribution expenses ............................... 35,394
Shareholder communication ........................... 7,000
Trustees' fees ...................................... 3,438
Miscellaneous ....................................... 2,575
-------
Total expenses ............................... 228,956
-----------
Net investment income ........................ 350,140
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments .................... 34,840
Unrealized depreciation of
investments for the period ........................ (1,316,311)
-----------
Net loss on investments ..................... (1,281,471)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS ............ $ (931,331)
===========
(Bottom)
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1996 December 31,
(Unaudited) 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ........................... $ 350,140 $ 678,642
Net realized gain on investments ................ 34,840 152,418
Unrealized appreciation (depreciation) of
investments for the period .................... (1,316,311) 3,192,187
----------- -----------
Net increase (decrease) in net assets
from operations .......................... (931,331) 4,023,247
DIVIDENDS PAID TO SHAREHOLDERS FROM
Investment income ............................... (350,140) (678,642)
CAPITAL SHARE TRANSACTIONS (Note 4) ............... 4,840,753 (1,279,945)
----------- -----------
Total increase ................... 3,559,282 2,064,660
NET ASSETS:
Beginning of period ............................. 12,622,332 10,557,672
----------- -----------
End of period ................................... $16,181,614 $12,622,332
=========== ===========
See Notes to Financial Statements.
3
<PAGE>
THE CALIFORNIA MUNI FUND
STATEMENT OF INVESTMENTS
June 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Issue(degree)(degree)(degree) Type(degree) Rating(degree)(degree) Value
------ ----------------------------- ------------ ---------------------- -------
<S> <C> <C> <C>
$ 100,000 #Arvin Development Corporation, COP, RB, 8.75, 9/01/18 ............ FCLT NR $ 24,013
9,395,000 ++Bakersfield, COP, ETM, CAB, 4/15/21 ............................. FCLT AAA 2,127,498
200,000 ++Beverly Hills, PFA, RB, IFRN*, MBIA Insured, 7.52, 6/01/15 ....... LRIB AAA 172,790
100,000 CSAC Finance Corp, COP, Sutter County Health Facilities
Project, 7.80, 1/01/21 ....................................... FCLT BAA 101,614
1,020,000 California HFA, Valley Presbyterian Hospital Project,
RB, Series A, 9.00, 5/01/12 ................................... FCLT BB 1,031,424
500,000 California Housing Finance Authority, RB, Series A,
MBIA Insured, 5.70, 8/01/10 .................................... FCSI AAA 502,140
40,000 California HFA, Pomona Valley Community Hospital
Project, Series A, 7.00, 1/01/17 ........................... FCLT A- 40,540
1,100,000 California Pollution Control Financing, Burney Forest
Project, LOC National Westminster, AMT, VRDN+,
3.65, 7/01/96 ................................................. VRDN AAA 1,100,000
300,000 ++California Statewide Communities Development Authority,
Cedars Sinai Medical Project, COP, RB, IFRN*, 7.07,
11/01/15 ....................................................... LRIB A1 218,487
15,000 Corona City, California Redevelopment Authority,
SFRM, RB, 9.00, 11/15/12 ..................................... FCLT A 15,151
300,000 East Bay, Wastewater System Project, RB, Refunding,
AMBAC Insured, IFRN*, 7.07, 6/01/20 .......................... LRIB AAA 248,754
500,000 Foothill / Eastern Transportation Corridor Agency,
Toll Road Revenue, CAB, 1/01/26 ............................. FCLT BAA 66,975
250,000 Hawthorne, California Redevelopment Authority, TAR,
6.75, 9/01/24 .................................................. FCLT BAA 254,943
200,000 Lake Elsinore, USD, Refunding, COP, 6.90, 2/01/20 ............. FCLT BBB 207,852
