<PAGE>
1994
ANNUAL
REPORT
DESCRIPTION OF ART WORK ON REPORT
COVER
----------------------------------
- - -
Small box above fund name showing
a
palm tree overlooking Hollywood,
Mullholland Drive.
----------------------------------
- - -
SMITH BARNEY SHEARSON
CALIFORNIA
MUNICIPALS
FUND INC.
<PAGE>
- - ---------------------------
CALIFORNIA MUNICIPALS FUND
- - ---------------------------
DEAR SHAREHOLDER:
We are pleased to provide the Annual Report for Smith Barney Shearson
California Municipals Fund Inc. for the fiscal year ended February 28, 1994.
In
this report we will provide you with a review of the Fund's performance, the
market environment and portfolio activities during the past twelve months. In
addition, we have taken this opportunity to simplify the report by separating
the historical performance information for Class A and B shares into two
distinct sections. Our goal is to provide clear, concise information that
makes
it easier for you to follow your investment.
THE NATIONAL AND CALIFORNIA
ECONOMIES AND THE FINANCIAL MARKETS
Over the past year the American economy has gone from a dead stop to gradual
but steady growth to a powerful fourth quarter in 1993. The United States is
clearly leading the world out of recession based on a leaner and more
competitive industrial foundation, and the lowest interest rates we've seen in
a generation. We expect that the economy will continue to experience steady,
healthy growth.
The Federal Reserve Board responded to economic conditions by keeping the
Federal funds rate (a sensitive indicator of the direction of interest rates)
at
3% for most of this time frame, until they were sure that the economy was on a
steady growth path. In early February, they raised the Federal funds rate to
3.25% and subsequent raises have brought it to 3.75%. We see these as just the
first moves in a gradual rise in short rates from the Fed. It should have a
minimal effect on longer rates, but it could put pressure on funds that use
leverage -- which we don't.
Signaled by positive news on the employment front, the California economy
finally appears to be improving. The state's unemployment rate dropped from
10.1% in January to 9.0% in February. Most of the job growth has been from
gains
in the service sector. However, the manufacturing sector continues to
struggle,
with gains in the electronics industry offset by the steady erosion of jobs in
the aerospace industry. The January 17th earthquake in Northridge didn't have
any immediate affect on any of the credits held by the Fund, although the
cleanup and repair efforts in the area should provide nominal economic
stimulus
to the area. It's too early to estimate the long-term impact the earthquake
will
have on business and tourism.
The municipal market over the past year stayed very attractive compared to
governments on an after-tax basis. The total issuance of municipal bonds in
1993
was a record-breaking $300 billion. It's highly unlikely that new issuance
this
year will even approach $200 billion, which will make supply much more
constrained. Coupled with the tax increase instituted by the Clinton
Administration which is likely to lead to higher demand for tax-exempt
securities, you have a marketplace
1
<PAGE>
- - ------------------------------------------------------------------------------
- - --
DIVIDEND POLICY
- - ------------------------------------------------------------------------------
- - --
Although not explicitly stated in the prospectus, the Fund's policy is to pay
a
level monthly dividend based on our projections for the municipal bond
market and the general direction of interest rates. This policy has no
appreciable affect on the Fund's investment strategies or net asset value per
share since it is guided by market conditions. It means that we do not invest
in more speculative securities that may undermine the Fund's net asset
value per share in order to maintain an unrealistically high dividend policy.
We continually monitor both the market and the Fund's income stream to
see that our dividend projections are realistic.
that represents real value. We think that as the issuance of municipal bonds
wanes over the next year, tax-exempts will comfortably outperform taxables and
provide investors with an attractive investment alternative.
PORTFOLIO STRATEGY
Our investment goal has been twofold: to provide a competitive tax-exempt
income
stream, and to provide you with the best total return possible. Early in the
Fund's fiscal year, when the economy was weaker, we invested the portfolio
primarily in long-term securities and discount coupons to take advantage of
falling interest rates. (Discount bonds generally carry a lower coupon rate
than
currently available in the market and therefore sell below their redemption
value. These bonds generally appreciate faster as interest rates fall.) In the
early fall, when the 30-year Treasury bond traded to the lowest interest rate
level in the past 25 years, we became very defensive for a number of reasons.
We
felt the market had priced in too much good news, and was quite vulnerable. We
reduced the portfolio's average life to 19 years, kept some cash on the
sidelines, and took a very conservative stance for the future. We also hedged
the portfolio against the decline in the price of bonds by selling short U.S.
Treasury Index futures contracts. A futures contract (which is an agreement to
sell (or buy) a specific amount of a financial instrument at a particular
price
on an agreed-upon date) is a tool used in declining markets to help preserve
your investment capital. Preservation of capital is a critical element in our
total return philosophy of investing. We believe these actions saved the Fund
a
great deal of money when bond prices declined, and we will continue this more
cautious and conservative stance until we believe the Federal Reserve has
stopped raising short-term interest rates.
2
<PAGE>
Although the California economy shows signs of improvement, it is still
premature to assume that a strong economic recovery will soon follow. For this
reason we continue our pattern of buying high quality, essential service
revenue
bonds. We also continue to avoid purchasing California state general
obligations
and lease revenue bonds that rely on appropriations from the state budget to
pay
debt service. As of February 28, 1994, nearly 94% of the portfolio was rated
investment grade (BBB/Baa and higher) by either Standard & Poor's Corporation
or
Moody's Investors Service, Inc. (two nationally recognized bond rating
organizations). The majority of the Fund's assets were invested in insured
hospital bonds, water and sewer, and transportation issues.
PERFORMANCE
The performance of Class A and Class B shares of the Fund in both calendar
year
1993 and its fiscal year was good, up over 12% and up over 9.27%,
respectively,
in 1993 and both Class A and Class B shares are each over 5% for the twelve
months ended February 28, 1994. Additional information about the performance
of
each share class is available from the performance pages of this report.
Our goal in this fiscal year is to provide our investors with a rational,
carefully thought out investment program that continues to deliver a
competitive
tax-exempt income stream and provide you with the best total return possible.
We
look forward to reporting to you in the Fund's Semi-Annual report.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman of the Board Vice President and
and Investment Officer Investment Officer
April 18, 1994
3
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
HISTORICAL PERFORMANCE - CLASS A SHARES (UNAUDITED)
<CAPTION>
Year Ended Net Asset Value Capital Dividends Total
February 28 Beginning Ending Gains Paid+ Paid+ Return*
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/9/84 -
2/28/85 $ 14.25 $13.94 -- $ 1.14 6.35%
- - ------------------------------------------------------------------------------
1986 $ 13.94 $16.16 -- $ 1.21 25.80%
- - ------------------------------------------------------------------------------
1987 $ 16.16 $16.54 $0.33 $ 1.14 12.13%
- - ------------------------------------------------------------------------------
1988 $ 16.54 $15.49 $0.07 $ 1.09 1.09%
- - ------------------------------------------------------------------------------
1989 $ 15.49 $15.33 $0.03 $ 1.12 6.67%
- - ------------------------------------------------------------------------------
1990 $ 15.33 $15.61 -- $ 1.07 9.02%
- - ------------------------------------------------------------------------------
1991 $ 15.61 $15.66 $0.12 $ 1.07 8.29%
- - ------------------------------------------------------------------------------
1992 $ 15.66 $15.78 $0.27 $ 1.05 9.50%
- - ------------------------------------------------------------------------------
1993 $ 15.78 $16.70 $0.29 $ 1.01 14.76%
- - ------------------------------------------------------------------------------
1994 $ 16.70 $16.15 $0.65 $ 0.84 5.92%
- - ------------------------------------------------------------------------------
Total $1.76 $ 10.74
- - ------------------------------------------------------------------------------
Cumulative Total Return -- (4/9/84 through 2/28/94) 154.21%
- - ------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains
distributions at net asset value and do not assume deduction of the
sales charge (maximum 4.5%).
+ The above distributions are reported in accordance with generally
accepted accounting principles and may differ from the figures reported
on Form 1099 due to timing differences.
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
AVERAGE ANNUAL TOTAL RETURN** - CLASS A SHARES (UNAUDITED)
<CAPTION>
Without Sales Charge With Sales
Charge***
With Without With
Without
Fee Waiver Fee Waiver Fee Waiver
Fee Waiver
and Expense and Expense and Expense
and Expense
Reimbursement Reimbursement Reimbursement
Reimbursement
- - ------------------------------------------------------------------------------
- - -------------
<S> <C> <C> <C>
<C>
Year Ended 2/28/94 5.92% N/A 1.15%
N/A
- - ------------------------------------------------------------------------------
- - -------------
Five Years Ended 2/28/94 9.46% N/A 8.46%
N/A
- - ------------------------------------------------------------------------------
- - -------------
Inception 4/9/84 through
2/28/94 9.89% 9.83% 9.38%
9.32%
- - ------------------------------------------------------------------------------
- - -------------
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net asset value. The Fund commenced
operations on April 9, 1984. The Fund waived investment advisory and sub-
investment advisory and administration fees from April 1984 to February
1986 and reimbursed expenses from April 1984 to February 1985. A
shareholder's actual return for the period during which waivers and
reimbursements were in effect would be the higher of the two numbers
shown.
*** Average annual total return figures shown assume the deduction of the
maximum 4.5% sales charge.
</TABLE>
NOTE: On November 6, 1992, existing shares of the Fund were designated Class A
shares. Class A shares are subject to a maximum 4.5% front-end sales charge
and
an annual service fee of 0.15% of the value of the average daily net assets
attributable to that class. The Fund's average annual rates of return would
have
been lower had service fees been in effect prior to November 6, 1992.