15,000 Los Angeles, Home Mortgage, RB, 9.00, 6/15/18 ................. FCLT A 15,455
2,000,000 Los Angeles Regional Airports Improvement Corp,
LOC Societe Generale, VRDN+, 3.65, 12/01/25 ................. VRDN A1+ 2,000,000
300,000 Los Angeles, Multiple Capital Facilities Project III,
COP, IFRN*, 8.16, 11/01/11 ..................................... INLT BAA1 298,212
1,264,498 Los Angeles, Housing Finance Authority, MFH Project C,
CAB, RB, 12.00, 12/01/29 ..................................... FCLT NR 1,264,498
35,000 Modesto, Valley Oak Project, RB, 10.60, 5/01/09 ................. FCSI NR 36,057
350,000 ++New Haven, USD, AMBAC Insured, CAB, 8/01/16 ................... FCLT AAA 104,045
250,000 ++Northern California Power Agency, Multiple Capital
Facilities, RB, MBIA Insured, IFRN*, 9.13, 8/01/25 ............. LRIB AAA 267,438
250,000 ++Northern California Transmission Agency, CA-ORE
Transmission Project, RB, MBIA Insured, IFRN*, 4/29/24 ........ LRIB AAA 215,188
250,000 Orange County, LTA, RB, IFRN*, 6.49, 2/14/11 ................... LRIB AA 252,725
250,000 Orange County, LTA, RB, IFRN*, 6.84, 2/14/11 .................. LRIB AAA 260,910
250,000 ++Palmdale, SFRM, Series A, CAB, 3/01/17 ........................... FCLT AAA 74,683
200,000 Panoche, Water District, COP, 7.50, 12/01/08 .................. FCSI BBB 215,604
250,000 ++Rancho, Water District Financing Authority, RB,
Prerefunded @104, AMBAC Insured, IFRN*, 8/17/21 .............. LRIB AAA 299,975
250,000 ++Redding, Electric System, COP, Series A, FGIC Insured,
IFRN*, 7.28, 6/01/19 ......................................... LRIB AAA 228,910
565,000 ++Rio, USD,COP, FSA Insured, Convertible, CAB, 9/01/03 .......... FCLT AAA 379,590
175,000 Riverside, HFA, Riverside Apartment Project, RB, 7.87,1/01/19 ... FCSI BB- 181,587
2,000,000 ++Salinas, Redevelopment Agency, TAB, CGIC Insured,
Central City Project, CAB, 11/01/22 ............................ FCLT AAA 412,900
500,000 ++San Bernardino, COP, Series B, MBIA Insured, IFRN*,
7.40, 7/01/16 .................................................. INLT AAA 478,245
900,000 San Bernardino, COP, Series PA-38, MBIA Insured, IFRN*,
13.91, 7/01/16 ................................................. LRIB AAA 725,202
</TABLE>
4
<PAGE>
THE CALIFORNIA MUNI FUND
STATEMENT OF INVESTMENTS (continued)
June 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$ 200,000 ++San Diego Water Authority, COP, FGIC Insured, IFRN*, 7.39,
4/22/09 ........................................................ LRIB AAA $ 207,790
1,440,000 San Jose, California Redevelopment Authority, TAB, MBIA
Insured, IFRN*, 9.15, 8/01/16 ............................... LRIB AAA 991,066
250,000 ++Southern California Public Power Authority, FGIC Insured,
IFRN*, 6.38, 7/01/17 ........................................... LRIB AAA 212,293
500,000 ++Southern California Public Power Authority, AMBAC
Insured, IFRN*, 6.18, 7/01/15 ............................... LRIB AAA 412,140
105,000 ++Tri City, Housing Finance Authority, FNMA/GNMA
Collateralized, AMT, 6.45, 12/01/28 .......................... FCLT AAA 108,309
130,000 Tri City, Housing Finance Authority, FNMA/GNMA
Collateralized, AMT, Series B, 6.30, 12/01/28 .................. FCLT AAA 132,348
100,000 Upland, Housing Finance Authority, RB, 7.850, 7/01/20 ............ FCLT BBB 105,646
-----------
Total Investments (Cost $16,541,660@) ................. $15,992,991
===========
<FN>
*Inverse Floating Rate Notes (IFRN) are instruments whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. (see Note 5) Coupon shown is as of June 30, 1996.
+Variable Rate Demand Notes (VRDN) are instruments whose interest rate charges on a specific date and/or whose interest rates
vary with changes in a designated base rate. Coupons shown are at June 30, 1996.
@Cost is the same for Federal income tax purposes.
++Approximately $5,826,678 market value of securities are segregated in whole or in part as collateral securing a line of credit.
(dd)Non-income producing security.
Legend
(degree)Type FCLT -Fixed Coupon Long Term
FCSI -Fixed Coupon Short or Intermediate Term
LRIB -Residual Interest Bond Long Term
SRIB -Residual Interest Bond Short or Intermediate Term
INLT -Indexed Inverse Floating Rate Bond Long Term
INSI -Indexed Inverse Floating Rate Bond Short or Intermediate Term
VRDN -Variable Rate Demand Note
(degree)(degree)Ratings If a security has a split rating the highest applicable rating is used,
including published ratings on identicial credits for individual
securities not individually rated.
NR -Not Rated
(degree)(degree)(degree)Issue AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CAB Capital Appreciation Bond
CGIC Capital Guaranty Insurance Company
COP Certificate of Participation
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
HFA Health Facilities Authority
LOC Letter of Credit
LTA Local Transportation Authority
MBIA Municipal Bond Insurance Assurance Corporation
MFH Multi Family Housing
PFA Public Financing Authority
RB Revenue Bond
SFRM Single Family Residential Mortgage
TAB Tax Allocation Bond
TAR Tax Allocation Refunding
USD Unified School District
</FN>
</TABLE>
5
<PAGE>
(Left column)
THE CALIFORNIA MUNI FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
1. Significant Accounting Policies
The California Muni Fund (the Fund) was organized as a Massachusetts
business trust and is registered as an open end management investment company
under the Investment Company Act of 1940. The Fund's objective is to provide as
high a level of income that is excluded from gross income for federal income tax
purposes and exempt from California personal income tax as is consistent with
the preservation of capital. The following is a summary of significant
accounting policies followed in the preparation of its financial statements:
Valuation of Securities-The Fund's portfolio securities are valued on the
basis of prices provided by an independent pricing service when, in the opinion
of persons designated by the Fund's trustees, such prices are believed to
reflect the fair market value of such securities. Prices of non-exchange traded
portfolio securities provided by independent pricing services and generally
determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. Securities traded or dealt in upon a securities exchange and not subject
to restrictions against resale as well as options and futures contracts listed
for trading on a securities exchange or board of trade are valued at the last
quoted sales price, or, in the absence of a sale, at the mean of the last bid
and asked prices. Options not listed for trading on a securities exchange or
board of trade for which over-the-counter market quotations are readily
available are valued at the mean of the current bid and asked prices. Money
market and short-term debt instruments with a remaining maturity of 60 days or
less will be valued on an amortized cost basis. Securities not priced in a
manner described above and other assets are valued by persons designated by the
Fund's trustees using methods which the trustees believe accurately reflects
fair value.
Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable and tax exempt income to its shareholders.
Therefore, no provision for federal income tax is required.
Distributions-The Fund declares dividends daily from its net investment
income and pays such dividends on the last business day of each month.
Distributions of net capital gains, if any, realized on sales of investments are
made annually, as declared by the Fund's Board of Trustees. Dividends are
reinvested at the net asset value unless shareholders request payment in cash.
(Right column)
General-Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and original issue discount on
securities purchased are amortized over the life of the respective securities.
Realized gains and losses from the sale of securities are recorded on an
identified cost basis.
Accounting Estimates-The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
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.
2. Investment Advisory Fees and Other Transactions With Affiliates
Under a Management Agreement, the Fund pays an investment management fee to
Fundamental Portfolio Advisors, Inc. (the Manager) equal to 0.5% of the Fund's
average daily net asset value up to $100 million and decreasing by .02% of each
$100 million increase in net assets down to 0.4% of net assets in excess of $500
million.
Under the Agreement, the Manager is required to reimburse to the Fund an
amount not exceeding the amount of fees payable to the Manager under the
Agreement for any fiscal year, if, and to the extent that the aggregate
operating expenses of the Fund for any fiscal year (including the fees payable
to the Manager, but excluding interest expense, taxes, brokerage fees and
commissions, extraordinary expenses beyond the control of the Manager and other
fees and expenses properly excludable from the definition of "aggregate annual
expenses" under California law) exceed any expense limitation imposed under
California law. No such reimbursements was required during the six months ended
June 30, 1996.