4
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS A SHARES
OF SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC.+
- - ------------------------------------------------------------------------------
- - --
April 9, 1984 - February 28, 1994
<TABLE>
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON COVERS (CLASS A)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in California
Municipals Fund's Class A shares on April 9, 1984 through February 28, 1994 as
compared with the growth of a $10,000 investment in the Lipper California
Municipal Fund Average and the Lehman Brothers Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
GROWTH OF $10,000 INVESTED IN THE INVESTMENT IN THE
INVESTED IN CLASS A LIPPER CALIFORNIA LEHMAN BROTHERS
MONTH SHARES OF THE MUNICIPAL FUND MUNICIPAL
ENDED FUND AVERAGE BOND INDEX
<S> <C> <C> <C>
03/31/84 - $10,000 $10,000
04/09/84 $ 9,550 - -
04/84 $ 9,469 $10,025 $10,015
06/84 $ 8,967 $ 9,544 $ 9,625
09/84 $ 9,355 $ 9,944 $10,280
12/84 $ 9,856 $10,415 $10,760
03/85 $10,250 $10,817 $11,194
06/85 $11,017 $11,676 $12,132
09/85 $10,930 $11,531 $11,950
12/85 $11,748 $12,377 $12,916
03/86 $12,863 $13,492 $14,224
06/86 $12,719 $13,413 $14,136
09/86 $13,272 $14,052 $14,895
12/86 $13,868 $14,617 $15,410
03/87 $14,245 $14,999 $15,784
06/87 $13,438 $14,129 $15,355
09/87 $13,025 $13,637 $14,974
12/87 $13,725 $14,341 $15,642
03/88 $14,153 $14,763 $16,180
06/88 $14,475 $15,071 $16,494
09/88 $14,905 $15,499 $16,917
12/88 $15,376 $15,927 $17,232
03/89 $15,454 $16,047 $17,347
06/89 $16,326 $16,969 $18,374
09/89 $16,340 $16,919 $18,386
12/89 $16,841 $17,489 $19,091
03/90 $16,875 $17,537 $19,177
06/90 $17,249 $17,938 $19,625
09/90 $17,191 $17,818 $19,636
12/90 $17,993 $18,627 $20,483
03/91 $18,232 $18,954 $20,946
06/91 $18,569 $19,353 $21,393
09/91 $19,373 $20,122 $22,225
12/91 $20,062 $20,719 $22,970
03/92 $19,977 $20,773 $23,039
06/92 $20,842 $21,583 $23,912
09/92 $21,187 $22,042 $24,548
12/92 $21,668 $22,490 $24,995
03/93 $22,491 $23,390 $25,923
06/93 $23,277 $24,176 $26,772
09/93 $23,987 $25,039 $27,677
12/93 $24,404 $25,271 $28,065
02/94 $24,277 $24,918 $27,651
</TABLE>
+ Illustration of $10,000 invested in Class A shares on April 9, 1984
assuming deduction of the maximum 4.5% sales charge at the time of
investment and reinvestment of dividends and capital gains at net asset
value through February 28, 1994.
LIPPER CALIFORNIA MUNICIPAL FUND AVERAGE -- The Lipper California
Municipal Fund Average is composed of an average of the Fund's peer group
of mutual funds (75 as of February 28, 1994) investing in California
municipal bonds.
LEHMAN BROTHERS MUNICIPAL BOND INDEX -- The Lehman Brothers Municipal
Bond Index is a weighted composite which is comprised of more than 15,000
bonds issued within the last 5 years, having a minimum credit rating of
at least Baa and a maturity of at least 2 years, excluding all bonds
subject to the Alternative Minimum Tax and bonds with floating or zero
coupons.
Index information is available at month-end only; therefore the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the other pages represent past
performance of the Fund and do not guarantee future results of Class A
shares.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
5
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
HISTORICAL PERFORMANCE - CLASS B SHARES (UNAUDITED)
<CAPTION>
Year Ended Net Asset Value Capital Dividends Total
February 28 Beginning Ending Gains Paid+ Paid+ Return*
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/6/92 -
2/28/93 $ 15.84 $16.70 $0.29 $0.29 9.27%
- - ------------------------------------------------------------------------------
1994 $ 16.70 $16.15 $0.65 $0.76 5.40%
- - ------------------------------------------------------------------------------
Total $0.94 $1.05
- - ------------------------------------------------------------------------------
Cumulative Total Return -- (11/6/92 through 2/28/94) 15.17%
- - ------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains
distributions at net asset value and do not assume deduction of the
contingent deferred sales charge ("CDSC").
+ The above distributions are reported in accordance with generally accepted
accounting principles and may differ from the figures reported on Form
1099 due to timing differences.
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
AVERAGE ANNUAL TOTAL RETURN** - CLASS B SHARES (UNAUDITED)
<CAPTION>
Without CDSC With CDSC
Actual Actual***
- - ------------------------------------------------------------------------------
- - ---
<S> <C> <C>
Year Ended 2/28/94 5.40% 1.05%
- - ------------------------------------------------------------------------------
- - ---
Inception 11/6/92 through 2/28/94 11.32% 8.37%
- - ------------------------------------------------------------------------------
- - ---
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net
asset value.
*** Average annual total return figures shown assume the deduction of the
maximum applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: The Fund began offering Class B shares on November 6, 1992. Class B
shares are subject to a maximum 4.5% CDSC and annual service and distribution
fees of 0.15% and 0.50%, respectively, of the value of the average daily net
assets attributable to that class.
6
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS B SHARES
OF SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC.+
- - ------------------------------------------------------------------------------
- - --
November 6, 1992 - February 28, 1994
<TABLE>
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON COVERS (CLASS B)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in California
Municipals Fund's Class B shares on November 6, 1992 through February 28, 1994
as compared with the growth of a $10,000 investment in the Lipper California
Municipal Fund Average and the Lehman Brothers Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
GROWTH OF $10,000 INVESTED IN THE INVESTMENT IN THE
INVESTED IN CLASS B LIPPER CALIFORNIA LEHMAN BROTHERS
MONTH SHARES OF THE MUNICIPAL FUND MUNICIPAL
ENDED FUND AVERAGE BOND INDEX
<S> <C> <C> <C>
10/31/92 - $10,000 $10,000
11/06/92 $10,000 - -
11/92 $10,174 $10,271 $10,179
12/92 $10,338 $10,419 $10,283
03/93 $10,718 $10,836 $10,665
06/93 $11,080 $11,201 $11,014
09/93 $11,403 $11,600 $11,386
12/93 $11,588 $11,708 $11,546
02/94 $11,117 $11,544 $11,375
</TABLE>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992
(commencement of operations) assuming deduction of the maximum
applicable CDSC at the time of redemption and reinvestment of dividends
and capital gains at net asset value through February 28, 1994.
++ Value does not assume deduction of applicable CDSC.
+++ Value assumes deduction of applicable CDSC (assuming deduction on
February 28, 1994).
LIPPER CALIFORNIA MUNICIPAL FUND AVERAGE -- The Lipper California
Municipal Fund Average is composed of an average of the Fund's peer
group of mutual funds (75 as of February 28, 1994) investing in
California municipal bonds.
LEHMAN BROTHERS MUNICIPAL BOND INDEX -- The Lehman Brothers Municipal
Bond Index is a weighted composite which is comprised of more than
15,000 bonds issued within the last 5 years, having a minimum credit
rating of at least Baa and a maturity of at least 2 years, excluding all
bonds subject to the Alternative Minimum Tax and bonds with floating or
zero coupons.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the other pages represent past
performance of the Fund and do not guarantee future results of Class B
shares.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
7
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO HIGHLIGHTS (UNAUDITED) FEBRUARY 28,
1994
INDUSTRY BREAKDOWN
<TABLE>
DESCRIPTION OF PIE CHARTS IN SHAREHOLDER REPORT
Industry Breakdown
Pie chart depicting the allocation of the California Municipals Fund's
investment securities held at February 28, 1994 by industry classification.