Pursuant to a Distribution Plan (the Plan) adopted pursuant to Rule12b-1,
promulgated under the Investment Company Act of 1940, the Fund may pay certain
promotional and advertising expenses and may compensate certain registered
securities dealers and financial institutions for services provided in
connection with the processing of orders for purchase or redemption of the
Fund's shares and furnishing other shareholder services. Payments by the Fund
shall not in the aggregate, in any fiscal year, exceed 0.5% of the average daily
net assets of the Fund.
Under a Distribution Agreement with Fundamental Service Corporation (FSC),
an affiliate of the Manager, amounts are paid under the Plan to compensate FSC
for the services it provides and the expenses it bears in distributing the
Fund's shares to investors.
Fees for those services aggregated $11,200 for the six months ended June 30,
1996.
6
<PAGE>
(Left column)
THE CALIFORNIA MUNI FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
The Fund compensates Fundamental Shareholder Services, Inc., an affiliate of
the Manager, for the services it provides under a Transfer Agent and Service
Agreement. Transfer agent fees for the six months ended June 30, 1996 are set
forth in the statement of operations.
3. Trustees' Fees
All of the Trustees of the Fund are also directors or trustees of two other
affiliated mutual funds for which the Manager acts as investment adviser. For
services and attendance at board meetings and meetings of committees which are
common to each Fund, each Trustee who is not affiliated with the Manager is
compensated at the rate of $6,500 per quarter pro rated among the funds based on
their respective average net assets.
4. Shares of Beneficial Interest
As of June 30, 1996 there were an unlimited number of shares of beneficial
interest (no par value) authorized and capital paid in amounted to $17,068,695.
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .............. 13,399,158 $110,715,165 7,881,857 $66,180,540
Shares issued on
reinvestment of
dividends .............. 30,786 251,496 60,506 494,825
Shares redeemed .......... (12,767,460) (106,125,908) (8,012,453) (67,955,310)
---------- ------------- ---------- -----------
Net increase (decrease) .. 662,484 $ 4,840,753 (70,090) ($1,279,945)
========== ============= ========== ===========
5. Complex Securities and Investment Transactions
Inverse Floating Rate Notes:
The Fund invests in variable rate securities commonly called "inverse
floaters". The interest rates on these securities have an inverse relationship
to the interest rate of other securities or the value of an index. Changes in
interest rate on the other security or index inversely affect the rate paid on
the inverse floater, and the inverse floater's price will be more volatile than
that of a fixed rate bond. Certain interest rate movements and other market
factors can substantially affect the liquidity of certain IFRN's.
Investment Transactions:
During the six months ended June 30, 1996, the cost of purchases and
proceeds from sales of investment securities, other than short-term obligations,
were $1,099,546 and $1,704,123 respectively.
(Right Column)
As of June 30, 1996 the net unrealized depreciation of portfolio securities
amounted to $548,669 composed of unrealized
appreciation of $390,240 and unrealized depreciation of $938,909.
6. Line of Credit
The Fund has a line of credit agreement with its custodian bank
collateralized by portfolio securities. Borrowings under this agreement bear
interest linked to the bank's prime rate. The maximum month end and the average
borrowings outstanding during the period ended June 30, 1996, were $2,000,000
and $989,000, respectively.
7. Litigation
The Fund was named as a defendant in a class action lawsuit: Sedrak v. The
California Muni Fund, et al., United States District Court, Southern District of
California (which was transferred to the United States District Court, Southern
District of New York). Also named as defendants in this action were the Manager,
Fundamental Service Corporation, and alleged control persons of the Fund.