The
pie is broken in pieces representing industries in the following persentages:
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
Transportation 11.7%
Water and Sewer 17.3%
Hospital 20.3%
Other Municipal Bonds, Short-Term
Tax-Exempt Investments, Futures
Contracts-Short Position and Net
Other Assets and Liabilities 21.2%
Pollution Control Revenue 3.4%
Housing 5.5%
Education 5.6%
General Obligations 7.5%
Utilities 7.5%
</TABLE>
<TABLE>
SUMMARY OF MUNICIPAL BONDS AND SHORT-TERM
TAX-EXEMPT INVESTMENTS BY COMBINED RATINGS
<CAPTION>
Standard & Percentage of
Moody's Poor's Market Value
- - ---------------------------------------------
<S> <C> <C>
AAA AAA 41.4%
AA AA 20.6
A A 15.2
BAA BBB 10.5
B B 0.1
VMIG1/P-1 A1 6.0
NR NR 6.2
-----
100.0%
-----
</TABLE>
AVERAGE MATURITY: 19.2 years
8
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS FEBRUARY 28,
1994
- - ------------------------------------------------------------------------------
- - --
KEY TO INSURANCE ABBREVIATIONS
- - ------------------------------------------------------------------------------
- - --
AMBAC -- American Municipal Bond Assurance Corporation
BIGI -- Bond Investors Guaranty Insurance
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Administration
MBIA -- Municipal Bond Investors Assurance
STINS -- State Insurance
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES - 94.3%
CALIFORNIA - 91.8%
$ 2,500,000 Alhambra Arcadia Azush County, California,
Independent Cities Authority, Risk
Management,
Certificates of Participation
7.250% due 3/1/07 NR NR
$ 2,603,125
Anaheim, California, Certificates of
Participation:
1,500,000 (Capital Improvement Project, Series C),
(BIGI Insured),
9.100% due 8/1/08 Aaa AAA
1,567,500
200,000 (Convention Center, Refunding Project),
(MBIA Insured),
5.700% due 8/1/02 Aaa AAA
210,750
5,000,000 Antioch Area, California, Public Facilities
Financing Authority, (FGIC Insured),
5.375% due 8/1/13 Aaa AAA
4,812,500
Association of Bay Area Governments (ABAG),
Financing for Nonprofit Corporations,
California:
Certificates of Participation,
(Stanford University Hospital):
2,100,000 5.250% due 11/1/06 Aa AA-
2,121,000
3,305,000 5.250% due 11/1/07 Aa AA-
3,321,525
5,120,000 5.250% due 11/1/08 Aa AA-
5,126,400
8,955,000 5.500% due 11/1/13 Aa AA-
8,753,513
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Napa Water Revenue, (MBIA Insured):
$ 1,185,000 5.250% due 5/1/07 Aaa AAA
$ 1,173,150
1,245,000 5.250% due 8/1/08 Aaa AAA
1,226,325
2,695,000 5.375% due 5/1/10 Aaa AAA
2,647,837
Bakersfield, California, Hospital Revenue,
(Advent Hospital), (MBIA Insured):
715,000 5.250% due 3/1/05 Aaa AAA
723,044
755,000 5.300% due 3/1/06 Aaa AAA
760,663
775,000 5.400% due 3/1/07 Aaa AAA
779,844
805,000 5.500% due 3/1/08 Aaa AAA
810,031
845,000 5.500% due 3/1/09 Aaa AAA
845,000
880,000 5.500% due 3/1/10 Aaa AAA
875,600
920,000 5.500% due 3/1/11 Aaa AAA
915,400
970,000 5.500% due 3/1/12 Aaa AAA
959,088
Banning, California, Certificates of
Participation,
(Banning Wastewater Facilities Corporation):
115,000 11.500% due 11/1/03 NR AAA
145,044
125,000 11.500% due 11/1/04 NR AAA
157,969
140,000 11.600% due 11/1/05 NR AAA
177,625
155,000 11.650% due 11/1/06 NR AAA
197,237
175,000 11.700% due 11/1/07 NR AAA
223,344
195,000 11.750% due 11/1/08 NR AAA
249,600
220,000 11.750% due 11/1/09 NR AAA
281,325
Beverly Hills, California, Public Financing
Authority,
Leasehold Revenue, Series A, (MBIA Insured):
1,295,000 5.350% due 6/1/07 Aaa AAA
1,309,569
1,000,000 5.400% due 6/1/08 Aaa AAA
1,011,250
Brea, California, Redevelopment Agency
Revenue,
(Project AB), Tax Allocation Revenue Bonds,
(MBIA Insured):
655,000 5.400% due 8/1/06 Aaa AAA
657,456
3,335,000 5.400% due 8/1/07 Aaa AAA
3,314,156
3,510,000 5.500% due 8/1/08 Aaa AAA
3,505,612
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Brisbane, California, Brisbane Redevelopment
Agency, Tax Allocation for Brisbane Community
Redevelopment, General Obligations:
$ 200,000 9.400% due 5/1/05 NR AA-
$ 214,000
220,000 9.400% due 5/1/06 NR AA-
235,400
California Alternative Energy Source,
Financing
Authority Revenue:
210,000 (Richmond Methane Recovery Project),
7.500% due 12/1/94 NR NR
211,575
1,000,000 (SRI International Project), Cogeneration
Revenue,
9.750% due 12/1/05 (in default) NR NR
500,000
California Department of Water Resources,
(Central
Valley Project), Water Systems Revenue,
Series L:
10,425,000 5.500% due 12/1/08 Aa AA
10,438,031
5,065,000 5.500% due 12/1/09 Aa AA
5,071,331
California Educational Facilities, Revenue
Bonds:
(Pooled College Loan):
750,000 5.800% due 6/1/02 Baa NR
761,250
3,000,000 6.125% due 6/1/09 Baa NR
3,030,000
1,000,000 6.250% due 6/1/18 Baa NR
1,007,500
2,500,000 (University of San Diego),
6.500% due 10/1/22 A NR
2,640,625
California Health Facilities Financing
Authority
Revenue Bonds:
1,000,000 (Adventist Health-West), Series A, (MBIA
Insured),
10.000% due 3/1/14 Aaa AAA
1,085,000
3,000,000 (Catholic Health), Series A, (MBIA Insured),
5.000% due 7/1/08 Aaa AAA
2,865,000
2,215,000 (Kaiser Permanente)
5.450% due 10/1/13 Aa2 AA
2,151,319
250,000 (St. Joseph's Health System), Series 1984B,
9.750% due 7/1/99 NR AAA
272,813
4,000,000 (Sutter Community Hospital, Sacramento),
9.250% due 1/1/13 A1 A+
4,255,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
California Health Facilities Financing
Authority
Revenue Bonds: (continued)
$ 250,000 (Victory Valley Community Hospital),
Series 1984A, (STINS Insured),
9.875% due 7/1/12 NR A+
$ 258,750
California Housing Finance Agency,
(Home Ownership Mortgage):
Series A:
95,000 9.200% due 8/1/15 Aa AA
99,037
4,750,000 (MBIA Insured),
5.500% due 2/1/14 Aaa AAA
4,595,625
15,000 Series 1984,
10.250% due 2/1/14 Aa A+
15,206
705,000 Series 1984B,
Zero Coupon due 8/1/16 Aa A+
62,569
125,000 California Housing Finance Agency, Multi-Unit
Rental
Housing, Revenue Bonds, Series 1984A,
10.375% due 8/1/05 A1 A+
128,125
California Pollution Control Financing
Authority,
Pollution Control Revenue:
2,500,000 (Pacific Gas & Electric Company), Series A,
6.625% due 6/1/09 NR A1
2,681,250
11,625,000 (Southern California Edison Company), Series
B,
6.400% due 12/1/24 Aa3 A+
12,264,375
615,000 California Public Capital Improvement Finance
Authority, Joint Power Agency, Series 1988B,
(BIGI Insured),
8.100% due 3/1/18 Aaa AAA
674,194
2,000,000 California Special Districts Finance
Authority,
Certificates of Participation, Series 1988A,
8.500% due 7/1/18 Baa1 NR
2,277,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
California State, General Obligation Bonds,
Veteran Series:
$ 4,000,000 9.700% due 2/1/01 Aa AA
$ 5,130,000
455,000 9.700% due 4/1/02 Aa AA
597,756
725,000 9.000% due 10/1/02 Aa AA
920,750
2,000,000 8.400% due 10/1/06 Aa AA
2,570,000
1,000,000 9.500% due 2/1/10 Aa AA
1,407,500
California Statewide Communities Development
Authority, Lease Revenue, Certificates of
Participation:
(Sutter Health Facilities), (MBIA Insured):
2,985,000 5.300% due 8/15/06 Aaa AAA
2,999,925
3,145,000 5.400% due 8/15/07 Aaa AAA
3,160,725
3,315,000 5.500% due 8/15/08 Aaa AAA
3,331,575
3,500,000 5.500% due 8/15/09 Aaa AAA
3,500,000
(St. Joseph's Health Facilities):
7,000,000 5.500% due 7/1/09 Aa AA
6,868,750
7,000,000 5.500% due 7/1/10 Aa AA
6,833,750
4,825,000 5.500% due 7/1/14 Aa AA
4,662,156
(Unihealth Facilities Corporation),
(AMBAC Insured):
11,370,000 5.500% due 10/1/06 Aaa AAA
11,469,488
4,515,000 5.500% due 10/1/07 Aaa AAA
4,537,575
150,000 Cucamonga, California, County Water District,
Certificates of Participation, (FGIC
Insured),
6.000% due 9/1/03 Aaa AAA
158,625
Desert Sands, California, Unified School
District,
(Measure "O" Project), Series C:
6,365,000 4.900% due 3/1/02 A NR
6,174,050
1,000,000 5.100% due 8/1/04 A NR
965,000
Dublin, California, Certificates of
Participation,
(Civic Center Project), (AMBAC Insured):
1,235,000 5.500% due 2/1/05 Aaa AAA
1,241,175
1,305,000 5.600% due 2/1/06 Aaa AAA
1,311,525
1,380,000 5.625% due 2/1/07 Aaa AAA
1,385,175
4,615,000 5.625% due 2/1/10 Aaa AAA
4,632,306
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Fontana, California, Public Financing
Authority, Tax
Allocation Revenue Bonds, Series A,
(MBIA Insured):
$ 625,000 5.100% due 9/1/05 Aaa AAA
$ 622,656
280,000 5.200% due 9/1/06 Aaa AAA
278,950
690,000 5.250% due 9/1/07 Aaa AAA
683,963
730,000 5.300% due 9/1/08 Aaa AAA
719,962
Foothill, California, Transit Zone
Certificates, Series A:
2,215,000 5.050% due 11/1/00 Baa1 NR
2,176,238
1,930,000 5.150% due 11/1/01 Baa1 NR
1,891,400
1,000,000 5.350% due 5/1/03 Baa1 NR
976,250
470,000 Fresno, California, Airport Revenue Bonds,
10.900% due 7/1/14 A NR
493,500
Fresno, California, Health Facilities
Revenue,
(Holy Cross Health System):
2,200,000 5.200% due 12/1/04 A1 AA-
2,200,000
670,000 5.200% due 12/1/04 A1 AA-
670,000
745,000 5.375% due 12/1/06 A1 AA-
746,862
2,435,000 5.375% due 12/1/06 A1 AA-
2,441,088
795,000 5.400% due 12/1/07 A1 AA-
791,025
2,565,000 5.400% due 12/1/07 A1 AA-
2,552,175
2,705,000 5.500% due 12/1/08 A1 AA-
2,691,475
830,000 5.500% due 12/1/08 A1 AA-
825,850
Fresno, California, Joint Powers Financing
Authority,
Lease Revenue, (Street Light Acquisition
Project),
Series A:
200,000 5.375% due 8/1/03 A A+
198,500
3,860,000 5.500% due 8/1/12 A A+
3,667,000
30,000 Fresno County, California, Housing Finance
Revenue,
Series A, (FHA Insured),
12.500% due 9/15/12 NR NR
30,637
Garden Grove, California, Community Agency,
Tax Allocation Revenue:
500,000 5.375% due 10/1/03 NR A
490,000
3,275,000 5.700% due 10/1/08 NR A
3,184,938
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Goleta, California, Water District Revenue,
Certificates of Participation, (FGIC
Insured):
$ 3,950,000 5.375% due 12/1/06 Aaa AAA
$ 4,024,062
1,430,000 5.500% due 12/1/08 Aaa AAA
1,447,875
1,760,000 Hayward, California, Housing Authority
Revenue,
FNMA, Multifamily Revenue, (Cypress Garden
Project), Revenue Bonds, Series C,
9.375% due 12/1/18 NR AAA
1,883,200
10,000 Huntington Beach, California, Home Mortgage,
Financing Program, Revenue Bonds, Series
1984A,
11.000% due 7/1/17 A NR
10,750
1,500,000 Intercommunity Hospital, California,
Financing
Authority, Certificates of Participation,
(North Bay
Health Care),
9.750% due 8/1/15 NR AAA
1,672,500
Irvine Ranch, California, Water District,
Joint Powers
Agency, Local Pool Revenue, Issue II:
9,000,000 7.800% due 2/15/08 NR A
9,697,500
8,500,000 8.250% due 8/15/23+++ NR BBB
9,360,625
100,000 Kern, California, High School District,
Series C,
(MBIA Insured),
8.750% due 8/1/03 Aaa AAA
126,625
Lancaster, California, Redevelopment Agency,
Tax Allocation Bond, (MBIA Insured):
705,000 5.400% due 8/1/06 Aaa AAA
709,406
745,000 5.400% due 8/1/07 Aaa AAA
745,931
785,000 5.500% due 8/1/08 Aaa AAA
789,906
2,000,000 Multifamily Housing Revenue, (High Valley
Apartment Project), (FHA Insured),
9.125% due 11/1/13 NR A-
2,055,000
465,000 Local Government Finance, Joint Powers
Authority,
California Revenue, (Anaheim Redevelopment
Agency), Series A,
8.200% due 9/1/15 A A-
546,956
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 2,000,000 Loma Linda, California, Hospital Revenue
Bonds,
(Loma Linda University Medical Center
Project),
Series B,
9.000% due 12/1/12 NR BBB
$ 2,210,000
200,000 Los Angeles, California, Certificates of
Participation,
Refunding Bonds, Waste Water,
6.600% due 11/1/99 A1 AA
217,000
1,000,000 Los Angeles, California, Community
Redevelopment
Agency, Tax Allocation Bond, (Central
Business
District), Series F,
8.500% due 7/1/02 NR A-
1,073,750
Los Angeles, California, Home Mortgage
Revenue Bonds:
1,990,000 GNMA, Second Mortgage Program,
8.100% due 5/1/17 Aaa AAA
2,166,613
495,000 Hollywood Lands 2, 3 and 4 (Gower
Apartments),
10.250% due 8/1/04 Aa3 NR
511,706
4,500,000 Los Angeles, California, Transportation
Authority
Sales Tax Revenue, (Project A), Series A,
(FGIC Insured),
5.000% due 7/1/21 Aaa AAA
4,083,750
Los Angeles, California, Wastewater Systems
Revenue,
Refunding Bonds, Series A, (MBIA Insured):
2,930,000 5.700% due 6/1/09 Aaa AAA
2,988,600
7,960,000 5.750% due 6/1/11 Aaa AAA
8,079,400
1,500,000 Los Angeles County, California, Certificates
of
Participation, (Van Nuys Courthouse Project),
9.000% due 6/1/15 NR AAA
1,695,000
Marin County, California, Municipal Water
District Revenue:
935,000 5.450% due 7/1/07 A1 AA
950,194
1,485,000 5.500% due 7/1/08 A1 AA
1,501,706
125,000 Martinez, California, Home Mortgage Housing
Revenue,
10.750% due 2/1/16 NR AAA
132,344
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 375,000 Marysville, California, Hospital Revenue,
(Freemont
Rideout Health Group), Series A, (AMBAC
Insured),
6.000% due 1/1/04 Aaa AAA
$ 399,375
4,890,000 Metropolitan Water District of Southern
California,
Waterworks Revenue, General Obligations
Series G,
5.750% due 3/1/14 Aaa AAA
4,945,012
Modesto, California, Certificates of
Participation,
(Community Center Project A), (AMBAC
Insured):
800,000 5.300% due 11/1/05 Aaa AAA
804,000
835,000 5.400% due 11/1/06 Aaa AAA
843,350
885,000 5.400% due 11/1/07 Aaa AAA
890,531
935,000 5.500% due 11/1/08 Aaa AAA
945,519
985,000 5.500% due 11/1/09 Aaa AAA
996,081
1,040,000 5.600% due 11/1/10 Aaa AAA
1,058,200
Mojave, California, Water Agency, Improvement
District, Series M, (Morongo Basin):
1,500,000 6.600% due 9/1/13 Baa1 BBB+
1,571,250
3,410,000 6.600% due 9/1/22 Baa1 BBB+
3,542,138
Moulton Niguel, California, Water District,
General
Obligation Bonds, (MBIA Insured):
3,460,000 5.300% due 9/1/07 Aaa AAA
3,442,700
1,730,000 5.300% due 9/1/08 Aaa AAA
1,712,700
3,000,000 New Haven, California, Unified School
District, School
Building Corporation, Certificates of
Participation, Refunding Bonds,
9.600% due 7/1/01 NR A-
3,296,250
2,605,000 Northern California Power Agency, Public
Power
Revenue Bonds, (Geothermal Project No. 3),
Series 1984A,
11.500% due 7/1/10 Aaa AAA
2,745,019
Oakland, California, Redevelopment Agency:
200,000 Certificates of Participation, (Oakland
Convention Center),
10.250% due 9/1/14 NR A
213,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Oakland, California, Redevelopment Agency:
(continued)
$ 4,075,000 Sub-Tax Revenue, Central District, (MBIA
Insured),
5.300% due 9/1/09 Aaa AAA
$ 3,988,406
Oceanside, California, Certificates of
Participation,
Wastewater Systems Revenue:
(AMBAC Insured):
385,000 5.500% due 5/1/06 Aaa AAA
392,219
800,000 5.500% due 8/1/06 Aaa AAA
814,000
415,000 5.550% due 5/1/07 Aaa AAA
422,262
840,000 5.550% due 8/1/07 Aaa AAA
854,700
440,000 5.600% due 5/1/08 Aaa AAA
447,700
440,000 5.650% due 5/1/09 Aaa AAA
443,850
915,000 5.650% due 8/1/09 Aaa AAA
923,006
890,000 (FGIC Insured),
5.600% due 8/1/08 Aaa AAA
905,575
1,000,000 Olivenhain, California, Municipal Water
District,
Water Revenue, (AMBAC Insured),
5.400% due 6/1/09 Aaa AAA
992,500
Ontario, California, Redevelopment Financing
Authority,
(MBIA Insured):
1,465,000 5.400% due 8/1/06 Aaa AAA
1,472,325
1,550,000 5.500% due 8/1/07 Aaa AAA
1,563,563
1,635,000 5.500% due 8/1/08 Aaa AAA
1,643,175
19,225,000 Orange County, California, Housing Finance
Agency,
Single Family Residential Mortgage, Revenue
Bonds,
Tax-Exempt Interest Accumulator,
Zero Coupon due 7/1/17 NR BBB+
2,090,719
2,800,000 Orange County, California, Sanitation
Districts
No. 1, 2 & 3, Certificates of Participation,
(Joint Facility Report),
12.000% due 8/1/96 Aaa A
3,318,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Orange County, California, Water District
Revenue,
Certificates of Participation:
$ 4,300,000 5.500% due 8/15/08 Aa AA
$ 4,337,625
5,515,000 Series A,
5.400% due 8/15/07 Aa AA
5,542,575
2,455,000 Oxnard, California, Public Facilities
Corporation,
Certificates of Participation, (Oxnard Public
Facility
Corporation), (AMBAC Insured),
7.500% due 9/1/06 Aaa AAA
2,817,112
180,000 Palm Springs, California, Financing
Authority, (Palm
Springs Regional Airport Revenue), (MBIA
Insured),
5.400% due 1/1/03 Aaa AAA
186,750
2,350,000 Palomar Pomerado Hospital District,
California,
(MBIA Insured),
5.000% due 11/1/13 Aaa AAA
2,173,750
8,000,000 Pleasanton, California, Joint Powers
Financing
Authority Revenue,
6.000% due 9/2/05 Baa1 NR
8,070,000
2,000,000 Port Oakland, California, Special Facilities
Revenue,
Series A,
6.750% due 1/1/12 Aa3 AA
2,140,000
2,000,000 Redding, California, Joint Powers Finance
Authority,
(Solid Waste and Corporate Yard), Series A,
5.500% due 1/1/13 A BBB+
1,882,500
Regents of the University of California,
Series A:
1,070,000 5.500% due 9/1/06 NR A-
1,071,338
1,125,000 5.600% due 9/1/07 NR A-
1,130,625
1,195,000 5.600% due 9/1/08 NR A-
1,196,494
1,255,000 5.700% due 9/1/09 NR A-
1,259,706
1,330,000 5.700% due 9/1/10 NR A-
1,331,662
Rialto, California, Certificates of
Participation,
Wastewater Systems Revenue, (MBIA Insured):
1,005,000 5.400% due 11/1/06 Aaa AAA
1,015,050
1,000,000 5.500% due 11/1/07 Aaa AAA
1,013,750
1,000,000 5.500% due 11/1/08 Aaa AAA
1,010,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 1,055,000 Riverside, California, Unified School
District,
Certificates of Participation, (Air
Conditioning
Equipment Facilities Project),
9.000% due 7/15/00 A- NR
$ 1,102,475
1,470,000 Riverside County, California, Housing
Authority
Revenue Bonds, Series A,
7.900% due 10/1/18 Baa NR
1,550,850
35,000 Riverside County, California, Single Family
Revenue Bonds,
10.500% due 9/1/14 NR BBB+
37,144
Sacramento, California, Municipal Utility
District,
Electric Revenue:
5,000,000 Series A, (MBIA Insured),
5.750% due 8/15/13 Aaa AAA
5,000,000
500,000 Series P,
8.625% due 7/1/10 A AAA
543,125
Sacramento, California, Municipal Utilities
Revenue:
2,160,000 5.500% due 5/15/06 A A-
2,192,400
1,000,000 5.500% due 5/15/07 A A-
1,006,250
750,000 5.500% due 5/15/08 A A-
748,125
3,000,000 5.700% due 5/15/12 A A-
2,951,250
4,000,000 (FGIC Insured),
5.250% due 11/15/12 Aaa AAA
3,825,000