The suit was filed in August of 1994 and alleged that the Fund invested in
certain financial instruments, primarily "derivatives," that were inconsistent
with the Fund's stated objectives as set forth in its prospectus. The suit
claimed that defendants are liable under Sections, 11 and/or 12 of the
Securities Act of 1933 because there existed material misstatements or omissions
in the prospectus that rendered it misleading. This suit also claimed that
defendants are liable under Section 10(b) of the Securities and Exchange Act of
1934 (and Rule 10b-5 promulgated thereunder) for making material misstatements
or omissions in connection with the purchase or sale of securities. The action
also alleged common law claims, including fraud.
By Stipulation of Settlement dated April 5, 1996, a settlement was reached
with the plaintiffs. By Final Judgement and Order of Consolidation and Dismissal
with Prejudice dated July 17, 1996, the Stipulation of Settlement was approved
by the Court. The settlement requires a payment of approximately $500,000 or
more under certain future circumstances by the Fund's investment adviser to the
class members as set forth in the Stipulation of Settlement. Under no
circumstances will the settlement result in any liability or cost to the Fund or
its shareholders. The settlement has, however, resulted in the dismissal of the
lawsuit and a release from liability issuing in favor of all defendants
including the Fund. The Stipulation of Settlement also expressly states that the
settlement does not constitute an admission of wrongdoing by the Fund or any of
the other defendants.
7
<PAGE>
THE CALIFORNIA MUNI FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
8. Selected Financial Information
<TABLE>
<CAPTION>
Six Months Years Ended December 31,
Ended --------------------------------------------
June 30, 1996 1995 1994 1993 1992
------------- ---- ---- ---- ----
(Unaudited)
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 8.91 $ 7.10 $ 9.49 $ 8.81 $ 8.80
------ ------ ------ ------ ------
Income from investment operations:
Net investment income .................................... .210 .419 .553 .563 .604
Net realized and unrealized gains (losses)
on investments ......................................... (1.130) 1.810 (2.390) .876 .010
------ ------ ------ ------ ------
Total from investment operations ............... (.920) 2.229 (1.837) 1.439 .614
------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income ..................... .210 (.419) (.553) (.563) (.604)
Dividends from net realized gains ........................ - - - (.196) -
------ ------ ------ ------ ------
Total distributions ............................ .210 (.419) (.553) (.759) (.604)
------ ------ ------ ------ ------
Net Asset Value, End of Period ........................... $ 7.78 $ 8.91 $ 7.10 $ 9.49 $ 8.81
====== ====== ====== ====== ======
Total Return ............................................. (10.41%) 32.02% (19.89%) 16.80% 7.23%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) .......................... 16,182 12,622 10,558 16,280 11,549
Ratios to Average Net Assets (annualized):
Interest expense ....................................... .54% .39% .98% .39% .16%
Operating expenses ..................................... 2.69% 2.81% 2.50% 1.77%* 1.47% *
Total expenses ................................. 3.23% 3.20% 3.48% 2.16%* 1.63%*
Net investment income .......................... 4.93% 5.02% 6.80% 6.04%* 6.87%*
Portfolio turnover rate .................................. 8.88% 53.27% 15.88% 51.26% 18.91%
BANK LOANS
Amount outstanding at end of period (000 omitted) ........ $ 0 $ 0 $1,292 $3,714 $ 0
Average amount of bank loans outstanding during the
period (000 omitted) ................................... $ 989 $ 642 $1,690 $ 958 274
Average number of shares outstanding during the period
(000 omitted) ........................................... 1,186 1,635 1,711 1,517 1,214
Average amount of debt per share during the period ....... $ .60 $ .39 $ .95 $ .63 $ .23
<FN>
*These ratios are after expense reimbursement of .50% for each of the years ended December 31, 1993, and 1992.
</FN>
</TABLE>
8
<PAGE>
THE CALIFORNIA MUNI FUND
90 Washington Street
New York NY 10006
1-800-322-6864
Independent Accountants
McGladrey & Pullen, LLP
New York, New York 10017
This report and the financial statements contained
herein are submitted for the general information of
the shareholders of the Fund. The report is not
authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an
effective prospectus.
THE CALIFORNIA MUNI FUND
Semi-Annual Report
June 30, 1996
(Unaudited)
THE CALIFORNIA MUNI FUND
Double
Tax-Free Investing
FUNDAMENTAL
Fundamental Family of Funds