Sacramento, California, Regional
Transportation
District, Certificates of Participation,
Series A:
200,000 6.375% due 3/1/02 A1 NR
215,000
400,000 6.400% due 3/1/03 A1 NR
430,500
500,000 San Bernardino, California, City Unified
School District,
5.000% due 5/1/05 NR A-
481,250
1,350,000 San Bernardino County, California,
Certificates
of Participation, Refunding Bonds,
(Capital Improvement Project),
7.800% due 7/1/16 A1 NR
1,447,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
San Diego, California, Certificates of
Participation:
$ 9,445,000 Asset Lease, (AMBAC Insured),
5.250% due 9/1/05 Aaa AAA
$ 9,504,031
(MBIA Insured):
1,975,000 5.100% due 4/1/06 Aaa AAA
1,942,906
1,350,000 5.100% due 4/1/07 Aaa AAA
1,314,562
San Diego, California, Industrial Development
Authority, Revenue Bonds:
3,500,000 (Horton Grand Saddlery Hotel Project),
10.375% due 12/15/14 NR A+
3,736,250
1,000,000 Series A,
9.250% due 9/1/20 Aa3 A+
1,096,250
2,000,000 San Diego, California, Redevelopment Agency
Refunding, (Marina Redevelopment Project),
8.750% due 12/1/08 Baa1 BBB
2,345,000
San Diego, California, Regional
Transportation District,
Certificates of Participation, Sales Tax
Revenue,
(FGIC Insured):
2,000,000 5.250% due 4/1/06 Aaa AAA
2,002,500
4,000,000 5.250% due 4/1/07 Aaa AAA
3,970,000
2,000,000 5.250% due 4/1/08 Aaa AAA
1,965,000
2,720,000 San Diego, California, Sewer Revenue, Series
A,
(AMBAC Insured),
5.000% due 5/15/13 Aaa AAA
2,550,000
San Elijo, California, Joint Powers
Authority,
Water Revenue, (FGIC Insured):
500,000 5.200% due 3/1/04 Aaa AAA
507,500
790,000 5.400% due 3/1/06 Aaa AAA
802,838
835,000 5.500% due 3/1/07 Aaa AAA
848,569
885,000 5.500% due 3/1/08 Aaa AAA
896,062
San Francisco, California, City & County
Redevelopment Agency:
7,500,000 Multi-Family Housing, (South Beach Project),
5.700% due 3/1/29 Aaa NR
7,237,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
San Francisco, California, City & County
Redevelopment Agency: (continued)
$ 6,750,000 Sewer Revenue, (FGIC Insured),
5.375% due 10/1/16 Aaa AAA
$ 6,488,437
Residential Mortgage Revenue:
13,775,000 (Capital Accumulator),
Zero Coupon due 4/1/17 NR BBB
1,274,188
250,000 Series 1984A,
9.750% due 10/1/17 NR BBB
264,062
San Francisco, California, Downtown Parking,
Corporate Parking Revenue:
135,000 6.250% due 4/1/04 A NR
137,700
1,800,000 6.550% due 4/1/12 A NR
1,878,750
1,750,000 6.650% due 4/1/18 A NR
1,839,688
San Joaquin Hills, California, Transportation
Authority,
Sr. Lien, Toll Revenue:
5,000,000 Zero Coupon due 1/1/14 NR NR
1,350,000
60,000,000 Zero Coupon due 1/1/16 NR NR
13,950,000
17,500,000 Zero Coupon due 1/1/17 NR NR
3,806,250
25,000,000 Zero Coupon due 1/1/18 NR NR
5,062,500
20,000,000 Zero Coupon due 1/1/19 NR NR
3,800,000
San Jose, California, Airport Revenue Bonds,
Series 93, (FGIC Insured):
200,000 5.400% due 3/1/04 Aaa AAA
202,250
1,735,000 5.500% due 3/1/05 Aaa AAA
1,756,688
1,945,000 5.500% due 3/1/07 Aaa AAA
1,945,000
2,150,000 5.625% due 3/1/13 Aaa AAA
2,147,312
530,000 San Luis Obispo, California, Housing
Authority
Revenue,
5.700% due 8/1/08 NR AAA
526,025
San Mateo, California, Series A:
435,000 5.200% due 7/1/06 Aa NR
426,300
310,000 5.300% due 7/1/07 Aa NR
303,413
480,000 5.400% due 7/1/08 Aa NR
469,800
490,000 5.400% due 7/1/09 Aa NR
482,037
250,000 5.400% due 7/1/10 Aa NR
244,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 1,250,000 San Pablo, California, Federal Development
Agency,
Sub Tax Allocation, (Merged Project Area),
(FGIC Insured),
5.000% due 12/1/13 A NR
$ 1,162,500
485,000 San Pablo, California, Redevelopment Agency
Revenue, Single Family Mortgage,
10.125% due 12/1/14 B NR
523,194
1,000,000 Santa Clara, California, Electric Revenue,
Series B,
(MBIA Insured),
5.500% due 7/1/10 Aaa AAA
1,001,250
2,000,000 Santa Clara County, California, Housing
Authority
Mortgage Revenue, (Fair Oaks Village West-B),
(FHA Insured),
9.000% due 11/1/12 NR BBB
2,110,000
Sonoma County, California, Certificates of
Participation,
(Honor Farm Detention Facilities Project):
290,000 9.100% due 6/1/01 NR A+
315,738
320,000 9.100% due 6/1/02 NR A+
347,600
345,000 9.100% due 6/1/03 NR A+
374,325
2,500,000 5.000% due 11/15/13 A1 A+
2,253,125
1,500,000 Southern California Public Power Authority,
Revenue Bonds, (Palo Verde Project),
Series C, (AMBAC Insured),
5.750% due 7/1/17 Aaa AAA
1,601,250
3,000,000 Southern California Rapid Transit District,
Certificates
of Participation, Revenue Bonds, Special
Benefit
Assignment District, Series A2,
6.000% due 9/1/09 Baa1 A-
3,018,750
3,135,000 Torrance, California, Hospital Revenue Bonds,
(Mary Greeley Hospital),
6.875% due 7/1/15 NR A
3,417,150
1,000,000 Tri Dam Power Authority, California,
Hydroelectric
Revenue, (Sand Bar Project),
11.375% due 1/1/17 NR NR
1,062,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - ------------
<C> <S> <C> <C>
<C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 50,000 Tulare County, California, Certificates of
Participation,
Financing Project, Series A, (MBIA Insured),
5.700% due 11/15/03 Aaa AAA
$ 52,938
4,500,000 Ukiah, California, Unified School District,
6.000% due 9/1/10 Baa1 BBB
4,381,875
1,700,000 Upland, California, Hospital Revenue,
Certificates of
Participation, (San Antonio Community
Hospital),
7.800% due 1/1/18 NR A
1,976,250
1,000,000 Woodland, California, Hospital Revenue,
Certificates of Participation, (Woodland
Memorial Hospital),
8.200% due 8/1/15 NR A
1,117,500
COLORADO - 1.5%
50,000,000 Dawson Ridge, Colorado, Metropolitan
District Commission No. 1,
Zero Coupon due 10/1/22 Aaa NR
7,812,500
GUAM - 1.0%
5,000,000 Guam Airport Authority Revenue, Series B,
6.700% due 10/1/23 NR BBB
5,250,000
------------------------------------------------------------------------
- - -------------
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $485,505,621)
502,368,125
------------------------------------------------------------------------
- - -------------
SHORT-TERM TAX-EXEMPT INVESTMENTS - 6.0%
CALIFORNIA - 6.0%
California Health Facilities Financing
Authority
Revenue Bonds:
12,000,000 (Kaiser Permanente), Series B,
2.350% due 5/1/28++ VMIG1 A1+
12,000,000
200,000 (St. Joseph's Health System), Series B,
2.200% due 7/1/09+ VMIG1 A1+
200,000
200,000 (St. Joseph's Health System), Series 1984B,
2.200% due 7/1/13+ VMIG1 NR
200,000
California Pollution Control Financing
Authority,
Pollution Control Revenue:
1,900,000 (Burney's Forest), Series A,
2.300% due 9/1/20+ P1 NR
1,900,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
RATINGS
(UNAUDITED)
MARKET VALUE
FACE VALUE MOODY'S S&P
(NOTE 1)
- - ------------------------------------------------------------------------------
- - -------------
<C> <S> <C> <C>
<C>
SHORT-TERM TAX-EXEMPT INVESTMENTS (CONTINUED)
CALIFORNIA - (CONTINUED)
California Pollution Control Financing
Authority,
Pollution Control Revenue: (continued)
(Delano Project):
$ 2,000,000 2.300% due 8/1/19+ P1 NR
$ 2,000,000
6,700,000 2.300% due 8/1/19+ P1 NR
6,700,000
1,500,000 (Honey Lake Project),
2.350% due 9/1/18+ P1 NR
1,500,000
300,000 (Shell Oil Project), Series A,
2.200% due 10/1/10+ VMIG1 A1+
300,000
(Ultra Power -- Malaga Project), Series B:
1,800,000 2.350% due 4/1/17+ P1 NR
1,800,000
1,900,000 2.350% due 4/1/17+ P1 NR
1,900,000
2,500,000 Irvine, California, Apartment Development
Revenue,
(San Rafael Apartments),
2.300% due 3/1/22+ VMIG1 A1+
2,500,000
Irvine Ranch, California, Water Conservation
District,
Construction Bonds:
300,000 Series A:
2.250% due 5/1/09+ NR A1+
300,000
500,000 Series B:
2.250% due 10/1/00+ NR A1+
500,000
300,000 2.250% due 6/1/15+ VMIG1 A1+
300,000
- - ------------------------------------------------------------------------------
- - -------------
TOTAL SHORT-TERM TAX-EXEMPT INVESTMENTS
(Cost $32,100,000)
32,100,000
- - ------------------------------------------------------------------------------
- - -------------
TOTAL INVESTMENTS (Cost $517,605,621*) 100.3%
534,468,125
- - ------------------------------------------------------------------------------
- - -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --
PORTFOLIO OF INVESTMENTS (continued) FEBRUARY 28,
1994
<CAPTION>
MARKET VALUE
CONTRACTS
(NOTE 1)
- - ------------------------------------------------------------------------------
- - -------------
<C> <S> <C>
<C>
FUTURES CONTRACTS - SHORT POSITION
(Cost $125,928,125)
1,100 U.S. Treasury Bond Index Futures, March 1994 (23.2)%
$(123,646,875)
- - ------------------------------------------------------------------------------
- - -------------
OTHER ASSETS AND LIABILITIES (NET) 22.9
122,099,305
- - ------------------------------------------------------------------------------
- - -------------
NET ASSETS 100.0 %
$ 532,920,555
- - ------------------------------------------------------------------------------
- - -------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand notes are payable upon not more than one day's notice.
++ Variable rate demand notes are payable upon not more than seven business
days' notice.
+++$4,000,000 segregated as collateral to cover open futures contracts.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ------------
STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28,
1994
<S> <C>
<C>
ASSETS:
Investments, at value (Cost $517,605,621) (Note 1)
See accompanying schedule
$534,468,125
Receivable for short futures contracts position
125,928,125
Interest receivable
7,487,189
Receivable for investment securities sold
3,901,455
Receivable for Fund shares sold
1,846,454
- - ------------------------------------------------------------------------------
- - ------------
TOTAL ASSETS
673,631,348
- - ------------------------------------------------------------------------------
- - ------------
LIABILITIES:
Futures contracts -- short position, at value
(Cost $125,928,125) (Note 1)
See accompanying schedule $123,646,875
Payable for investment securities purchased 12,784,639
Variation margin on short futures contracts 2,281,250
Due to custodian 775,069
Payable for Fund shares redeemed 525,521
Dividends payable 255,704
Investment advisory fee payable (Note 2) 143,278
Administration fee payable (Note 2) 81,793
Service fee payable (Note 3) 61,768
Distribution fee payable (Note 3) 40,755
Custodian fees payable (Note 2) 20,000
Transfer agent fees payable (Note 2) 12,000
Accrued expenses and other payables 82,141
- - ------------------------------------------------------------------------------
- - ------------
TOTAL LIABILITIES
140,710,793
- - ------------------------------------------------------------------------------
- - ------------
NET ASSETS
$532,920,555
- - ------------------------------------------------------------------------------
- - ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ------------
STATEMENT OF ASSETS AND LIABILITIES (continued) FEBRUARY 28, 1994
<S>
<C>
NET ASSETS CONSIST OF:
Distributions in excess of net investment income $
(255,704)
Accumulated net realized gain on securities and futures
contracts
3,960,384
Net unrealized appreciation of securities and futures
contracts
19,143,754
Par value
329,891
Paid-in capital in excess of par value
509,742,230
- - ------------------------------------------------------------------------------
- - ------------
TOTAL NET ASSETS
$532,920,555
- - ------------------------------------------------------------------------------
- - ------------
NET ASSET VALUE:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($425,180,815 / 26,318,838 shares of common stock
outstanding)
$16.15
- - ------------------------------------------------------------------------------
- - ------------
MAXIMUM OFFERING PRICE per share ($16.15 / 0.955)
(based on maximum sales charge of 4.5% of the offering price on
February 28, 1994)
$16.91
- - ------------------------------------------------------------------------------
- - ------------
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($107,739,740 / 6,670,240 shares of common stock
outstanding)
$16.15
- - ------------------------------------------------------------------------------
- - ------------
<FN>
+ Redemption price per share for Class B shares is equal to net asset value
less
any applicable contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ---------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28,
1994
<S> <C>
<C>
INVESTMENT INCOME:
Interest
$ 30,275,131
EXPENSES:
Investment advisory fee (Note 2) $1,761,043
Sub-investment advisory and administration fee (Note 2) 1,005,899
Service fee (Note 3) 756,582
Distribution fee (Note 3) 384,392
Transfer agent fees (Notes 2 and 4) 129,431
Custodian fees (Note 2) 82,798
Legal and audit fees 60,732
Directors' fees and expenses (Note 2) 47,451
Other 236,942
- - ------------------------------------------------------------------------------
- - ---------------
TOTAL EXPENSES
4,465,270
- - ------------------------------------------------------------------------------
- - ---------------
NET INVESTMENT INCOME
25,809,861
- - ------------------------------------------------------------------------------
- - ---------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTES 1 AND 5):
Net realized gain on:
Securities
15,260,424
Futures contracts
3,129,848
- - ------------------------------------------------------------------------------
- - ---------------
Net realized gain on investments during the year
18,390,272
- - ------------------------------------------------------------------------------
- - ---------------
Net change in unrealized appreciation/(depreciation) of:
Securities
(18,011,497)
Futures contracts
2,281,250
- - ------------------------------------------------------------------------------
- - ---------------
Net unrealized depreciation of investments during the year
(15,730,247)
- - ------------------------------------------------------------------------------
- - ---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
2,660,025
- - ------------------------------------------------------------------------------
- - ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 28,469,886
- - ------------------------------------------------------------------------------
- - ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
YEAR
YEAR
ENDED
ENDED
2/28/94
2/28/93
<S> <C>
<C>
Net investment income $ 25,809,861 $
23,716,791
Net realized gain on securities and futures contracts
during the year 18,390,272
10,575,828
Net unrealized appreciation/(depreciation) on securities
and futures contracts during the year (15,730,247)
21,852,756
- - ------------------------------------------------------------------------------
- - ------------
Net increase in net assets resulting from operations 28,469,886
56,145,375
Distributions to shareholders from net investment
income:
Class A (21,453,692)
(23,437,009)
Class B (3,407,803)
(294,664)
Distributions to shareholders in excess of net
investment income:
Class A (220,654)
- - --
Class B (35,050)
- - --
Distributions to shareholders from capital gains:
Class A (16,828,789)
(6,969,037)
Class B (3,683,752)
(244,394)
Distributions to shareholders from capital:
Class A --
(997,228)
Class B --
(12,537)
Net increase in net assets from Fund share transactions
(Note 6):
Class A 15,790,654
35,928,638
Class B 72,861,938
36,499,931
- - ------------------------------------------------------------------------------
- - ------------
Net increase in net assets 71,492,738
96,619,075
NET ASSETS:
Beginning of year 461,427,817
364,808,742
- - ------------------------------------------------------------------------------
- - ------------
End of year (including distributions in excess of net
investment income of $255,704 at February 28, 1994) $532,920,555
$461,427,817
- - ------------------------------------------------------------------------------
- - ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ---------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
YEAR YEAR YEAR
YEAR YEAR
ENDED ENDED ENDED
ENDED ENDED
2/28/94*** 2/28/93* 2/28/92
2/28/91 2/28/90
<S> <C> <C> <C>
<C> <C>
Operating performance:
Net asset value, beginning of year $16.70 $15.78 $15.66
$15.61 $15.33
- - ------------------------------------------------------------------------------
- - ---------------------------
Income from investment operations:
Net investment income 0.86 0.97 1.04
1.07 1.09
Net realized and unrealized
gain/(loss) on
investments 0.08 1.25 0.40
0.17 0.26
- - ------------------------------------------------------------------------------
- - ---------------------------
Total from investment operations 0.94 2.22 1.44
1.24 1.35
- - ------------------------------------------------------------------------------
- - ---------------------------
Less distributions:
Distributions from net investment
income (0.83) (0.97) (1.05)
(1.07) (1.07)
Distributions in excess of net
investment income (0.01) -- --
- - -- --
Distributions from net realized
gains (0.65) (0.29) (0.27)
(0.12) --
Return of capital -- (0.04) --
- - -- --
- - ------------------------------------------------------------------------------
- - ---------------------------
Total distributions (1.49) (1.30) (1.32)
(1.19) (1.07)
- - ------------------------------------------------------------------------------
- - ---------------------------
Net asset value, end of year $16.15 $16.70 $15.78
$15.66 $15.61
- - ------------------------------------------------------------------------------
- - ---------------------------
Total return++ 5.92% 14.76% 9.50%
8.29% 9.02%
- - ------------------------------------------------------------------------------
- - ---------------------------
Ratios to average net
assets/supplemental data:
Net assets, end of year (in 000's) $425,181 $423,504 $364,809
$334,599 $328,938
Ratio of operating expenses to
average
net assets 0.80% 0.70% 0.65%
0.65% 0.72%
Ratio of net investment income to
average
net assets 5.20% 6.04% 6.54%
6.85% 6.95%
Portfolio turnover rate 76% 72% 86%
53% 35%
- - ------------------------------------------------------------------------------
- - ---------------------------
<FN>
* The Fund commenced operations on April 9, 1984. On November 6, 1992 the
Fund
commenced selling Class B shares. Any shares in existence prior to November
6, 1992 were designated Class A shares.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
***Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed method does not accord with results of
operations for both classes of shares.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - --------------------------
FINANCIAL HIGHLIGHTS (continued)
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
YEAR YEAR YEAR
YEAR PERIOD
ENDED ENDED ENDED
ENDED ENDED
2/28/89 2/28/88 2/28/87
2/28/86 2/28/85*
<S> <C> <C> <C>
<C> <C>
Operating performance:
Net asset value, beginning of year $15.49 $16.54 $16.16
$13.94 $14.25
- - ------------------------------------------------------------------------------
- - --------------------------
Income from investment operations:
Net investment income+++ 1.12 1.09 1.14
1.21 1.14
Net realized and unrealized
gain/(loss)on
investments (0.13) (0.98) 0.71
2.22 (0.31)
- - ------------------------------------------------------------------------------
- - --------------------------
Total from investment operations 0.99 0.11 1.85
3.43 0.83
- - ------------------------------------------------------------------------------
- - --------------------------
Distributions:
Distributions from net investment income (1.12) (1.09) (1.14)
(1.21) (1.14)
Distributions in excess of net
investment income -- -- --
- - -- --
Distributions from net realized gains (0.03) (0.07) (0.33)
- - -- --
Return of capital -- -- --
- - -- --
- - ------------------------------------------------------------------------------
- - --------------------------
Total distributions (1.15) (1.16) (1.47)
(1.21) (1.14)
- - ------------------------------------------------------------------------------
- - --------------------------
Net asset value, end of year $15.33 $15.49 $16.54
$16.16 $13.94
- - ------------------------------------------------------------------------------
- - --------------------------
Total return++ 6.67% 1.09% 12.13%
25.80% 6.35%
- - ------------------------------------------------------------------------------
- - --------------------------
Ratios to average net
assets/supplemental data:
Net assets, end of year (in 000's) $313,059 $156,464 $207,872
$111,705 $ 39,739
Ratio of operating expenses to average
net assets 0.67% 0.64% 0.67%
0.73% + 0.33% **+
Ratio of net investment income to
average
net assets 7.19% 7.26% 6.99%
8.08% 9.31% **
Portfolio turnover rate 27% 22% 16%
14% 32%
- - ------------------------------------------------------------------------------
- - --------------------------
<FN>
* The Fund commenced operations on April 9, 1984. On November 6, 1992 the
Fund
commenced selling Class B shares. Any shares in existence prior to November
6, 1992 were designated Class A shares.
** Annualized.
+ Annualized expense ratios before waiver of fees and voluntary reimbursement
of expenses by investment adviser and sub-investment adviser and
administrator were 0.82% and 0.95% for the fiscal year ended February 28,
1986 and the fiscal period ended February 28, 1985, respectively.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
+++Net investment income per share before waiver of fees and voluntary
reimbursement of expenses by investment adviser and sub-investment adviser
and administrator was $1.20 and $1.06, for the fiscal year ended February
28,
1986 and the fiscal period ended February 28, 1985, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
<TABLE>
- - ------------------------------------------------------------------------------
- - ---------------
FINANCIAL HIGHLIGHTS (continued)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
YEAR
PERIOD
ENDED
ENDED
2/28/94*** 2/28/93*
<S> <C>
<C>
Operating performance:
Net asset value, beginning of period
$16.70 $15.84
- - ------------------------------------------------------------------------------
- - ---------------
Income from investment operations:
Net investment income
0.77 0.29
Net realized and unrealized gain on investments
0.09 1.15
- - ------------------------------------------------------------------------------
- - ---------------
Total from investment operations
0.86 1.44
- - ------------------------------------------------------------------------------
- - ---------------
Less distributions:
Distributions from net investment income
(0.75) (0.28)
Distributions in excess of net investment income
(0.01) --
Distributions from net realized gains
(0.65) (0.29)
Return of capital -
- - - (0.01)
- - ------------------------------------------------------------------------------
- - ---------------
Total distributions
(1.41) (0.58)
- - ------------------------------------------------------------------------------
- - ---------------
Net asset value, end of period
$16.15 $16.70
- - ------------------------------------------------------------------------------
- - ---------------
Total return++
5.40% 9.27%
- - ------------------------------------------------------------------------------
- - ---------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $
107,740 $37,924
Ratio of operating expenses to average net assets
1.33% 1.30%**
Ratio of net investment income to average net assets
4.67% 5.44%**
Portfolio turnover rate
76% 72%
- - ------------------------------------------------------------------------------
- - ---------------
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Annualized.
++ Total return represents aggregate total return for the period indicated
and
does not reflect any applicable sales charges.
*** Per share amounts have been calculated using the monthly average share
method,
which more appropriately presents the per share data for the period since
use
of the undistributed method does not accord with results of operations for
both classes of shares.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson California Municipals Fund Inc. (the "Fund") was
incorporated under the laws of the State of Maryland on February 17, 1984. The
Fund is a non-diversified, open-end management investment company registered
with the Securities and Exchange Commission under the Investment Company Act
of
1940, as amended (the "1940 Act"). The Fund offers two classes of shares:
Class
A shares and Class B shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent deferred sales charge
("CDSC"). Class B shares will convert automatically to Class A shares eight
years after the date of original purchase. Both classes of shares have
identical
rights and privileges except with respect to the effect of the respective
sales
charges to each class, the distribution and/or service fees borne by each
class,
expenses allocable exclusively to each class, voting rights on matters
affecting
a single class, the exchange privilege of each class and the conversion
feature
of Class B shares. The following is a summary of significant accounting
policies
consistently followed by the Fund in the preparation of its financial
statements.
Portfolio valuation: Securities are valued by The Boston Company Advisors,
Inc.
("Boston Advisors") after consultation with an independent pricing service
(the
"Service") approved by the Board of Directors. When, in the judgment of the
Service, quoted bid prices for securities are readily available and are
representative of the bid side of the market, these investments are valued at
the mean between the quoted bid prices and asked prices (as obtained by the
Service from dealers in such securities). Securities for which, in the
judgment
of the Service, there are no readily obtainable market quotations (which may
constitute a majority of the portfolio securities) are carried at fair value
as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal securities of comparable quality, coupon,
maturity
and type; indications as to values from dealers; and general market
conditions.
Short-term investments that mature in 60 days or less are valued at amortized
cost.
Futures contracts: Upon entering into a futures contract, the Fund is
required
to deposit with the broker an amount of cash or cash equivalents equal to a
certain percentage of the contract amount. This is known as the "initial
margin." Subsequent payments ("variation margin") are made or received by the
Fund each day, depending on the daily fluctuation of the value of the
contract.
34
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
For financial statement purposes, an amount equal to the settlement amount of
the contract is included in its Statement of Assets and Liabilities as an
asset
and as an equivalent liability. For long futures positions, the asset is
marked-to-market daily; for short futures positions, the liability is
marked-to-market daily. The daily changes in the contract are recorded as
unrealized gains or losses. The Fund recognizes a realized gain or loss when
the
contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with
the
change in value of the hedged investments. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an
illiquid
secondary market.
Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund
takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding
period.
This arrangement results in a fixed rate of return that is not subject to
market
fluctuations during the Fund's holding period. The value of the collateral is
at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counter-party default, the Fund has the
right to use the collateral to offset losses incurred. There is potential loss
to the Fund in the event the Fund is delayed or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a
possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert its rights. The Fund's investment adviser, acting under
the
supervision of the Board of Directors, reviews the value of the collateral and
the creditworthiness of those banks and dealers with which the Fund enters
into
repurchase agreements to evaluate potential risks.
Securities transactions and investment income: Securities transactions are
recorded as of the trade date. Interest income is recorded on the accrual
basis.
Securities purchased or sold on a when-issued or delayed delivery basis may be
settled a month or more after the trade date. Interest income on these
securities is not accrued until settlement date. When required, the Fund
instructs the custodian to segregate assets in a separate account with a
current
value at least equal to the amount of its when-issued purchase commitments.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Investment income and realized and unrealized gains and losses are
allocated based upon the relative net assets of each class of shares.
35
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
Dividends and distributions to shareholders: Dividends from net investment
income are determined on a class level, declared on each day that the Fund is
open for business and paid on the last day of the Smith Barney Shearson Inc.
("Smith Barney Shearson") statement month. Distributions from net realized
capital gains are declared and paid annually, after the end of the fiscal year
in which earned. In addition, in order to avoid the application of a 4%
nondeductible excise tax on certain undistributed amounts of ordinary income
and
capital gains, the Fund may make an additional distribution shortly before
December 31 in each year of any undistributed ordinary income or capital gains
and expects to make any other distributions as are necessary to avoid this
tax.
Income distributions and capital gain distributions are determined in
accordance
with income tax regulations which may differ from generally accepted
accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund
as
a whole. For the year ended February 28, 1994, a permanent reclass adjustment
for market discount was made between undistributed net investment income and
accumulated net realized gains.
Federal taxes: It is the policy of the Fund to qualify as a regulated
investment company, which distributes tax-exempt interest dividends, by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no Federal
income tax provision is required.
Reclassifications: During the current period, the Fund adopted Statement of
Position 93-2 "Determination, Disclosure and Financial Statement Presentation
of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies." Accordingly, certain reclassifications have been made to the
components of capital in the Statement of Net Assets to conform with the
accounting and reporting guidelines of this statement. Distributions in excess
of book basis accumulated realized gains or undistributed net investment
income
that were the result of permanent book and tax accounting differences have
been
reclassified to paid-in capital. In addition, amounts distributed in excess of
undistributed net investment income as determined for financial statement
purposes but as distributions from net investment income or accumulated net
realized gains for tax purposes, previously reported as distributions from
paid-in capital, have been reclassified to reflect the tax characterization.
Accordingly, amounts as of February 28, 1993, have been restated to reflect an
increase in paid-in capital, an increase in distributions in excess of net
investment income and a decrease in accumulated net realized gains of
36
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
$1,648,852, $935,977 and $712,875, respectively. The Statement of Changes in
Net
Assets and Financial Highlights for prior periods have not been restated to
reflect this change in presentation. Net investment income, net realized
gains,
and net assets on a book and tax basis were not affected by this change.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER RELATED PARTY TRANSACTIONS
Up to the close of business on July 30, 1993, the Fund had entered into an
investment advisory agreement with Shearson Lehman Brothers Inc. ("Shearson
Lehman Brothers") on behalf of Shearson Lehman Advisors, a member of the Asset
Management Group of Shearson Lehman Brothers. Under the investment advisory
agreement, the Fund paid a monthly fee at the following annual rates: 0.35% of
the value of its average daily net assets up to $500 million and 0.32% of the
value of its average daily net assets in excess of $500 million.
As of the close of business on July 30, 1993, The Travelers Inc. ("Travelers")
(which at the time was known as Primerica Corporation) and Smith Barney,
Harris
Upham & Co. Incorporated completed the acquisition of the domestic retail
brokerage and asset management business of Shearson Lehman Brothers, and Smith
Barney, Harris Upham & Co. Incorporated was renamed Smith Barney Shearson.
As of the close of business on July 30, 1993, Greenwich Street Advisors, a
division of Mutual Management Corp., which is controlled by Smith Barney
Shearson Holdings Inc. ("Holdings") succeeded Shearson Lehman Advisors as the
Fund's investment adviser. Holdings is a wholly owned subsidiary of Travelers.
The new investment advisory agreement with Greenwich Street Advisors (the
"Advisory Agreement") contains terms and conditions substantially similar to
the
investment advisory agreement with the predecessor investment adviser and
provides for payment of fees at the same rates as were paid to such
predecessor
investment adviser.
The Fund has also entered into an administration agreement (the
"Administration
Agreement") with Boston Advisors, an indirect wholly owned subsidiary of
Mellon
Bank Corporation ("Mellon"). Under the Administration Agreement the Fund pays
a
monthly fee at the following annual rates: 0.20% of the value of its average
daily net assets up to $500 million and 0.18% of the value of its average
daily
net assets in excess of $500 million. Prior to the close of business on May
21,
1993, Boston Advisors served as sub-investment adviser and administrator to
the
Fund.
37
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
For the year ended February 28, 1994, the Fund incurred total brokerage
commissions of $22,496, none of which was paid to Smith Barney Shearson.
For the year ended February 28, 1994, Smith Barney Shearson received from
investors $937,828 representing commissions (sales charges) on sales of Class
A
shares.
A CDSC is generally payable by a shareholder in connection with the redemption
of Class B shares within five years after the date of purchase. In
circumstances
in which the CDSC is imposed, the amount of the charge ranges between 4.5% and
1% of net asset value depending on the number of years since the date of
purchase. For the year ended February 28, 1994, Smith Barney Shearson received
from shareholders $75,150 in CDSCs on the redemption of Class B shares.
No officer, director or employee of Smith Barney Shearson, Boston Advisors or
any parent or subsidiary of those corporations receives any compensation from
the Fund for serving as a Director or officer of the Fund. The Fund pays each
Director who is not an officer, director, or employee of Smith Barney
Shearson,
Boston Advisors or any of their affiliates $2,000 per annum plus $500 per
meeting attended and reimburses each such Director for travel and out-of-
pocket
expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc.,
a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
3. DISTRIBUTION AGREEMENT
Smith Barney Shearson acts as distributor of the Fund's shares pursuant to a
distribution agreement with the Fund, and sells shares of the Fund through
Smith
Barney Shearson or its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Services and
Distribution Plan (the "Plan"). Under this Plan, the Fund compensates Smith
Barney Shearson for servicing shareholder accounts for Class A and Class B
shareholders and covers expenses incurred in distributing Class B shares.
Smith
Barney Shearson is paid an annual service fee with respect to Class A and
Class
B shares of the Fund at the annual rate of 0.15% of the value of the average
daily net assets of each respective class of shares. Smith Barney Shearson is
also paid an annual distribution fee with respect to Class B shares at the
annual rate of 0.50% of the value of the average daily net assets of Class B
shares. For the year ended February 28, 1994, the Fund incurred service fees
of
$641,265 and $115,317 for Class A and Class B shares, respectively. For the
year
ended February 28, 1994, the
38
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
Fund incurred a distribution fee of $384,392 for Class B shares. Prior to the
close of business on July 30, 1993, Shearson Lehman Brothers served as the
Fund's distributor.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of
shares are prorated among the classes based upon the relative net assets of
each
class. Operating expenses directly attributable to a class of shares are
charged
to that class' operations. In addition to the above servicing and distribution
fees, class specific operating expenses include transfer agent fees. For the
year ended February 28, 1994, the Fund incurred transfer agent fees of $91,364
and $38,067 for Class A and Class B shares, respectively.
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments for the year ended February 28, 1994, amounted to
$416,596,472 and $371,726,503, respectively.
At February 28, 1994, aggregate gross unrealized appreciation for all
securities
in which there was an excess of value over tax cost amounted to $19,407,757,
and
aggregate gross unrealized depreciation for all securities in which there was
an
excess of tax cost over value amounted to $2,545,253.
6. COMMON STOCK
At February 28, 1994, the Fund had authorized capital of 500 million shares of
$.01 par value common stock divided into two classes: Class A and Class B.
Changes in common stock outstanding were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED
Class A shares: Shares 2/28/94Amount
Shares2/28/93*Amount
<S> <C> <C> <C>
<C>
- - ------------------------------------------------------------------------------
- - -------
Sold 2,686,986 $44,513,803
4,722,676 $75,602,546
Issued as reinvestment of dividends 1,519,575 25,027,145
1,261,122 20,202,163
Redeemed (3,246,672) (53,750,294)
(3,737,329) (59,876,071)
- - ------------------------------------------------------------------------------
- - -------
Net increase 959,889 $15,790,654
2,246,469 $35,928,638
- - ------------------------------------------------------------------------------
- - -------
</TABLE>
* The Fund commenced selling Class B shares on November 6, 1992. Any shares
outstanding prior to November 6, 1992 were designated Class A shares.
39
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED
Class B shares: Shares 2/28/94Amount
Shares2/28/93*Amount
<S> <C> <C> <C>
<C>
- - ------------------------------------------------------------------------------
- - -------
Sold 4,488,473 $74,380,170
2,283,977 $36,708,179
Issued as reinvestment of dividends 278,568 4,584,260
22,363 360,422
Redeemed (367,733) (6,102,492)
(35,408) (568,670)
- - ------------------------------------------------------------------------------
- - -------
Net increase 4,399,308 $72,861,938
2,270,932 $36,499,931
- - ------------------------------------------------------------------------------
- - -------
</TABLE>
* The Fund commenced selling Class B shares on November 6, 1992. Any shares
outstanding prior to November 6, 1992 were designated Class A shares.
7. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line of
credit provided by Continental Bank N.A. under an Amended and Restated Line of
Credit Agreement (the "Agreement") dated April 30, 1992, primarily for
temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The Fund may
borrow up to the lesser of $25 million or 10% of its net assets. Interest is
payable either at the bank's Money Market Rate or the London Interbank Offered
Rate (LIBOR) plus 0.375% on an annualized basis. The Fund and the other
affiliated entities are charged an annual aggregate commitment fee of $125,000
which is allocated equally among each of the participants. The Agreement
requires, among other provisions, each participating fund to maintain a ratio
of
net assets (not including funds borrowed pursuant to the Agreement) to
aggregate
amount of indebtedness pursuant to the Agreement of no less than 5 to 1.
During
the year ended February 28, 1994, the Fund had an average outstanding daily
balance of $24,932 with interest rates ranging from 3.438% to 4.125%. Interest
expense totaled $898 for the year ended February 28, 1994. At February 28,
1994,
the Fund had no outstanding borrowings under this Agreement.
8. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of
California
and local governments in the State of California, its political subdivisions,
agencies and public authorities to obtain funds for various public purposes.
The
Fund is more susceptible to factors adversely affecting issuers of California
municipal securities than is a municipal bond fund that is not concentrated in
these issuers to the same extent.
40
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC.
We have audited the accompanying statement of assets and liabilities of Smith
Barney Shearson California Municipals Fund Inc., including the schedule of
portfolio investments, as of February 28, 1994, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for
each of the nine years in the period then ended and for the period April 9,
1984
(commencement of operations) to February 28, 1985. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Smith
Barney Shearson California Municipals Fund Inc. as of February 28, 1994, the
results of its operations for the year then ended, the changes in its net
assets
for each of the two years in the period then ended, and the financial
highlights
for each of the nine years in the period then ended and for the period April
9,
1984 (commencement of operations) to February 28, 1985, in conformity with
generally accepted accounting principles.
Coopers &
Lybrand
Boston, Massachusetts
April 8, 1994
41
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
TAX INFORMATION (UNAUDITED) YEAR ENDED FEBRUARY 28,
1994
Of the dividends paid by the Fund attributable to net investment income for
the
year ended February 28, 1994, 100% is tax-exempt for regular Federal income
taxes and California income taxes.
The capital gains dividend distribution paid to shareholders for fiscal year
ended, February 28, 1994, whether taken in additional shares or in cash, is as
follows:
Long-Term Capital Gains................ $8,994,180
The above figure may differ from that cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
42
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
PARTICIPANTS
DISTRIBUTOR
Smith Barney Shearson Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
43
<PAGE>
Smith Barney Shearson
California Municipals Fund Inc.
- - ------------------------------------------------------------------------------
- - --
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS): This is the increase (or decrease) in the market value
(price) of a security in your portfolio. If a stock or bond appreciates in
price, there is a capital gain; if it depreciates there is a capital loss. A
capital gain or loss is "realized" upon the sale of a security; if net capital
gains exceed net capital losses, there may be a capital gain distribution to
shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE): A back-end load, a CDSC is imposed if
shares are redeemed during the first few years of ownership. The CDSC may be
expressed as a percentage of either the original purchase price or the
redemption proceeds. Most CDSCs decline over time, and some will not be
charged
if shares are redeemed under certain conditions.
DISTRIBUTION RATE: This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized
capital gains to shareholders. A fund's distribution rate is usually expressed
as an annualized percent of the fund's offering price.
DIVIDEND: This is income generated by securities in a portfolio and
distributed
after expenses to shareholders.
FRONT-END SALES CHARGE: This is the sales charge applied to an investment at
the
time of initial purchase.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on a
given day. The total value of your investment would be the NAV multiplied by
the
number of shares you own.
SEC YIELD: This standardized calculation of a mutual fund's yield is based on
a
formula developed by the Securities and Exchange Commission (SEC) to allow
funds
to be compared on an equal basis. It is an annualized yield based on the
portfolio's potential earnings from dividends, interest and yield to maturity
of
its holdings, and it reflects the payments of all portfolio expenses for the
most recent 30-day period. Mutual funds are required to use this figure when
stating yield.
TOTAL RETURN: Total return measures a fund's performance, taking into account
the combination of dividends paid and the gain or loss in the value of the
securities held in the portfolio. It may be expressed on an average annual
basis
or cumulative basis (total change over a given period). In addition, total
return may be expressed with or without the effects of sales charges or the
reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average
annual total return according to the standardized calculation developed by the
SEC. The SEC average annual total return calculation includes the effects of
all
fees and sales charges and assumes the reinvestment of all dividends and
capital
gains.
44
